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2016 (4) TMI 35 - ITAT JAIPUR

2016 (4) TMI 35 - ITAT JAIPUR - TMI - Fair Market Value of land for the purpose of Computation of Capital Gain - Indexed cost of acquisition - whether FMV of land for the purpose of Computation of Capital Gain, should have been taken on the date of Notification in official Gazette by which agriculture land became the Capital assets within meaning of section 2(14)(iii)? - Held that:- What is relevant is the actual “cost of acquisition” of the asset in the hands of the assessee and not the FMV on .....

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l remain the same whether the asset was a capital asset within the meaning of section 2(14) at the time of initial purchase or it falls within the definition of the capital asset because of subsequent legislative notifications as in the instant case where due to the a specific notification, the agriculture land falls within the specified limits of a municipality and it came within the ambit of a capital asset under section 2(14) of the Act. Accordingly, once an asset becomes “capital asset” and .....

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relief by way of deduction under section 54F of the Act.- Decided in favour of assessee

Addition on unexplained cash deposit in Bank account - Held that:- AO made the addition simply on the ground that the assessee could not explain the source of deposit. It is pertinent to note that neither the question of deposit of cash was made in query letter dated 29.02.2011. The compliance of query letter was made and copy of same is placed in paper Book. The final reply of various query lett .....

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or remand - ITA No. 176/JP/13 - Dated:- 12-2-2016 - SHRI R.P. TOLANI, JM and SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri S.K. Sharma, and Shri Mukesh Gupta (C.As.) For The Revenue : Shri Rajendra Singh (JCIT) ORDER PER SHRI VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-III, Jaipur dated 14.1.2012 wherein the assessee has taken the following three effective grounds of appeal: (i) On the facts and in the circumstances of the case , the ld .....

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ng claim of benefit of section 54F of the I.T. Act, 1961. (iii) On the facts and in the circumstances of the case , the ld. CIT(A) has erred in confirming the addition of ₹ 19 lacs made by AO under the head unexplained cash deposit in Bank account. 2. Regarding ground No.1, the relevant facts as apparent from records are that during the financial year relevant to A.Y. 2009-10, assessee had sold agricultural land situated at Sanganer for a total consideration of ₹ 38,00,000/-. Since t .....

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1,031/-and the long term capital gains was accordingly computed at ₹ 37,98,969/-. 2.1 The ld. AR argued the matter at length and submitted that the AO has adopted the cost of acquisition of agriculture land as on 01.04.1981 at ₹ 97.63/- per bigha without appreciating the situation of land and circumstances that land was sold on 20.09.2008. In case capital gains from the sale of agricultural land is brought to tax, the assessee should have an option to substitute its cost on the date .....

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K Kooka (1962) 46 ITR 86 (SC) CIT vs. Hamtapura Te Co. Ltd. (1973) 258 (SC) CIT vs. Groz Bockert Sabod Ltd. (1979) 89 ITR 258 (SC) Gurjit Singh mansahia vs. ITO (1983) 5 ITD 126 (CHD) The Ld AR submitted that though the aforesaid decisions relates to introduction of clause III to section 2(14) yet these decisions are applicable in the instant case because after extension of municipal corporation area of Jaipur, the land in question became the capital asset and not prior to that. 2.2 The ld DR su .....

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ed the material on record. In order to decide the issue under consideration, it would be relevant to examine the relevant provisions of the Act which have a bearing on the matter. 3.1 Section 45 of the Act provides for levy of income tax on the profits and gains arising from, the transfer of a capital asset effected by the assessee in the previous year. Section 48 of the Act deals with the mode of computation of income chargeable under the head Capital gains and provides that the income chargeab .....

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ituted for indexed cost of acquisition which has been defined under Explanation (iii) to section 49 as under: Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on the 1ST Day of April, 1981, whichever is later. Further, Section 55(2) defines the express .....

