section 45

Development Agreement – Income Tax on Land Owner

Income Tax - Computation of income tax liability in the hands of the land owners upon execution of a development agreement has been a matter of litigation for ages. The injustice is caused to the land owners due to capital gain tax liability arising on the date of execution of the DA and handing over possession of the land to the Developer....

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Capital Gain on Conversion of Capital Asset into Stock in Trade

Income Tax - Section 45(2) of Income Tax Act deals with the cases where a capital asset is converted into stock in trade. Whenever a capital asset is converted into stock in trade by an assessee it is deemed as transfer of capital asset and attracts capital gain provisions, in spite of the fact that the ownership of such capital asset doesn’t change...

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Conversion or treatment of a capital asset as stock-in-trade [Section 45(2)]

Income Tax - (1) General Provision [Section 45(1)]:- Any profits or gains arising from the transfer of a capital asset effected in the previous year, shall be chargeable to Income-tax under this head in the previous year in which the transfer took place. (2) Special Case [Section 45(2)]:- A person who is the owner of a capital asset […]...

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Summary of sub-section (5A) of section 45 of Income Tax Act, 1961

Income Tax - Section 45 of the Income Tax Act, 1961 (‘Act’) is the charging section of the income chargeable under the head Capital Gains. In the ordinary course, a transaction is subject to capital gain in the year of transfer of the capital asset. In case of the Joint Development Agreement (‘JDA’) or Specified Agreement (‘SA’) where the ...

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‘Undervalued’ vs ‘Understated’ Capital Asset- Fiction of Fair Value

Income Tax - It is a well settled and in substance a legal precedent that what is subject to tax is a real income. The principle of real income has been subject matter of intrinsic litigation in past and the possibility of probable dispute on the scope of what constitutes real income in days to come cannot be completely ruled out despite there have be...

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AO cannot ignore provisions of section 55(2)(b) in computation of indexed cost

Devendra Kumar Shroff Vs ITO (ITAT Kolkata) - Computation of indexed cost of acquisition by the AO, taking the cost of acquisition at the cost price of 15.04.1976 without considering the provisions of section 55(2) clause (b) and taking the base cost inflation index at 406 is bad in law and we direct that Rs. 8,30,000/- must be taken as the cos...

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Capital Gain payable on Transfer of Property to Builder through Sale Agreement alongwith POA

Shri. Tirumalasetti Srinivasa Rao Vs. DCIT (ITAT Visakhapatnam) - Once the assessee had entered into agreement of sale coupled with power of attorney and handed over the possession of the property to the vendee, the transfer is complete as provided u/s 47 of the Act....

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Date of Award is Date of Accrual of Gains under Section 45 in case of Compulsory Acquisition

Raj Pal Singh Vs CIT (Supreme Court of India) - The issue under consideration is whether the High Court was right in taking the date of award as the date of accrual of capital gains for the purpose of Section 45 of the Act of 1961?...

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Capital Gains taxable in Year of Transfer of Possession of Land

DCIT Vs Shivaji Bhagwanrao Jadhav (ITAT Pune) - The issue under consideration is whether Capital Gain will be taxable in the year when consideration for sale of land received irrespective of the possession of the land?...

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Unlisted shares sold before 11.07.2014 eligible for benefit of short holding period

Mrs. Neelu Analjit Singh Vs The Addl. Commissioner of Income tax (ITAT Delhi) - The issue under consideration is Unlisted shares sold after holding for 23 months considered as Long Term Capital Gains or Short Term Capital Gains?...

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Recent Posts in "section 45"

AO cannot ignore provisions of section 55(2)(b) in computation of indexed cost

Devendra Kumar Shroff Vs ITO (ITAT Kolkata)

Computation of indexed cost of acquisition by the AO, taking the cost of acquisition at the cost price of 15.04.1976 without considering the provisions of section 55(2) clause (b) and taking the base cost inflation index at 406 is bad in law and we direct that Rs. 8,30,000/- must be taken as the cost of acquisition instead of Rs.1,122/-.....

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Development Agreement – Income Tax on Land Owner

Computation of income tax liability in the hands of the land owners upon execution of a development agreement has been a matter of litigation for ages. The injustice is caused to the land owners due to capital gain tax liability arising on the date of execution of the DA and handing over possession of the land to the Developer....

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Posted Under: Income Tax |

Capital Gain on Conversion of Capital Asset into Stock in Trade

Section 45(2) of Income Tax Act deals with the cases where a capital asset is converted into stock in trade. Whenever a capital asset is converted into stock in trade by an assessee it is deemed as transfer of capital asset and attracts capital gain provisions, in spite of the fact that the ownership of such capital asset doesn’t change...

