TMI Blog2017 (6) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Ld Principal CIT has failed disprove the said claim of the assessee. Hence, in our view, the AO has taken a possible view in this matter and further the Ld Principal CIT has failed to show that the tax which was lawfully exigible has not been imposed. It cannot also be said that the AO has applied the provisions on an incorrect way or there was incomplete interpretation of the provisions, since the view taken by the AO is a possible view. Hence CIT has assumed jurisdiction u/s 263 on this issue without properly complying with the mandate of the section, i.e., he has failed to show that the assessment order was erroneous on this issue causing prejudice to the revenue. Weighted deduction u/s 35(1)(ii)- Held that:- We notice that the assessing officer has failed to examine the same at all. Further the Ld Principal CIT has also observed that the weighted deduction is allowed upon compliance of certain conditions, which require examination. Under these set of facts, we are of the view that the Ld Principal CIT was justified in invoking revision provisions on this issue. Appeal decided partly in favour of assessee. - S.A. No. 287/Mum/2017, And I.T.A. No. 2830/Mum/2016 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into stock in trade. As per the agreement, the assessee is eligible to get 51% saleable area from the developer. Further TDR (transferrable development rights) could be purchased and loaded on the property which would increase permissible FSI consumption, on which also the assessee had 51% right. The assessee s case before the AO was that no tax liability would arise on revaluation of cost of land and also upon entering into development agreement in respect of stock in trade. The AO completed the assessment accepting the explanations of the assessee. 5. However, Learned Principal CIT took the view that the assessee is liable to pay capital gain tax on conversion of capital asset into stock in trade, since the transfer has been completed upon entering into development agreement. According to Ld Principal CIT, the assessing officer has not properly examined this issue in accordance with the law. The Ld Principal CIT further noticed that the assessee has donated a sum of ₹ 70.00 lakhs to M/s ASPEE Agricultural Research and Development Foundation and claimed weighted deduction u/s 35(1)(ii) of the Act at ₹ 1,22,50,000/-. The Ld Principal CIT noticed that the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain would arise during the year under consideration. Accordingly it was contended that the AO has taken a possible view of the matter. Further, as per the development agreement, the developer would bring TDR in order to increase the FSI. Since the assessee was getting 51% of the aggregate saleable area, it was contended before Ld Principal CIT that the cost of TDR is indeterminable in its hands and hence no capital gain would be chargeable. However, learned Principal CIT observed as under with regard to various submissions of the assessee:- While it is true that the Assessing Officer appears to have sought an explanation with reference to the chargeability of capital gain on conversion of capital asset into stock in trade, the reply given by the assessee at that point of time is almost similar to the reply given during the present proceedings and seems to skirt around the issue and perhaps deliberately fails to address it. The Assessing Officer has accepted the response of the assessee, which is devoid of not only merit but also logic mechanically without any application of mind and in complete disregard the relevant statutory provisions and the applicable judicial decisions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be full value of consideration received or accruing as a result of the transfer of the capital asset. The Ld A.R submitted that the assessee has given license only to the developer through the development agreement and hence there is no transfer of any asset. He further submitted that the Ld Principal CIT has taken the view that the provisions of sec. 2(47)(v) of the Act would be applicable to the impugned transaction of development of a land held as stock in trade. The Ld A.R invited our attention to sec. 2(47) of the Act, which commences as under:- 2(47) transfer in relation to a capital asset, includes,-- . The Ld A.R submitted that the definition of the term transfer given in that section would apply only in relation to a capital asset and not to Stock in trade. Accordingly he submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter it applied for renewal of the same. However, the renewal got delayed and hence the Ld Principal CIT has taken the view that the AO has not examined the same. 11. The Ld CIT D.R, however, submitted that the Ld Principal CIT has deliberated in a detail as to how the capital gain tax would arise during the year under consideration. He submitted that the action of the assessee in obtaining valuation reports as on 1.4.1981 and 1.4.2010 would show that the assessee was very well aware of the fact that the transfer of the asset has been completed during the year under consideration. He submitted that the deeming provisions of sec. 2(47)(v) would be applicable to the impugned transaction and the Ld Principal CIT has rightly applied the same by following the decision rendered by Hon ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra). He further submitted that the AO did not discuss anything about these transactions in the assessment order. 12. With regard to the weighted deduction claimed by the assessee, the Ld CIT DR submitted that the assessing officer did not examine the said claim at all during the course of assessment proceedings. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282. 14. It is settled proposition of law that the Ld Pr. CIT can revised the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue. The question as to when an order can be termed as erroneous was explained by Hon ble Bombay High Court in the case of Gabriel India Ltd (203 ITR 108) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sec. 2(47)(v) of the Act, have been completed during the instant year. 16. The main contention of the assessee is that the view taken by the Ld Principal CIT is not in accordance with the mandates of the provisions of sec. 45(2) and sec. 2(47)(v) of the Act. We have already extracted both the provisions in the earlier paragraphs. Sec. 45(2) of the Act clearly provides that the taxability of the Capital gains would arise only in the year in which the stock in trade is sold. In the instant case, there is no dispute that the assessee has converted its capital asset into stock in trade as on 1.4.2010. The question is whether or not the transfer of stock in trade is completed upon entering into the development agreement ? The Ld Principal CIT has taken the view that the provisions of sec. 2(47)(v) shall apply to the impugned transaction and hence as per the said provision, the transfer shall be deemed to have been completed. However, the contention of the assessee with regard to the view so taken by Ld Principal CIT is twofold, viz., (a) the developer has been given only licencee rights and the possession has not been legally handed over and hence the provisions of sec. 2(47)(v) wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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