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s makes it clear that what is relevant is the actual cost of acquisition of the asset in the hands of the assessee and not the FMV on the date on which the asset became a capital asset for the purpose of levy of capital gains tax. The only exception is where the asset was purchased prior to 1.4.1981, the legislation has provided a specific relaxation by virtue of which the actual cost can be substituted for FMV prevailing as on 1.4.1981. The said relaxation cannot be extended, as suggested by th .....

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nd it came within the ambit of a capital asset under section 2(14) of the Act. Accordingly, once an asset becomes capital asset and it is transferred thereafter, the capital gains has to be computed in the manner laid down in section 48, and 55(2) of the Act as has been rightly done by the AO in the instant case. 3.3 Similar line of arguments was advanced by the Counsel for the appellant in case of Ranchhodbhai Bhaijibhai Patel vs. CIT (1971) 81 ITR 446 (Guj) where the Hon ble Gujarat High Court .....

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ficult to see how it can be said that the property as a capital asset was acquired by the assessee when it was converted into a capital asset and how it would be possible in such a case to determine the cost of acquisition. There are no two different acquisitions of property, one as a non-capital asset and the other as a capital asset. The property is acquired by the assessee only once and merely its character changes in the sense that, whereas, originally it was non-capital asset, it now become .....

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cquisition, the market value of the property on that date should be deemed to be the cost of such acquisition. There is no warrant for imposing such legal fiction on the plain language at section 48, clause (ii)…. The contention of the assessee also stands refuted by the language of section 55(2), clause (i). The property which is transferred could become the property of the assessee only at one point of time. It would not become the property of the assessee as a non-capital asset at one .....

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zed canon of construction. Then again it is apparent from sections 49, 51 and 55(3) that the words the cost of acquisition of the capital asset , the cost for which the asset was acquired , and the cost for which the previous owner of the property acquired it , are variously used by the Legislature to denote the same idea and the reference is intended to be made only to the cost of acquisition of the property regardless of the question whether it was a capital asset or a non-capital asset at the .....

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hich the Ld AR has drawn our reference in support of his contention. It is noted that the facts arising in that case were that the assessee who held by way of investment several shares in companies commenced a business in shares converting the shares into stock-in trade of the business, and subsequently sold these shares at a profit. On these facts a question arises whether the assessee s assessable profits on the sale of shares is the difference between the sale price and the cost price or the .....

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ich the sharers were originally purchased by the assessee. Also, ld AR had drawn from another decision of the Hon ble Supreme Court in case of Groz-Beckert Saboo Ltd. 116 ITR 125, wherein the Supreme Court held that: it is now well settled that where an assessee converts his capital assets into stock in trade and starts dealing in them, the taxable profit on the sale must be determined by deducting from the sale proceeds the market value at the date of their conversion into stock- in- trade (sin .....

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the instant case are clearly distinguishable. In the instant case, agricultural land was sold and its character changed from a non-capital asset to a capital asset by virtue of a statutory notification whereby the agricultural land came within the specified limits of a municipality. The issue in the present case is also not for ascertaining the business income of the assessee. The issue involved in the present case is to ascertain the capital gains as per the provisions contained in section 45, .....

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by the appellant. Hence, the same is dismissed. 4. Regarding the next ground no. 2 where the appellant has challenged the action of ld. CIT(A) in not considering claim of benefit of section 54F of the I.T. Act, 1961, it is noted from perusal of the records that the AO did not allow deduction claimed u/s 54F of the Act since the investment of ₹ 15,40,000/- was not supported by any withdrawal from the bank account till the due date of filing of the return of income. 4.1 During the course of .....

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that it is evident from the bank statement that assessee made withdrawals of ₹ 15,40,000/- on 04.09.2010 for making payments towards construction of residential house. The photocopy of approved valuer in support of cost of residential house is placed at p. 9-14 of PB. In view of the above facts without properly appreciating the facts of the case, the AO has made the addition and confirming by CIT(A) on ex-parte basis. 4.2 Considering the totality of the facts and circumstances of the case, .....

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