Case Law Details
M/s. AJB Developers Pvt. Vs DCIT (ITAT Delhi)
Conclusion:
Where land was stock in trade in the books of account, but, there was a complete bar on assessee as per the Notification of the Ministry of Defence to raise any construction or to do any business activity therein, the land in question could not not be treated as stock in trade but as a capital asset in nature determining holding period from the date of acquisition.
Held:
Assessee sold the land which was converted in capital assets from 6th April 2012 and earlier the land was held as stock in trade. Assessee had shown the income under long term capital gain/loss with indexation. AO however assessed the income as short term capital gain and tax was charged at the rate applicable on normal business income. Tribunal observed that even if assessee company had shown the impugned land as stock in trade in the books of account, but, there was a complete bar on assessee as per the Notification of the Ministry of Defence to raise any construction therein and as such assessee could not have done any business activity on the land in question. Therefore, merely because impugned land have been shown as stock in trade in the books of account would not be relevant. It’s true character appears to be of capital asset in nature and in case it is transferred subsequently, the only capital gain/loss shall have to be computed in accordance with Law. In present facts of case, the capital asset was acquired way back in F.Y. 2006-2007 which was accepted by the A.O, as such, on date of sale period of holding would be beyond 36 months. Therefore, the benefit of indexation should be allowed as the asset was acquired way back in F.Y. 2006-2007. Therefore, on account of transfer of the same, long term capital gains/loss was to be determined as per Law.
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