Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (7) TMI 20 - AT - Income TaxLong term capital gain arising from transaction of sale of rights as per Joint Development Agreement (JDA) - claim of cost of acquisition - Adoption of indexation cost of acquisition - HELD THAT:- Computation of gain arising from Joint Development Agreement is to be made after taking into account cost of land transferred to the builder under the agreement whereon the building is constructed. To put it simply, in the present case, the assessee has received consideration of ₹ 33 crores by assigning rights over 5 acres land in favour of the builder M/s. SAS Infoetech P. Ltd. and as such we find no justification in the action of the assessing officer in disallowing the claim of cost of acquisition. In any case, merely because the land is continued to be reflected in the Balance Sheet of the assessee would not have any adverse implication on the computation of long term capital gain as the accounting treatment in the books of account cannot override the determination of real income under the provisions of Income Tax Act, 1961. In view of the above, we find no merit in the ground raised in the revenue’s appeal and same is dismissed. A plain reading of section 45(2) makes it amply clear that it is the prerogative of the assessee to covert the capital asset to stock. Further, the term ‘Business carried on by him’ necessarily means that the capital asset so converted must form part of stockin- trade of the business carried on by the assessee. Assessee company is in the healthcare business and not in business related to real estate and as such it cannot be said that assessee, by entering into the Joint Development Agreement, has converted the land into its stock-in-trade. Therefore, we have no hesitation in holding that there is no scope of applicability of section 45(2) of the Act to the facts of the present case. Therefore, we are unable to find any justification in the action of the Ld. CIT (A) in invoking provisions of section 45(2). Once we have denounced the application of Section 45(2), there remains no basis for restricting the indexation to AY 2008-09 particularly when the taxable event arose in AY 2011-12 when the construction got complete and the assessee opted to part with 5 acres of land for a consideration of ₹ 33 crores. Accordingly, in view of our reaching this considered opinion, the assessing officer is directed to allow the benefit of indexation of cost of acquisition till AY 2011-12 i.e. the year of assessment of capital gain. - Decided in favour of assessee.
|