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Posted Under: Income Tax | ,

Capital Gain payable on Transfer of Property to Builder through Sale Agreement alongwith POA

Shri. Tirumalasetti Srinivasa Rao Vs. DCIT (ITAT Visakhapatnam)

Once the assessee had entered into agreement of sale coupled with power of attorney and handed over the possession of the property to the vendee, the transfer is complete as provided u/s 47 of the Act....

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Date of Award is Date of Accrual of Gains under Section 45 in case of Compulsory Acquisition

Raj Pal Singh Vs CIT (Supreme Court of India)

The issue under consideration is whether the High Court was right in taking the date of award as the date of accrual of capital gains for the purpose of Section 45 of the Act of 1961?...

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Conversion or treatment of a capital asset as stock-in-trade [Section 45(2)]

(1) General Provision [Section 45(1)]:- Any profits or gains arising from the transfer of a capital asset effected in the previous year, shall be chargeable to Income-tax under this head in the previous year in which the transfer took place. (2) Special Case [Section 45(2)]:- A person who is the owner of a capital asset […]...

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Posted Under: Income Tax |

Capital Gains taxable in Year of Transfer of Possession of Land

DCIT Vs Shivaji Bhagwanrao Jadhav (ITAT Pune)

The issue under consideration is whether Capital Gain will be taxable in the year when consideration for sale of land received irrespective of the possession of the land?...

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Unlisted shares sold before 11.07.2014 eligible for benefit of short holding period

Mrs. Neelu Analjit Singh Vs The Addl. Commissioner of Income tax (ITAT Delhi)

The issue under consideration is Unlisted shares sold after holding for 23 months considered as Long Term Capital Gains or Short Term Capital Gains?...

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Transfer of land held as stock on HUF partition not amounts to conversion into Capital Asset

CIT Vs C. Ramaiah Reddy (Karntaka High Court)

The issue under consideration is whether land held as stock, transferred upon HUF - partition, tantamount to conversion into capital asset for the purpose of imposing a capital gain tax?...

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No capital gain tax on land transfer to co-op society formed by flat purchasers

J. S. & M. F. Builders Vs A. K. Chauhan and others (Bombay High Court)

Whether the AO is correct in considering that the capital gain will arise in the year when the land is transferred to the co-operative society formed by the flat purchasers and not when flats are sold?...

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Know-how under development is self-generated asset & hence no Capital Gain Tax

Bharat Serums And Vaccines Ltd. Vs ACIT (ITAT Mumbai)

Whether the CIT(A) is correct in holding that consideration received on assignment of know-how is chargeable to tax as Capital Gains?...

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Summary of sub-section (5A) of section 45 of Income Tax Act, 1961

Section 45 of the Income Tax Act, 1961 (‘Act’) is the charging section of the income chargeable under the head Capital Gains. In the ordinary course, a transaction is subject to capital gain in the year of transfer of the capital asset. In case of the Joint Development Agreement (‘JDA’) or Specified Agreement (‘SA’) where the ...

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Posted Under: Income Tax |

Deeming section 50C cannot override section 45(3)

ACIT Vs Amartara Pvt. Ltd. (ITAT Mumbai)

The issue under consideration is whether A.O. is correct by adding long term capital gains by applying section 50C in case where land is transferred by the partner in his firm as capital contribution?...

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Capital Gain tax liable on property sold by bank to recover loan given to group concerns

T.S. Hajee Moosa & Co Vs. ACIT (ITAT Chennai)

The issue under consideration is whether Capital Gains will be applicable in case where Bank sold the property of group concern as it failed to repay the loan?...

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Section 45(2) not apply on Land transferred by partner as capital contribution recorded as stock-in-trade in books of firm

ITO Vs Shri Mahendrabhai D. Zalavadia (ITAT Rajkot)

ITO Vs Shri Mahendrabhai D. Zalavadia (ITAT Rajkot) The issue under consideration is whether section 45(2) will be applicable in situation where Land transferred by partner as capital contribution recorded as stock-in-trade in the books of firm? In the given case, ITAT state that the impugned land was transferred by the partners to the fi...

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Section 45(3) AO cannot disturb value of consideration recorded in books of firm

Shri Sarrangan Ashok Vs ITO (ITAT Chennai)

Provision of section 45(3) are exhaustive and does not confer any power on the AO to adopt consideration different from what is recorded in the books of account of the firm. Thus, AO was not correct in adopting the market value of land as revalued subsequently by the firm in the books of account....

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‘Undervalued’ vs ‘Understated’ Capital Asset- Fiction of Fair Value

It is a well settled and in substance a legal precedent that what is subject to tax is a real income. The principle of real income has been subject matter of intrinsic litigation in past and the possibility of probable dispute on the scope of what constitutes real income in days to come cannot be completely ruled out despite there have be...

