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2018 (2) TMI 59 - HC - Income TaxCapital gain computation - Determination of value of land - possession over land in dispute - transfer of land - Held that:- What has been done in the case in hand is that ignoring the fact that Assessee did not have any title over land but possessed only lease rights, and land was owned by State Government, Revenue Authorities have proceeded to consider valuation assuming that Assessee had a right/title over land which is convertible into the manner, Assessee liked, and have proceeded accordingly. Lease land was converted by Assessee in 'stock in trade' on 01.04.2003 i.e. Financial Year 2003-04 (A.Y. 2004-05). As is admitted, land being Nazul, owned by State Government and Assessee was only enjoying lease rights over the land, the definition of 'capital asset' includes within it, 'lease rights' over land since 'capital asset' means property of any kind held by an Assessee but that will not extend to land itself. The term 'transfer' in relation to a 'capital asset' includes extinguishment of any right therein and conversion or treatment as 'stock in trade' in business. Such conversion or treatment is defined under Section 2(47) but this conversion is only in relation to 'lease rights' over land in question and not the title or ownership of land. That continued to be vested in State Government even in A.Y. 2004-05. In respect of capital gain over land in question, thus occasion for computation would arise only when title is transferred by State Government, i.e., ownership, upon Assessee/lessee who held that land under a lease agreement of 1942 for a period of 30 years, renewable upto 90 years. It is nobody's case that such transfer of property took place in the A.Y. 2004-05. Therefore, transfer of land as such resulting in capital gain could not have been worked out in A.Y. 2004-05 in the manner as has been done by Assessee since it did not own land in A.Y. 2004-05. It has not come on record, when Assessee got title of land after execution of freehold deed/sale deed from State Government. The Builder's agreement with respect to share in land and transfer of land under the impression that land itself has been converted into 'stock in trade' is nothing but a colourable transaction and it amounts to fraud. Revision u/s 263 - Held that:- The view taken by Tribunal cannot be sustained inasmuch A.O. having not examined the matter in correct perspective, as discussed above, it is a clear case where his order is erroneous and prejudicial to the interest of Revenue and, therefore, CIT has rightly exercised jurisdiction under Section 263 of Act, 1961. - Decided in favour of Revenue.
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