TMI Blog2008 (10) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... r ascertaining as to whether it was a long-term capital asset or a short-term capital asset within the meaning given in ss. 2(29A) and 2(42A) as the same was not held by it as a capital asset. It is only when the same was converted by the assessee company into investment i.e., w.e.f. 1st April, 2002 that the same was held by it as capital asset and as the same was held by it for not more than 36 months immediately preceding the date of its transfer i.e., 12th Dec., 2002, it was a short-term capital asset as defined in s. 2(42A) and the capital gain arising from the sale thereof was chargeable to tax as 'short-term capital gain' as defined in s. 2(42B). In that view of the matter, we find no infirmity in the order of the ld CIT(A) upholding the action of the AO in treating the profit arising from the sale of the said property as short-term capital gain and upholding the same, we dismiss this appeal filed by the assessee. Appeal of the assessee is dismissed. - Member(s) : VIMAL GANDHI., P. M. JAGTAP. ORDER-P.M. JAGTAP, A.M.: This appeal by the assessee is directed against the order of learned CIT(A)-XII, New Delhi, dt. 28th Nov., 2006 and in the solitary g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended that the date of conversion of the property from stock-in-trade into investment thus was irrelevant and the period during which the property was held by the assessee company as stock-in-trade should also be taken into account for determining as to whether the same was its long-term capital asset or short-term capital asset. It was contended that the property will assume the character of capital asset right form the date from which the same was held by the assessee company even as stock-in-trade and the said period has to be taken into account for ascertaining whether the property was a long-term capital asset or a short-term capital asset. It was also pointed out by the assessee that the definition of long-term capital asset given in s. 2(42A) does not lay down that the holding of the asset for the required period has to be as capital asset. 4. The submissions made on behalf of the assessee before him as above were not found acceptable by the AO. According to him, the definition of 'short-term capital asset' given in s. 2 (42A) clearly means a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer. He held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). The learned CIT(A) did not find merit with the said submissions and rejecting the same, he upheld the order of AO treating the property sold by the assessee company as its short-term capital asset and bringing to tax the profit arising from sale thereof under the head 'Short-term capital gain' for the following reasons given in para No. 4 of his impugned order: "I have carefully considered the submissions of the appellant company and facts involved. As noted by the AO and also submitted by the Authorised Representative, the company was incorporated in 1987 with the objects: (i) To purchase, acquire land, houses, to construct, erect, maintain, buy and sell land. (ii) To acquire, improve, manage, develop, all rights in respects of leasehold and freehold immovable properties etc. In accordance with the objects of the company, the company had acquired land at Gurgaon in the financial year 1998-99 and treated the same as stock-in-trade till 31st March, 2002. As the board of directors had considered holding of the same asset as no longer viable or commercially potential had passed a resolution dt. 1st April, 2002 and converted/treated the stock-in-trade in the form of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the period of holding of the land. Therefore the material period to be reckoned for determining the nature of capital gain is from the time of sale (sic) of stock conversion of commercial or business asset into 'capital asset' to the date of transfer or sale of the asset and not from the date of acquisition upto the date of transfer in this case. As stated earlier, the land has been held by the company as business asset in the form of stock-in-trade and the same was converted into investment or capital asset on 1st April, 2002 as holding of the same was not considered commercially profitable. The intended utilization and actual utilization of the asset determines whether the same is capital asset or business asset. In the present case, the land was purchased by the company for the purpose of its business and also for earning business profit and the same was held as such upto 1st April, 2002. It was not a capital asset prior to 1st April, 2002. As observed by the AO in para 4.4 of his order the appellant has also got benefits during the financial years 1998-99 to 2001-02 in the form of expenses against the property in stock-in-trade and no tax was paid on it. Sec. 2(29A) and 2 (42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company acquired a property i.e., land for a consideration of Rs. 3,03,78,520 and the same was subjected to development in the financial years 2000-01 and 2001-02 incurring certain expenditure. The cost of acquisition of the said property along with the development expenditure incurred in respect thereof was shown by the assessee company as its stock-in-trade in the balance sheet for the relevant years upto 31st March, 2002. As on 1st April, 2002, the said property shown as its stock-in-trade was converted by the assessee company into investment and the same was sold on 12th Dec., 2002 to another company M/s Premier Tyres Ltd. for Rs. 6 crores. The profit arising from the said sale was claimed by it to be a long-term capital gain. The AO as well as learned CIT(A) however did not accept the said claim of the assessee and brought to tax the said profit under the head 'Short-term capital gain'. 9. The issue before us thus is whether the profit arising from the sale of the property is long-term capital gain or short-term capital gain. 'Long-term capital gain' is defined in s. 2(29B) as capital gain arising from the transfer of long-term capital asset whereas 'short-term capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the stock-in-trade for the purpose of its business and this being so, we are of the view that the period for which the said property was held by the assessee company as stock-in-trade of its business could not be reckoned for ascertaining as to whether it was a long-term capital asset or a short-term capital asset within the meaning given in ss. 2(29A) and 2(42A) as the same was not held by it as a capital asset. It is only when the same was converted by the assessee company into investment i.e., w.e.f. 1st April, 2002 that the same was held by it as capital asset and as the same was held by it for not more than 36 months immediately preceding the date of its transfer i.e., 12th Dec., 2002, it was a short-term capital asset as defined in s. 2(42A) and the capital gain arising from the sale thereof was chargeable to tax as 'short-term capital gain' as defined in s. 2(42B). In that view of the matter, we find no infirmity in the impugned order of the learned CIT(A) upholding the action of the AO in treating the profit arising from the sale of the said property as short-term capital gain and upholding the same, we dismiss this appeal filed by the assessee. 13. In the result, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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