| The Tax Publishers2020 TaxPub(DT) 2236 (Hyd-Trib) INCOME TAX ACT, 1961
Section 2(47)
Where assessee engaged in real estate business, treated its portion of land as stock-in-trade and contributed its portion of land to joint development agreement (JDA), then assessee was liable to offer business income in year in which stock-in-trade was sold because stock-in-trade was only contributed and was not sold during relevant assessment year, thus, there was no receipt or accrual of business receipt during the relevant assessment year.
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Capital gains - Transfer of capital assets - Year of taxability - Assessee treating land as stock-in-trade which was transfer under development agreement--Tax liability whether arose when land was sold or when same was contributed for development
Assessee company was engaged in real estate business. Pursuant to a search action in case of certain entity, a Joint Development Agreement (JDA) entered into by assessee along with said entity was found and seized. Therefore, notice under section 153C was issued to assessee, in response to which, assessee filed its return of income. While framing assessment under section 143(3) read with section 153C, AO alleged that assessee treated land as stock-in-trade in its books of account and assessee was liable to offer business income on share of land, which was transferred for development. CIT(A) allowed appeal of assessee by holding that business income was taxable only in year of sale of villas and not in relevant assessment year. Held: In case of a capital asset, if it is transfer under any of provisions of section 2(47), coupled with handing over of possession of capital asset, capital gain is to be offered on mercantile basis in year in which possession is given. As rightly pointed out by CIT(A) in case of assessee, land was treated as stock-in-trade and assessee only contributed its portion of land to JDA and was liable to offer business income in year in which stock-in-trade was sold. Since stock-in-trade was only contributed and was not sold during relevant assessment year, there was no receipt or accrual of business receipt during the relevant assessment year.
Followed:Dheeraj Amin v. Asstt. CIT [ITA No. 1709/Ban/2013, dated 30-6-2014] : 2015 TaxPub(DT) 2967 (Bang-Trib).
REFERRED : Sir Kikabhai Premchand v. CIT (1953) 24 ITR 506 (SC) : 1953 TaxPub(DT) 0121 (SC), Chainrup Sampatram v. CIT (1953) 24 ITR 481 (SC) : 1953 TaxPub(DT) 0120 (SC), CIT v. TK. Dayalu 2011 TaxPub(DT) 1642 (Karn-HC) and Chaturbhuj Dwarkadas Kapadia v. CIT 2003 TaxPub(DT) 1029 (Bom-HC)
FAVOUR : In assessee's favour.
A.Y. : 2012-13
IN THE ITAT, HYDERABAD BENCH
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