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COMMISSIONER OF INCOME-TAX Versus SAFFIRE HOTELS P. LTD.

2015 (11) TMI 386 - BOMBAY HIGH COURT

Computation of income arising from the conversion/treatment of land into stock-in- trade of construction business and profits thereon - invoking of section 45(2) accepted by ITAT - Held that:- The fact that the land and its buildings were treated by the respondent-assessee as capital asset as, according to them, the project was not completed loses all significance, once the Revenue does not accept the same and proceeds to hold that the property had been sold in the subject assessment year and th .....

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h stock-in-trade yet for purpose of computing capital gains the date of conversion would have to be determined. This exercise has to be carried out by the Assessing Officer after considering the evidence to be led before it. Thus, no fault can be found with the above direction of the Tribunal as it is a consequence of the finding of fact arrived at by the Tribunal that the land in question was originally held as capital asset and was later converted into stock-in-trade. - Decided against revenue .....

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ence that an amount of ₹ 27.31 lakhs was the amount received in cash by the respondent- assessee. We find that the aforesaid conclusions reached by the Tribunal is a possible and reasonable view. Thus, no substantial question of law arises for our consideration. - Decided against revenue. - Income Tax Appeal No. 105 of 2013. - Dated:- 2-3-2015 - M. S. SANKLECHA and G. S. KULKARNI, JJ. Tejveer Singh for the appellant. Percy Pardiwalla, Senior Counsel, instructed by RMG Law Associates, for t .....

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ssee for invoking of section 45(2) of the Act in relation to the computation of income arising from the conversion/treatment of land into stock-in- trade of its construction business and profits thereon ? 2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal is correct in setting aside the case to the file of the Assessing Officer to decide the year of conversion or treatment of land into stock-in-trade in spite of the fact that the assessee-company is involved i .....

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Nos. 1 and 2 3. The respondent-assessee is engaged in the business of developing property and declared an income of ₹ 35.59 lakhs. The respondent-assessee claimed to be following the project completion method and no premises has been sold during the relevant assessment year. During the assessment proceedings the respondent-assessee's contention that no premises had been sold was found to be incorrect. Thus, by order dated January 23, 2006, the Assessing Officer enhanced the income by & .....

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on 45(2) of the Act were attracted when the land (capital asset) was converted into stock-in-trade. It is at that time the same to be brought to tax although payable when the stock-in-trade was sold. The Commissioner of Income-tax (Appeals) did not accept the above submission of the assessee and upheld the order dated March 23, 2006, of the Assessing Officer. 5. On further appeal, the Tribunal by the impugned order on the basis of the facts found that during the course of assessment proceedings .....

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overnment of India Tourism Department dated August 21, 1971, evidencing approval for the proposed construction of a hotel building. Further, evidence was led before the Tribunal in the form of commencement certificate issued in 1972 by the Pune Municipal Corporation for undertaking the basic initial construction work for the hotel project. Thus, the Tribunal by the impugned order held that the provisions of section 45(2) of the Act in the present facts would be applicable. 6. Further, on the iss .....

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he commencement certificate dated June 15, 1972, issued by the Pune Municipal Corporation which was produced only before the Tribunal and, thus, the same could not be relied upon. Besides, it is emphasized that the respondent-assessee in spite of being in construction business has been showing land as capital asset in its balance-sheet. In these circumstances, it is the submission on behalf of the Revenue that section 45(2) of the Act is inapplicable as the assessee is in the business of constru .....

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ust 21, 1971, from the Government of India, Department of Tourism granting approval to its proposed hotel and the acquisition of the lands in question was for that purpose. Besides, there was also an opinion of the company secretary in 1993 advising the respondent-assessee that it could utilise the land in its new business of development of land construction. Therefore, even if one ignores the fresh evidence which was in the form of commencement certificate dated June 15, 1972, issued by the Pun .....

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of a capital asset into stock-in-trade would arise and require consideration. The impugned order on facts has found the land was originally a capital asset which has later been converted into stock-in-trade. Thus, section 45(2) of the Act is applicable. 9. However, the capital gains on conversion of capital assets into stock-in- trade is payable only in the year in which the assessee ultimately sells such stock-in-trade yet for purpose of computing capital gains the date of conversion would have .....

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asonable view on the basis of the appreciation of facts. Thus, no substantial question of law arises for our consideration. Therefore, we see no reason to entertain questions Nos. 1 and 2. Appeal dismissed as regards questions Nos. 1 and 2. Re : Question No. 3 11. As a result of survey proceedings, the Assessing Officer sought to bring to tax an amount of ₹ 27.31 lakhs as concealed income on account of certain cash transactions. This was on the basis of certain documents found during the c .....

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