SANJAY AMRUTRAO SATAV HUF, Pune V. Income Tax Officer, Ward-12(4), Pune, Pune

ITA 570/PUN/2023

AI Insights

The case involves Sanjay Amrutrao Satav, HUF, who appealed against the order of the National Faceless Appeal Centre (NFAC) which confirmed the addition of capital gains to his income for the assessment year 2016-17. The appellant had sold ancestral agricultural land, part of which was converted into stock-in-trade and developed under a development agreement. The primary legal issue was whether the gains from the sale of this land, converted into stock-in-trade, were taxable in the year of sale or in the year of conversion. The appellant argued that the land was agricultural and situated beyond 8 kilometers from municipal limits at the time of conversion, thus not liable for capital gains tax in the year of conversion. The Tribunal found merit in the appellant's arguments and allowed the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137483 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-08-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 10-05-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Capital asset; Cost of acquisition; Capital Gains
• Section: 45(2); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.570/PUN/2023 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 Sanjay Amrutrao Satav, HUF, Amrut Palace Bunglow, Gat No.12, Bhawadi Road, Wagholi, Near Bhairavnath Mandir, Tal. Haveli, Pune- 412207. PAN : AAYHS1085F Vs. ITO, Ward-12(4), Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 14.03.2023 for the assessment year 2016-17. 2. Briefly, the facts of the case are that the appellant is a HUF deriving income under the head “agricultural and capital gains”. It Assessee by : Shri Hemant Shah Revenue by : Shri M. G. Jasnani Date of hearing : 29.08.2023 Date of pronouncement : 26.09.2023 ITA No.570/PUN/2023 2 is engaged in the business of developers and builders. The Return of Income for the assessment year 2016-17 was filed on 17.10.2016 declaring total income of Rs.6,45,270/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-12(4), Pune (‘the Assessing Officer’) vide order dated 28.12.2018 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,92,17,320/-. While doing so, the Assessing Officer brought to tax the gains arising on sale of agricultural land of Rs.1,85,72,046/-. The factual background of the case is as under : The appellant sold ancestral agricultural land situated at Gat No.564 in Village- Wagholi, Tal- Haveli, Dist- Pune. It is stated that out of the said land, an area admeasuring 2 Hectares and 80 R were converted into stock-in-trade on 16.11.2011. Subsequently, the appellant had entered into a development agreement with one Mr. Manish Dwarkadas Maheshwari for the purpose of development of the said property in consideration of sharing 50-50 in gross sale proceeds. The said development agreement was registered on 17.11.2011. In terms of the said development agreement, the appellant also received interest free security deposits ITA No.570/PUN/2023 3 of Rs.1,67,00,000/-. It is stated that during the course of assessment proceedings, a query was raised by the Assessing Officer as to why the capital gains arising on sale of the said property cannot be brought to tax. The appellant filed detailed submissions before the Assessing Officer stating that the capital gains arising on sale of property were not liable to tax as on the date of Notification dated 06.01.1994 of CBDT, the agricultural lands were situated beyond 8 kilometres from the municipal limit of Pune, as on the date of conversion of the said property from capital assets to stock-in-trade, the said land was an agricultural. Without prejudice to the above, it is contended that the capital gains, if any, can be brought to tax only in the year of sale in terms of the provisions of section 45(2) of the Act. Without prejudice to the above contention, during the course of assessment proceedings, the appellant also computed the capital gains of Rs.1,85,72,046/-, which is extracted by the Assessing Officer at page no.3, vide para 8(i) of the assessment order. Based on this information, the Assessing Officer proceeded with framing assessment by bringing to tax the capital gains of Rs.1,85,72,046/-. 3. Being aggrieved by the above order of assessment, an appeal was filed before the NFAC contending that as on the date of ITA No.570/PUN/2023 4 conversion of agricultural land into stock-in-trade, the lands were sold were agricultural lands situated beyond 8 kilometres from the municipal limits of Pune and the question of taxing the gains arising in the year of sale of stock-in-trade in terms of provisions of section 45(2) of the Act does not arise. However, the NFAC merely confirmed the addition without meeting the reasoning of the appellant, which is extracted in para 7.5 of the order of the NFAC. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the taxability of gains arising on sale of agricultural land converted into stock-in- trade. The undisputed fact of the case is that the appellant sold ancestral land situated at Gat No.564 in Village- Wagholi, Tal- Haveli, Dist- Pune and out of the said land, an area admeasuring of 2 Hectares 80 R were converted into stock-in-trade as on 16.11.2011. By virtue of the provisions of section 45(2) of the Act, in the case of capital asset converted into stock-in-trade, the difference between the market value as on the conversion and the original cost of acquisition can be brought to tax only in the year in ITA No.570/PUN/2023 5 which the stock-in-trade is sold. The contention of the appellant that as on the date of conversion was agricultural land situated beyond 8 kilometres from the municipal limit of Pune remains unadjudicated. Therefore, the gains, if any, assessable under capital gains in the year of sale of stock-in-trade cannot be brought to tax. Thus, the grounds of appeal filed by the assessee stands allowed. 6. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 26 th day of September, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 26 th September, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.