9911796707
Advanced Search 
TMI Blog2015 (5) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax (Appeals) ought to have appreciated that the land was originally converted as stock in trade on 01.04.2007 and therefore as held by the Tribunal, the profit on sale of the land to the extent or gain determined on the date of conversion under Section 45(2) should have been assessed as capital gains and only the balance should have been assessed as business profit. 5.The Commissioner of Income tax (Appeals) ought to have appreciated that as per Section 45(2) when the land is converted into stock in trade deemed capital gains as on date of conversion should be assessed as such at the time of actual transfer of land. When the land demerged from Essorpee Mills Limited to Essorpee Holdings Private Limited there was no transfer and hence when Essorpee Holdings Private Limited sells the property, the assessment of deemed capital gains under Section 45(2) should have been taken into consideration." 3. The facts of the case are that the assessee is engaged in the business of real estate, financial services and other business. The assessee filed its income electronically on 16.09.2011 declaring total income of Rs. 24,71,8101-. The income included business loss of Rs. 12,32,049/-, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sivakumar utilizing the POA granted to him for a consideration of Rs. 15,00,00,000- with which the loan outstanding was settled. During the year the assessee had transferred their holding of preference shares in EML for a consideration of Rs. 20,00,000/- and booked long term capital loss of Rs. 32,10.42.503/-. The assessee offered the gain on transfer of entire 10.15 acres of land as long term capital gains and set it off against the long term capital loss incurred by the assessee. The Assessing Officer assessed the entire sale consideration as business profit on the ground that the land was shown as stock in trade. Aggrieved, the assessee went in appeal before the Commissioner of Income-tax(Appeals). The CIT(A) has given partial relief by holding that the sale consideration on the extent of 5.075 acres of land was already brought to tax in the hands of EML, for the assessment year 2009-10, the assessing officer has to treat the balance amount of Rs. 15 crores as sale consideration for the remaining land of 5.075 acres transferred to M/S Globus Realtors Pvt. Ltd. as business income in the hands of present assessee. Against this the assessee is in appeal before us. 4. The ld. AR su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an area measuring 5.075 acres was sold by Power of Attorney holder Shri V. Sivakumar to M/s. Rasi Seeds (P) Ltd. and M/s. Globuse Realtors Pvt Ltd. EML gave Power of Attorney to Shri V. Sivakumar through registered document for part of the land measuring 5.075 acres on 21.04.2008. When EML have filed demerger application before the High Court, the issue of transfer of land admeasuring 5.075 acres to Shri V. Sivakumar was not brought to the notice of the Court. The High Court of Madras as per the Scheme of Demerger approved EML demerging with M/s. EHPL, transferring the real estate division of EML to EHPL as a going concern. As on 31.03.2010, the assessee has shown the land in question as stock-in-trade. As per the submissions made by the assessee before the Assessing Officer, he has converted the stock-in-trade into Fixed Asset as per the Board Resolution. It is to be stated here that the Directors of the assessee company are one and the same of EML. The demerger was approved by the High Court of Madras on the request of EML to hive out the real estate division as EHPL with the land remaining as stock-in-trade in EML balance sheet. The demerger petition was filed to form the real e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd both sides. Perused the orders of the lower authorities and records. The Commissioner of Income Tax (Appeals) in his elaborate order considered the submissions of the assessee as well as contentions of the Assessing Officer and arrived at a conclusion that there is a transfer within the meaning of section 2(47) of the Act in respect of the property and income had arisen during the assessment year 2009-10. However, since the assessee has converted the capital asset into stock-in-trade, he has directed the Assessing Officer to calculate the business income on the sale of 5.075 acres of land by the assessee company for the assessment year 2009-10. However, he directed the Assessing Officer to take 50% of Rs. 35,25,00,000/- as sale consideration in respect of total property of 10.15 acres of land for the assessment year 2009-10 as business income on account of transfer of property. The counsel for the assessee could not substantiate his claim that there is no transfer and no income had arisen during the assessment year 2009-10 and at the same time, has no serious objection in assessing gain as business income, as per the provisions of section 45(2) of the Act. The assessee has not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (WDV of building) 12.This prayer is made since the cost inflation index has increased only by 5.6% from the financial year 2007- 08 to financial year 2008-09." 9. Therefore, we uphold the order of the Commissioner of Income Tax (Appeals) as far as assessing the income in respect of transfer of property of the assessee as business income. However, the gain on transfer of property up to the date of conversion into stock-in-trade has to be assessed under the head "capital gains" and the gain in respect of property i.e. after the date of conversion into stock-in-trade has to be assessed as business income. As the Assessing Officer computed the entire sale consideration under the head long term capital gains, he did not apply the provisions of section 45(2) of the Act. In the circumstances, we direct the Assessing Officer to compute the business income in respect of stock-intrade of the property taking into consideration the provisions of section 45(2) of the Act in accordance with law after giving an adequate opportunity of hearing to the assessee in the light of the submissions made by the assessee before us. Ground no.8 of grounds of appeal is allowed with the above observations. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