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Posted Under: Income Tax |

Income Tax on Joint Development: Post amendment scenario

The concept of joint development agreement is common now a days because of its advantage of bringing together of both landlords and the developer. The landlord who has land with insufficient funds to develop such land can reap the benefit of current market price after the development. Always the price for developed property is greater [&h...

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Posted Under: Income Tax |

Conversion of Stock in trade to Capital Asset

As per the section 45(2) of Income Tax Act, conversion of the capital asset by the owner of a capital asset into stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him....

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Posted Under: Income Tax |

Reconstitution of firm does not constitute transfer u/s 45(4)

National Company Vs ACIT (Madras High Court)

Section 45(4) would not be attracted on the retirement of the two partners and consequential allotment of their share in the assets in the assessee-firm as there was no element of transfer of interest in the partnership assets by the retiring partner to the continuing partners. ...

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Receipt from a right to sue cannot be considered capital gain U/s. 45

ACIT Vs Shri Anil Gulabdas Shah (ITAT Mumbai)

ACIT  Vs Shri Anil Gulabdas Shah (ITAT Mumbai) The undisputed position that emerges is the fact that the property under consideration was subject matter of extensive litigation which ultimate got culminated into sale of the property by the assessee in terms of consent terms dated 03/01/2012 between the assessee and certain other parties....

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Retiring partner to pay capital gain tax on excess amount received against Capital A/c

Savitri Kadur Vs DCIT (ITAT Bangalore)

Savitri Kadur Vs DCIT (ITAT Bangalore) Conclusion: When the partnership firm paid lump-sum amount to retiring partner, it was paid in consideration of her retirement in the partnership and assignment of her interest to other partners, the transaction would amount to transfer u/s 2(47) and liable to tax excess amount over partner’s c...

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Capital Gains on Income From Sale of Agricultural Land

Sale of land resulting in business income 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....

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Posted Under: Income Tax |

Amount payable on fulfilment of conditions has to be excluded while computing capital gains

Late Shri Gordhandas S. Garodia Vs. Dy. Commissioner of Income Tax (ITAT Mumbai)

Unless, a debt due by somebody has been created in favour of assessee, it cannot be said that he has acquired a right to receive the income or that income has accrued to him. An amount can accrue to assessee if he acquires a legally enforceable right to receive it from the debtor. ...

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Capital gain chargeable only on transferor and not on transferee: No Tax on firm on crediting Revaluation Surplus to Retiring Partners A/c

Mahul Construction Corporation Vs. Income Tax Officer (ITAT Mumbai)

Mahul Construction Corporation Vs. ITO (ITAT Mumbai) In this case The AO wants to tax the amount credited in capital a/c of retiring as well as continuing partners within the realm of 45(4) of the Act. So far as amount credited to capital a/c of retiring partners is concerned, notwithstanding the fact that there is […]...

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S. 45(4) not applies if retiring partner takes only money for his share & if there is no distribution of capital assets among partners

The Commissioner of Income Tax Vs M/s Dynamic Enterprises (High Court of Karnataka at Bangalore)

To attract Section 45(4) there should be a transfer of a capital asset from the firm to the retiring partners, by which the firms ceases to have any right in the property which is so transferred. In other words, its right to the property should stand extinguished and the retiring partners acquires absolute title to the property. ...

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Despite deferment of Consideration capital gain taxable in the year of transfer

Income-tax Officer-21(1)(2), Mumbai Vs Ms. Indira R. Shete (ITAT Mumbai)

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 ...

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Income arising from sale of shares to be taxed as ‘Long term capital gain’ and not as ‘Income from other sources’

Smt. Amita Agarwal Vs. Assistant Commissioner of Income Tax (ITAT Agra)

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 e...

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Sum received on surrender of tenancy right is capital receipt and hence, not taxable

Commissioner of Income Tax Vs Meera Chatterjee (Delhi High Court)

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...

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Whether, for computation of capital gains on land sold by NRI, the fair market value of the land is to be reckoned with rather than the full value of the consideration received

Asst. Director of Income Tax Vs. Shri Ranjay Gulati (ITAT Delhi)

Asst. 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 […...

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In view of the provisions of section 112 where there are several transactions of sale and purchase of securities, the discretion to take the benefit of indexation lies with assessee

Jethiben K Patel Discretionary Trust Vs DCIT (ITAT Ahemdabad)

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 on transfer of long- term capital asset....

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Surrender of Us-64 for conversion into UTI tax free bonds would not amount to transfer for purpose of section 45

ACIT Vs. ABC Bearings Ltd. (ITAT Mumbai)

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 trans...

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