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2016 (3) TMI 742 - ITAT CHENNAI

2016 (3) TMI 742 - ITAT CHENNAI - TMI - Assessment of capital gains on sale of 5.075 Acres of land - Held that:- The property in question was given as security to M/s Globus Realtors Pvt. Ltd. for advancing loan to the sister concern M/s Essorpe Holdings Pvt. Ltd. Therefore, it is obvious that to promote the business of sister concern, M/s Essorpe Holdings Pvt. Ltd, the assessee gave the land in question as security. While giving the security, the assessee has also executed power of attorney in .....

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sing in the course of business. Since no amount was realized and the assessee-company suffered a loss for giving security to the sister concern, the same has to be allowed as business loss while computing the taxable income. In view of the above, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to compute the capital gains u/s 45(2) of the Act on sale of land upto the date of .....

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ACCOUNTANT MEMBER For The Appellant : Shri R.Vijayaraghavan, Advocate For The Respondent : Dr. Milind Madhukar Bhusari, CIT ORDER PER N.R.S.GANESAN, JUDICIAL MEMBER This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-I, Coimbatore, dated 9.12.2014 and pertains to assessment year 2009-10. 2. The only issue arises for consideration is assessment of capital gains on sale of 5.075 Acres of land. 2. Shri R.Vijayaraghavan, ld. Counsel for the assessee .....

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ldings Pvt. Ltd, a sister concern of the assessee-company. The assessee has also executed a power of attorney in favour of Shri V. Sivakumar, the Managing Director of M/s Globus Realtors Pvt. Ltd in respect of 5.075 acres of land. The physical possession of the land was also handed over to M/s Globus Realtors Pvt. Ltd. Shri V.Sivakumar, Managing Director of M/s Globus Realtors Pvt. Ltd, sold 5.075 acres of land to M/s Rasi Seeds (P) Ltd and M/s Globus Realtors Pvt. Ltd. on 5.1.2009 and 7.1.2009 .....

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contention of the assessee before the lower authorities is that there was a demerger by the order of the High Court with effect from 28.2.2007 in respect of real estate division. The manufacturing division remained with the assessee-company. The real estate division was allotted to M/s Essorpe Holdings Pvt. Ltd, therefore, with effect from 28.2.2007, the assessee is no longer the owner of the landed property. The ld. Counsel further submitted that when the matter came up before this Tribunal in .....

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to compute the business income in respect of the stock-in-trade of the property after considering the provisions of sec. 45(2) of the Act. According to the ld. Counsel, in view of this observation of this Tribunal, the property was capital asset till the assessment year 2007-08 and from assessment year 2007-08, the property was converted into stock-in- trade. According to the ld. Counsel, the assessee has not received any consideration on transfer of the land to M/s Rasi Seeds (P) Ltd, therefore .....

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when the land was actually sold, the income arising from the sale of such land has to be considered as business income. The ld. Counsel further submitted that the land was given as security to the sister concern in the course of business activity for commercial purpose. Therefore, the loss suffered by the assessee in the course of business activity has to be allowed as business loss. 3. On the contrary, Dr. Milind Madhukar Bhusari, ld. Departmental Representative submitted that this Tribunal in .....

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e earlier round of litigation. The CIT(A) after referring to the order of this Tribunal dated 11.7.2013, found that the issue of taxability regarding gain on transfer of capital asset was decided by this Tribunal therefore, the CIT(A) found no merit in the claim of the assessee. 4. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee-company was demerged by an order dated 15.9.2009. Before demerger, the assessee-compa .....

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the assessee to M/s Rasi Seeds (P) Ltd. The question arises for consideration is whether the profit arising on sale of the land while enforcing the security given by the assessee for loan given to the sister concern namely, M/s Essorpe Holdings Pvt. Ltd, is assessable in the hands of the assessee or not? As rightly pointed out by the ld. DR, this Tribunal in the earlier occasion by an order dated 11.7.2013 examined this issue and found that upto the date of conversion of the capital asset into s .....

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nal dated 11.7.2013 attained finality. 5. We have carefully gone through the provisions of sec. 45(2) of the Act which reads as follows: Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as, stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transfer .....

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rty, the assessee has not received any amount, therefore, it has to be allowed as business loss. It is not in dispute that M/s Essorpe Holdings Pvt. Ltd. is a sister concern of the assessee. The property in question was given as security to M/s Globus Realtors Pvt. Ltd. for advancing loan to the sister concern M/s Essorpe Holdings Pvt. Ltd. Therefore, it is obvious that to promote the business of sister concern, M/s Essorpe Holdings Pvt. Ltd, the assessee gave the land in question as security. W .....

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