The first and most important issue to be determined is whether the land is held as investment or stock in trade. If the agricultural land is held as stock in trade then the sale of such lands is taxable as business income and no exemption under the Act is provided in this regard.

It is clear from the provisions of Sec. 45(1) , being a deeming provision any gain which has arisen during the year has to be taken for consideration irrespective of the fact that the transferor may receive the sale consideration in subsequent years. Further, the observation of the Ld. CIT(A) that in family members cases, for the capital gains arising out of the transfer of shares, the return of income have been accepted by the department under scrutiny assessment, cannot be accepted under the principles of consistency as we are not bound to follow the decisions of the authorities which are inconsistent with the provisions of section 45(1) of the Act.

Smt. Amita Agarwal v. ACIT (ITAT Agra) -Assessee filed her return wherein income arising from sale of shares was shown as ‘Long-term Capital gain’ – Assessing Officer, however, brought said amount to tax under head ‘Income from other sources’ – On appeal before Tribunal, Judicial Member, allowed assessee’s claim in light of overwhelming evidences produced by her to prove genuineness of transaction – Accountant Member, however, in view of order passed in case of Baijnath Agarwal v. Asstt. CIT [2010] 40 SOT 475 (Agra)(TM) took a different view

CIT Vs Meera Chatterjee (Delhi High Court)- In the present case, the Assessing Officer has not held that it is possible to compute and calculate the cost of acquisition of the tenancy rights in the hands of the original tenant Ram Krishan Dalmia. The said exercise was not undertaken by him in the assessment order. In view of the aforesaid position, we are not required to determine, decide and compute income from capital gains under Section 45.

Asstt. Director of Income-tax Vs. Shri Ranjay Gulati (ITAT Delhi) – Under section 48 of the Income Tax Act, 1961 the income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following [...]

Jethiben K Patel Discretionary Trust Vs DCIT (ITAT Ahemdabad) – In the case of Mohanlal N. Shah (HUF) –vs- ACIT reported in [2008] 26 SOT 380 (Mum) wherein it was held that as per section 48, option is with the assessee to or not to avail of benefit of indexation for computation of capital gains [...]

Transfer of an asset is a primary condition which must be satisfied before a receipt can be treated as capital gain and/or capital loss u/s 45. The transaction regarding surrender of US-64 units for converting the same into Unit Trust of India 6.75% tax free bonds in terms of the scheme of the Unit Trust of India would not amount to transfer for purpose of section 45.