TMI Blog1978 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. 3. During the year of account the assessee sold land to the extent of 741 grounds and 2104 sq. ft. to M/s. Simpson Co., of which the assessee is a 100 per cent subsidiary. The excess amount of Rs. 15,57,891 realised on this transaction was offered by the assessee as capital gains and exemption under s. 47(v) was claimed. The ITO held that the sum of Rs. 15,57,891 realised by the assessee should be treated as business receipt taxable. Likewise, consequent to the nationalisation of general insurance,, the assessee had to surrender certain shares of Hercules Insurances Co. Held by the assessee for a compensation. The assessee made a gain of Rs. 4,89, 440 which was also offered as capital gains for tax. The ITO treated the above tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was imminent. The only sale according to the AAC to an outsider was of a negligible area of 1.524 acres, the reason for which sale was given as the necessity to round off the borders of the land held by the factories in order to facilitate their working. From the above data the AAC came to the conclusion that the assessee had treated the land only as an investment and not as stock-in-trade. Even though, therefore, there was provision in the memorandum of association for the assessee to deal in land, the assessee transactions cannot be treated as business transactions. With regard to the shares, the AAC found that the shares were purchased in 1960 and there was only a sale of a small quantity of shares in 1967 in order to liquidate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the land had to be sold to India Piston in order OT meet some demand of cash. The other sales to allied companies were only for the purpose of getting rid of the insecure position on account of the impending urban land ceiling legislation. Even to the parent company the assessee has transferred its land only for the purpose. The assessee has not sold the lands to any outsider much less in the capacity of a business man. The same position obtains in the case of the insurance company shares; if general insurance had not been nationalised the assessee would have still retained the shares with him. In both the cases the transactions were of capital assets. 7. It is well settled that in order to treat a transaction in land as a business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch imminent legislation and were trying to arrange their affairs. The price at which the present lands were sold, namely Rs. 15,57,891, had not been proved to be with any evidence the market value of the land. All these details indicate that the assessee was not a dealer in land and the transfer in the present case is only of a capital asset. We see no reason to interfere with the conclusion of the AAC on this point. 8. Apart from the fact that all the sales are allied concerns, one thing which strikes us as important and which would in a very large way help to decide the question of the assessee's intention is the fact that these lands had been transferred to the parent company at what is treated to be the market value. The figure of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions between a parent and subsidiary company, the nature of the transactions and the value of the transferred asset cannot be treated as the same as in the case of transfers at arms length between two different persons or entities. Mostly this is only a matter of book adjustment appearing as profit on the one hand and loss on the other. As stated above, for this paper transaction the assessee could have instead of putting the value at Rs. 15 lacs put the value of the land even at 5 lacs or 55 lacs; still the entries in the books would be tallied. It will not, therefore, in the first place be proper to hold either that there was any increase in profit even if the transactions were treated as a business transaction and not a transfer of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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