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TMI Blog2008 (10) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... otal consideration of Rs. 3,03,78,520. In the years 2000-01 land 2001-02, expenditure of Rs. 40,10,786 and Rs. 2,73,765 was incurred by the assessee company on the development of the said land and thus the total value of the said land was reflected at Rs. 3,46,63,069 in the balance sheet as on 31st March, 2002. Upto that date, the said land was shown by the assessee company as stock-in-trade in all its balance sheets. On 1st April, 2002, the said land however 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 giving rise to profit of Rs. 2,53,36,931. The said profit was shown as long-term capital gain in the return filed for the year under consideration and was declared at Rs. 1,66,09,750 after claiming benefit of indexation. As the said land was earlier held by the assessee company as stock-in-trade and converted into investment only on 1st April, 2002, the AO was of the opinion that it was held by the assessee company as capital asset only for a period of about 9 months before its sale on 12th Dec., 2002 and the same, therefore, constituted its short-term capital asset. He, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in reckoning whether it is short-term or long-term asset. He also relied on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Chunilal Khushaldas (1974) 93 ITR 369 (Guj) and that of Bombay High Court in the case of Executor of The Will of Late Manecklal Premchand vs. CIT (1990) 81 CTR (Bom) 124 : (1990) 186 ITR 554 (Bom). The AO also referred to the decision (definition) of capital asset given in s. 2(14) wherein it was specifically stated that capital asset does not include stock-in-trade held by the assessee for the purpose of its business or profession. He held that the property in question held by the assessee as stock-in-trade upto 31st March, 2002 thus could not be regarded as a capital asset upto 31st March, 2002 and it became a capital asset only on 1st April, 2002 when the same was converted from stock-in-trade into investment. Accordingly, he held that the said property was not held by the assessee company as capital asset for more than 36 months and the same being a short-term capital asset, the profit arising from sale thereof was chargeable to tax as short-term capital gain and not a long-term capital gain. He, therefore, computed such profit at Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet attached with the return of income which was converted into investment as per the said resolution dt. 1st April, 2002. In my view, the idea and wisdom behind resolution for such conversion of business asset into capital asset itself has demonstrated the fact that the same property has all along been treated and considered by the company as business or commercial asset to be sold or disposed of for earning business profit. In other words, the land was purchased with the object of exploiting it commercially and profitably in the line of the company's business as envisaged in the objects for which it was incorporated. In fact, I agree with the contention of the appellant that there was no proceed or accrual of income on the date of conversion of stock-in-trade into investment. However, a pertinent issue to be considered here is that the nature of the capital gain on sale of the said asset by the company. Sec. 2(14) provides 'capital asset' means property of any kind held by an assessee, whether or not connected with his business or profession but it does not include (i) any stock-in-trade, consumable stores or raw materials held for the purpose of his business or profession ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. It was held therein that what is relevant is the 'cost of acquisition' and not date on which the asset become a capital asset for the purpose of levy of capital gains tax. In that case the capital asset acquired by the father was not treated as business asset or held as stock-in-trade for the purpose of utilization or sale on future date for earning business profit. In view of the above facts and observations, I find the AO is right and justified in treating the capital gain as short-term capital gain and the same is upheld." 6. Aggrieved by the order of the learned CIT(A), the assessee company has preferred this appeal before the Tribunal. 7. At the time of hearing before us, learned counsel for the assessee has reiterated the submissions made on behalf of the assessee company before the authorities below. The learned Departmental Representative on the other hand, has relied on the orders of the authorities below in support of the Revenue's case submitting that the same are well-reasoned and well-discussed on the issue under consideration in this appeal. 8. We have considered the rival submissions and also perused the relevant material on record. It is observed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than 36 months immediately preceding the date of its transfer." 11. As is evident from the definitions given above, a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer is a short-term capital asset whereas a capital asset held by an assessee for 36 months or more is regarded as long-term capital asset. The expression used in both these definitions is 'capital asset' which clearly envisages that for ascertaining as to whether it is a short-term capital asset or a long-term capital asset, the period for which the said asset is held by the assessee as capital asset alone has to be reckoned. The claim of the assessee in the present case in this regard is that the asset in question i.e., the land was acquired by it in the financial year 1998-99 and although the same was held by it as stock-in-trade upto 31st March, 2002 and converted into investment only on 1st April, 2002, the period of holding it as stock-in-trade also has to be reckoned for the purpose of ascertaining as to whether it was a short-term capital asset or a long-term capital asset. We find it difficult to accept this claim of the assessee. 12. As rightly hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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