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TMI Blog2017 (10) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2006-07 was valid. 2. That under the facts and circumstances of the case, The Ld. D.C.I.T. Circle-4, Jaipur and Ld. C.I.T. (Appeals) II Jaipur have erred disallowing Rs. 1790922/- paid to JVVNL on account of Compounding Charges." 3. Briefly the facts of the case are that the assessment was originally completed u/s 143(3) on 23.12.2008. Subsequently, it comes to the notice of the Assessing officer that the income on account of long term capital gains amounting to Rs. 5,69,55,130/- has escaped taxation and notice u/s 148 was issued. After disposing off the objection raised by the assessee, assessment proceedings were completed u/s 147 wherein AO brought to tax long term capital gains of Rs. 7,82,45,942/-. The Assessing Officer considered sales consideration u/s 50C as determined by the DVO and Sub-Registrar at Rs. 7,83,10,852/-. And regarding cost of acquisition, the Assessing Officer noted that the original cost of land in the books of erstwhile partnership firm, Assam Roller Flour Mills was shown at Rs. 11,648/- and accordingly, he computed the indexed cost of acquisition at Rs. 55,910/- and after giving allowance for the same, brought to tax long term capital gains of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, inheritance or devaluation, the cost of acquisition was to be calculated as per the provisions of section 55(2)(b)(ii). The said section provides that where the capital asset became the property of the assessee by any of the modes specified in sub section (1) of section 49 and the capital asset became the property of previous owner before 01.04.1981, the cost of acquisition would be the cost of capital asset to the previous owner or the fair market value of the asset as on 01.04.81 at the option of the assessee. The partnership firm had purchased this land in 1962 from Sh. Hari Singh at a purchase consideration of Rs. 11,648/-. On succession, the shares were allotted to the erstwhile partners of the firm in proportion of their capital. The appellant had also obtained valuation report from the registered valuer for the purpose of determining the fair market value of the land as on 01.04.1981. Therefore in view of these specific provisions, the appellant company had rightly claimed the benefit of indexation on the fair market value of the land as on 01.04.1981. Since the land was converted into stock in trade in AY 2005-06, the AO was not right in applying the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase consideration of Rs. 11,648/- and since the partnership firm was succeeded by the assessee company, the cost of acquisition has to be determined in terms of provisions of section 49(i)(iii)(a) read with section 55(2)(b)(ii). Accordingly, the cost of acquisition would be cost of asset to the previous owner or the fair market value of the asset as on 01.04.1981, at the option of the assessee. Further, the ld. CIT(A) has held that the appellant company has already offered profit on sale of stock-in-trade of Rs. 1,13,02,091/- as business income as per return of income and same was accepted by the Revenue in the original assessment and AO had again charged capital gains tax which amounts to double taxation. 6. The issue for consideration therefore is whether the capital asset has been converted into stock-in-trade of business carried on by the assessee as claimed by the assessee and upheld by the ld CIT(A). Where the answer to the said issue is in affirmative, whether the provisions of section 45(2) would be applicable and not the provisions of section 50C as invoked by the Assessing officer. In our view, the second issue is no more rest-integra in view of the decision of Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 45(2) are satisfied. The above findings of the Assessing officer remain uncontroverted before us which shows due compliance of provisions of section 45(2) of the Act. In the reassessment proceedings, there is no wisper by Assessing officer that based on any additional information, he holds a different opinion on the matter. It is also not the case of the Revenue that fair market value of the asset on the date of conversion so determined by the assessee at Rs. 5,65,58,400/- is not correct or the matter was referred to the DVO who has determined a different valuation or for that matter, why the valuation has increased from Rs. 5,65,58,400/- to Rs. 7,57,00,000 in a short span of last than a year when the asset was converted into stock-in-trade and subsequently sold. 11. Further, it is noted that in compliance thereof, the assessee company has worked out long term capital loss of Rs. 4,52,640/- taking into consideration the full value of the consideration at Rs. 5,65,58,400/- as per valuation report dated 30.03.2005. The cost of acquisition was taken at Rs. 1,18,77,264/- as on 01.04.1981 as per valuation report dated 20.3.2005 and indexed cost thereof was comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 17,90,922/- to JVVNL towards settlement of dues of JVVNL. The entire issue of electricity had been settled during the year. The assessee company had paid the amount as per JVVNL letter dated 04.01.2006. The liabilities had crystallized, settled and adjusted during the year. The details of payment made by cheques to JVVNL, Jaipur were as per their acknowledgement letter dated 04.01.2006. The payment pertained to electricity arrears of the previous years paid in consequence of final settlement and as such were claimed in the year. As the matter was in dispute and litigation in High Court was pending but after the settlement payment was made during this assessment year 2006-07. The break-up as under:- a. Principal due Rs. 15,134/- b. Charges due to non payment Rs. 15,788/- c. Compounding charges Rs. 11,00,000/- d. Principal Due Rs. 4,00,000/- e. Charges due to non payment Rs. 2,60,000/- Total Rs. 17,90,922/- The assessee company also submitted copy of minutes of Corporate Level Settlement Committee dated 12.05.2005. From the above, it was clear that the committee in its meeting held on 25.04.2005 approved the proposal. Therefore, the amount was determined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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