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2016 (7) TMI 513 - AT - Income TaxAddition u/s. 69C - determination of value - sale of capital asset after conversion into stock in trade - applicability of section 50C - Held that:- While computing the business income, assessee has claimed certain cost of construction and most of the amounts were spent in earlier years. Instead of verifying the expenditure incurred during the year, the AO undertook the exercise of referring the cost of construction to valuation itself which indicated certain differences in valuation. As rightly opined by the Ld. CIT(A) as against the books values shown by assessee, the total valuation by the Valuation Officer on all the three projects has resulted in a difference of 0.1% which is very negligible considering the ₹ 27 Crores value shown by assessee. - Decided against revenue Determination of cost of acquisition - capital gains computation - Held that:- Assessee has made an agreement with the parties for acquisition of the undivided portion of the share from two different unrelated parties at a value which is not disputed. Since the sale occurred during the year, assessee has offered Long Term Capital Gain and business profits on the total project including the portions which are acquired to fulfill the sale and the assessee has reduced the values correspondingly to arrive at the market value on the day of offering the gains. As seen from the agreement of sale and the amounts paid by assessee which are not disputed by the Revenue for the purpose of determination of capital gains, we are of the opinion that the rates adopted by assessee are reasonable. Moreover, in determining the value at ₹ 550/-, the AO adopted only the value of cost of construction on the structure, ignoring the corresponding land value. Therefore, the very premise on which AO has restricted the amount is not correct. As seen from the order of the CIT(A) also, he has determined the amount of ₹ 625/- without any justification which the Revenue is also contending in its appeal. After considering the evidences placed on record and the working as adopted by assessee, we are of the opinion that the rate 2,000/- and 1100/- adopted by assessee in arriving at the cost of acquisition for the purpose of capital gains is reasonable and accordingly, the grounds raised by assessee are allowed - Decided against revenue Revision u/s 263 - Non consideration of provisions of Section 50C while determining the capital gain - Held that:- As noticed in the appeals considered earlier on the orders u/s. 143(3), AO was very much aware that assessee has converted the fixed asset into stock-in-trade as on 01-01-2008 and he has computed the Long Term Capital Gain on that day by making certain adjustments to the cost claimed by assessee. Not only that, AO also has brought to tax the business profits of subsequent sale and in doing so, he has restricted the cost of the building. Even though those issues were subject matter of earlier appeals, it is noticed that AO is very much aware about the conversion of fixed assets to work-in-progress on 01-01-2008 and subsequent sale on 31-03-2008, consequently the transaction does not attract the provisions of Section 50C as directed by Ld.CIT. It is also to be noted that assessee adopted the valuation as certified by the authorities in taking the sale consideration on the date of conversion which was accepted by the AO. In view of this, question of invoking the provisions of Section 50C as on 31- 03-2008 does not arise. Moreover, as seen from the registered document, the value of ₹ 14.51 Crores pertain to the date of registration which was in the year 2009 but not on 31-03-2008. On that fact also, the valuation of ₹ 14.51 Crores cannot be adopted as on 31-03-2008. Since the asset sold on 31-03-2008 is no longer a fixed asset and being stock-in-trade, the Ld. CIT erred in invoking the provisions of Section 50C. We are of the opinion that it is the CIT who erred in considering the facts and therefore, we have no hesitation in setting aside the order of the CIT as the order of AO is not erroneous and prejudicial to the interest of Revenue - Decided in favour of assessee
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