DCIT Vs Man Prakash Talkies Pvt Ltd. (ITAT Jaipur)
ITAT Jaipur held that mere entering into the Development Agreement would not permit invocation of section 45(2) of the Income Tax Act. There is no positive act which indicates that the assessee has treated capital asset as stock-in-trade.
Facts- Revenue has preferred the present appeal mainly on the ground that whether CIT(A) is right in quashing the reopening proceedings of AO ignoring the fact that the assessee has converted its capital reopening proceedings of AO ignoring the fact that the assessee has converted its capital asset into stock in trade by converting the land use after demolition of Cinema Hall building and entered into a Development Agreement for construction of multistoried commercial complex, therefore, the provisions of Section 45(2) of the I.T. Act are applicable and the income ought to be taxed as Business Income and not a Capital Gains?
Conclusion- Held that law has no intention nor section 45(2) provides for the same. To maximize the Gains by an assessee does not mean that the intention of the assessee could be meted out by carrying on the business. In all Development Agreements there are multiple units which could be sold / retained by the Land Owner as per its choice. Thus, mere entering into the Development Agreement would not permit invocation of section 45(2) of the Act. It is a well-accepted principle of tax jurisprudence that the Assessing Officer cannot decide what is to could have been done by the assessee and is evident from the facts on record that the intention of assessee is not the necessary criteria for invoking section 45(2) of the Act corroborate the intention along with the passing off necessary entries in books of accounts which is absent.
