Brief of the case:
These are the appeals filed by revenue against which assessee also filed cross-objection relevant to three AYs. In these cases ITAT examined various issues and held that capital gain on transfer of land held as stock-in-trade can be made only in the year in which stock-in-trade was sold and not in year in which agreement was made. In an another issue in another AY ITAT remitted the matter to AO to examine the cost of land where assessee determine the cost by relying upon the report of registered valuer and AO used fair market value as cost price of the land to compute capital gain. In an another issue ITAT also held that AO cannot make any addition u/s 14 A read with rule 8D without recording any satisfaction.
Facts of the case:
- Assessee has entered into a project development agreement with M/s Arif Industries Ltd. to develop company’s group housing-cum-shopping project on the company’s land.
- In the revised return filed by the assessee, long term capital loss was claimed at Rs.68,42,57,966.30. For this purpose, the land of the assessee-company was converted into stock-in-trade.
- The value of the land as on 1.4.2003 relevant to the financial year 2003-04, on conversion into stock-in-trade was taken at Rs.1,25,93,70,545.20.
- The value of the land as on 1.4.1981 was worked out at Rs.1,94,36,28,541.50 (indexed cost) on the basis of valuation reports dated 19.3.2001, 25.3.2001 and 13.6.2002 of the Government Approved Valuer. The difference being Rs.68,42,57,966.30 was claimed as long term capital loss.
- AO examined the transactions of transfer of land into stock-in-trade with reference to provisions of section 2(47) and held the same to be a transfer within the meaning of section 2(47)(v) and 2(47)(vi) of the Act.
- AO worked out the long term capital gains at Rs.37,31,686/-.
- AO, on the basis of certain advances received by the assessee from M/s Arif Industries Ltd., concluded that conversion of the company’s land into stock-in-trade and agreement with the said company constituted transfer under section 2(47) of the Act and assessed the long term capital gains.
Contention of the revenue:
