TMI Blog2017 (11) TMI 1958X X X X Extracts X X X X X X X X Extracts X X X X ..... or development had not been received by assessee or the said developer. Hence, the property i.e. stock in trade was not even ready for development. CIT(A) referred to the provision of Section 45(2) of the Act but goes on to say, since the assessee has declared income from capital gains, then the same may be assessed in the hands of the assessee. However, such assessment made in the hands of the assessee is against provision of the Act, especially with reference to Section 45(2) of the Act. In view thereof, we find no merit in the findings of CIT(A) in this regard Deduction u/s. 54B(1) and 54B(2) - Since the assessee would be liable to pay tax on the capital gain only, when the stock in trade is sold or otherwise, transferred by him. Then the question which arises is whether entering into development agreement by the assessee would result in otherwise, transferring of the said land by the assessee. We find no merit in the same and hold that the deemed transfer as envisaged under Section 45(2) of the Act, would arise only when stock in trade is sold or otherwise, transferred by him and not in the year, in which he converted his asset into stock in trade and further, entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rejecting the valuation of land adopted by the AO without directing the AO to refer the matter to DVO. 2. The Learned Commissioner of Income Tax (Appeals) erred in allowing the deduction claimed by the assessee u/s. 54B(1) B(2) of the Income Tax Act, 1961. 3. The Learned Commissioner of Income Tax (Appeals) erred in holding that the amendment to the section 55A of the Act i.e. the AO may refer the valuation to the DVO if he is opinion that the value claimed by the assessee is at variance with its FMV, effective from 01/07/2012, is prospective and cannot be applied to the A.Y.2010 -11, is not justified and not acceptable. The assessment proceedings in the case concluded on 04.03.2013 i.e. after 01/07/2012 and hence, the amendment was also applicable to this case. 4. The Learned Commissioner of Income Tax (Appeals) erred in not remanding the AO to refer the matter of valuation to the DVO for ascertaining the value than deciding the amendment to the section 55A is not applicable in this case. 5. The Learned Commissioner of Income Tax (Appeals) erred in failing to appreciate that the due date of filing of return in this case u/s. 139(1) of the Act is 31/07/2010 as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared capital gain at ₹ 1,16,99,600/-. The Assessing Officer noted that assessee in support of claim of cost of acquisition as on 01.04.1981, had relied on a valuation certificate of Registered Valuer. The Assessing Officer further noted that the valuer relied on certain sale instances, which were in respect of very small pieces of land and were used for NA purpose. The Assessing Officer was of the view that land of the assessee was agricultural land even three years before. At that time, if it was used for agriculture, the valuer should have referred to selling rates of agricultural land. The Assessing Officer also noted that assessee had not furnished any evidence about agricultural income derived from the said land even in those days. The Assessing Officer, thus, adopted the value of assessee s agricultural land at ₹ 50,000/- estimating ₹ 10,000/- per acre. The indexed value worked out to ₹ 3,16,000/- and long term capital gain was worked out to ₹ 1,59,34,000/-. The second aspect noted by Assessing Officer was investment of ₹ 90,00,000/- on 15.10.2010 in the Nationalized Bank. The assessee had claimed deduction u/s. 54B(2) of the Act. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the security deposit of ₹ 50,00,000/- as business income. The assessee explained before the CIT(A) that till 31.03.2010 even the municipal sanction of the plan for construction was not passed and so there was no question of any sale of flats by the developer till 31.03.2010. The amount received on account of security deposit was though taxable against sale proceed but they were not business receipts taxable in the hands of the assessee during the said previous year. The CIT(A) noted that as per the terms of development agreement i.e. Clause 11, the assessee was entitled to receive 37% in the gross receipts and further, as per Clause 15, the assessee was entitled to receive security deposit of ₹ 50,00,000/- for performance of the obligation by developer as per the agreement and another sum of ₹ 50,00,000/- was received in the succeeding Financial year. The CIT(A) observed that nature of transactions between the party by way of an agreement was in the nature of development agreement and could not be said to be sale of property strictly. The CIT(A) thus, held that the deposit of ₹ 50,00,000/- is not business receipts in the hands of the assessee. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Next the CIT(A) took up the claim of deduction u/s. 54B(1) for investment in agricultural land and also claim of ₹ 90,00,000/- u/s. 54B(2) for depositing in capital gain deposit scheme. Before CIT(A), the assessee furnished evidence of agricultural operation being carried out on the adjacent plot which was owned by assessee jointly with other person. He also pointed out that agricultural land sold by the assessee was ancestral land on which Bhui Mug crops i.e. groundnut, pulses and other vegetables were being grown as evident from the 7/12 extract which formed part of the registered sale deed. The 7/12 extract was also filed before the Assessing Officer during assessment proceedings. The assessee also owned NA potential plot adjacent to the said plot. The CIT(A) took note that evidences filed by the assessee during assessment proceeding that agricultural activities were undertaken by the assessee in the preceding years and the assessee had furnished 7/12 extract depicting agricultural produce cultivated by the assessee in the years between 2001-02 to 2010-11. The CIT(A) observed that the said extract not only shows the crops undertaken but also indicate details about par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 90,00,000/- in the capital gains account scheme, before filing income, u/s. 54(B)(2) of the Act. The CIT(A) in this regard held that as per the provision of the Act, the requirement for the assessee was to acquire the agricultural land within the period of two years from the date of sale and nowhere, it was mentioned that the sale proceeds received should be utilized for purchasing the new asset or amount of unutilized capital gain be deposited in the capital gains accounts scheme, before the due date of filing return of income. The CIT(A) allowed this claim of the assessee. 13. Aggrieved with the order of CIT(A), the Revenue is in appeal before the Tribunal. 14. The first issue which has been raised is against the deduction of fair market value as on 01.04.1981. The second issue which has been raised is against the order of CIT(A) in allowing deduction u/s. 54(B)(1) and 54(B)(2) of the Act. The Revenue is also aggrieved by the order of CIT(A) in interpreting the provision of Section 45(2) of the Act and in holding that the capital gain offered by the assessee on the date of conversion of land into stock-in-trade is to be assessed in the hands of assessee in the present y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m receipt of such money or other assets shall be chargeable to income-tax under the head Capital gains and shall be deemed to be the income of such person of the previous year in which such money or other asset was received and for the purposes of section 48, value of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset. Explanation.-For the purposes of this sub-section, the expression insurer shall have the meaning assigned to it in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938). (2) 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-intrade 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 the full value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee or the said developer. Hence, the property i.e. stock in trade was not even ready for development. 18. The next issue which needs to be adjudication is that CIT(A) referred to the provision of Section 45(2) of the Act but goes on to say, since the assessee has declared income from capital gains, then the same may be assessed in the hands of the assessee. However, such assessment made in the hands of the assessee is against provision of the Act, especially with reference to Section 45(2) of the Act. In view thereof, we find no merit in the findings of CIT(A) in this regard. We also find no merit in the other exercise carried out by CIT(A) in determining the quantum of long term capital gain. Thus, the assessee is not eligible for claiming deduction u/s. 54B(1) and 54B(2) of the Act. Since the assessee would be liable to pay tax on the capital gain only, when the stock in trade is sold or otherwise, transferred by him. Then the question which arises is whether entering into development agreement by the assessee would result in otherwise, transferring of the said land by the assessee. We find no merit in the same and hold that the deemed transfer as envisaged under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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