Itxa/1556/2012 Of The Commissioner Of Income Tax - 10 v. M/S.vidyavihar Containers Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1556 OF 2012 The Commissioner of Income Tax-10..Appellant.V/s.M/s. Vidyavihar Containers Ltd...Respondent. Mr. Tejveer Singh, for the Appellant.Mr. J. D. Mistri, Sr. Advocate with Mr. A. K. Jasani, for the Respondent. P.C:- CORAM: J.P.DEVADHAR & M.S.SANKLECHA,JJ.DATE : 5[th] MARCH, 2013. In this Appeal by the Revenue for the Assessment Year 2006- 07, although several questions of law have been raised in the memo of appeal, Counsel for the Revenue presses only two questions which read as under:- (a)Whether on the facts and in circumstances of the case and in law, the Tribunal erred in directing that the real estate business was duly commenced and carried on by the assessee since 1996? (b)Whether on the facts and in the circumstances of the case and in law, the Tribunal further erred in allowing that the sum of Rs.23 Crores paid by the assessee to Collector for change in user of land from Industrial to Commercial constitute cost of improvement of land which is contrary to the definition of the cost of improvement by itself and such payments cannot be said to be cost of improvement of said land and hence not allowable? 2So far as Question (a) is concerned as framed by the Revenue, does not bring out the real controversy between the parties. The basic issue is when the land which was held by the assessee was converted into stock in trade within the meaning of Section 45(2) of the Income Tax Act, 1961. It is the case of the Revenue that the Assessee is not carrying out any business of real estate development. Consequently, the entire gain arising on the sale of land is a capital gain taxable under the head 'Capital Gain'. As against that, the case of the Assessee is that they were carrying out business of real estate development. The Tribunal has returned a finding of fact on the basis of evidence led before it that the Respondent-Assessee carried a business of real estate. It is not the case of Revenue that the above finding of the Tribunal is perverse. Moreover, we find that by the impugned order, the Tribunal has restored the matter to the Assessing Officer to determine the date of conversion of the capital asset into stock in trade for the purpose of computing capital gains. Since the dispute is restored to the Assessing Officer for re-determination, we see no reason at this stage to entertain Question (a). 3Similarly, as regard Question (b), the Tribunal has restored the issue to the Assessing Officer to consider and allow the claim of the Respondent-Assessee depending upon the determination of the fair market value of the Respondent-Assessee's property as on the date of conversion into stock in trade. The Tribunal held that the sum of Rs.23 Crores if paid by the Assessee to the Collector prior to the conversion of the capital asset in to stock in trade would constitute cost of improvement and hence allowable as deduction. The Tribunal further held that if the said sum of Rs.23 Crores is found to have been paid after the conversion of the capital asset into stock in trade, then the said amount of Rs.23 Crores would be allowable as expenditure incurred wholly and exclusively for the purpose of its real estate development business. In these circumstances, we see no reason to entertain the proposed question (b).4Accordingly, appeal is dismissed with no order as to costs. (M.S.SANKLECHA,J.) (J.P.DEVADHAR,J.)