D.C.I.T. Cir - 8,Kolkata, Kolkata V. M/s Patton Developers Pvt Ltd, Kolkata

ITA 90/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100129 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK NAG JCITSRDR
• Assessee Lawyers: DEV KR KOTHARI; MANOHAR AGARWA
• Keywords: Capital asset; Date of conversion; Fair market value
• Section: 45(2); 143(3); 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 90 / KOL / 2013 ASSESSMENT YEAR :2009-10 DCIT, CIRCLE-8, AAYAKAR BHAWAN, 5 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 V/S . PATTON DEVELOPERS PVT. LTD., 3C, CAMAC STREET, KOLKATA 700 016 [ PAN NO.AABCT 2076 H ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ALOK NAG, JCIT-SR-DR /BY RESPONDENT SHRI DEVKR KOTHARI, FCA & SHRI MANOHAR AGARWAL, ADVOCATE /DATE OF HEARING 07-10-2015 /DATE OF PRONOUNCEMENT 24-11-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA IN APPEAL NO.163 /CIT(A)-VIII/KOL/11-12 DATED 17.10.2012. ASSESSMENT WAS FRAMED BY JCIT(OSD ), CIRCLE-8, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 28.12.2011 FOR ASSESSMENT YEAR 2009-10. REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF AO RS.2,11 ,44,914/- ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED BY THE ASSESSEE U/S24(B) OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF AO HOLDING THAT RS.1,53,45,722/- AS A LONG TERM CAPITAL LOSS INSTEAD OF THE CLAIM OF ASSESSEE I.E. SHORT ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 2 TERM CAPITAL LOSS OF RS.55,64,950/- AND BUSINESS LO SS OF RS.97,80,772/- . 2. FIRST GROUND REGARDING THE ISSUE IS THAT LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR AN AMOUN T OF RS.2,11,44,914/- ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIM BY ASSESS EE U/S 24(B) OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY. IT DERIVES INCOME IN THE FORM OF RENT BESIDES INCOME F ROM INVESTING IN SHARES. THE ASSESSEE IS SUBSIDIARY OF M/S PATTON INTERNATIO NAL LTD. (MPIL IN SHORT). IN THE EARLIER YEAR, MPIL HAS GIVEN A LOAN TO M/S CENT RE POINT REALITY PVT. LTD. (CPRPL IN SHORT). THE CPRPL THEN HAS PURCHASED A HO USE PROPERTY OUT OF THE LOAN RECEIVED FROM MPIL. SUBSEQUENTLY CPRPL GOT AMALGAMATED WITH THE ASSESSEE-COMPANY WITH EFFECT FROM 01.04.2006. AS A RESULT OF AMALGAMATION THE ASSESSEE-COMPANY BECAME THE OWNER OF THE HOUSE PROPERTY WHICH WAS PURCHASED ORIGINALLY BY CPRPL OUT OF THE LOAN TAKEN FROM MPIL. THEREAFTER THE ASSESSEE-COMPANY BORROWED A LOAN FROM THE STATE BANK OF MYSORE (SBM FOR SHORT) AND THIS BORROWING FROM SBM WAS UTILIZED FOR REPAYMENT OF LOAN TO THE HOLDING COMPANY I.E. MPIL. DURING THE FINANCIAL YEAR 2008-09 SBM REVIEWED THE EXISTING LOAN AND SANCTIONED ANOTHER L OAN OF RS.20 CRORES ON 19.08.2008 BY CLOSING THE OLD LOAN WHERE, A SUM O F RS.8.37 CRORES WAS LYING IN THE ACCOUNT OF ASSESSEE. THE BALANCE AMOUNT OF L OAN WAS UTILIZED FOR THE REPAYMENT OF EARLIER LOAN TAKEN FROM HOLDING COMPAN Y. ON THIS NEW AMOUNT OF LOAN, THERE WAS INTEREST ACCRUED FOR THE RELEVANT Y EAR OF RS.2,11,44,914/- AND THIS INTEREST WAS CLAIMED U/S 24(B) OF THE ACT BY A SSESSEE-COMPANY IN ITS RETURN OF INCOME. 4. HOWEVER, AO DISALLOWED THE INTEREST AMOUNT ON TH E GROUND THAT THERE WAS NO PROVISION TO ALLOW THE DEDUCTION OF INTEREST ON A SUBSEQUENT LOAN TAKEN TO REPAY THE ORIGINAL LOAN. THE AO HAS ALSO RELIED ON THE ORDER OF THIS TRIBUNAL IN THE CASE OF ITO V. SATYA CO. LTD. (1986) 19 ITD 596 (KOL TRIBUNAL). ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 3 5. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) WHERE THE LD. AR DEMONSTRATED THAT THE ORDER OF THE AO WAS ERRONE OUS. FOR THE SAKE OF CLARITY, WE REPRODUCE SUBMISSION OF THE LD. AR AS U NDER:- I) THE LD. A.O HAS ALSO MISINTERPRETED THE DECISIO N OF THE CALCUTTA BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. SATYA C O. LTD. (1986) 19 ITD 596 (CAL-TRIBUNAL). THE BRIEF FACT OF THE CASE IS T HAT THE ASSESSEE COMPANY PURCHASED A HOUSE PROPERTY OUT OF BORROWED MONEY. SUBSEQUENTLY, THE ASSESSEE REPAID THE SAID LOAN BY TAKING LOAN FROM ANOTHER PARTY. THEN IT AGAIN REPAID IT AFTER BORROW ING MONEY FROM SOME OTHER PARTY AND SO ON. IN THIS CONTEXT THE TRIBUNAL HELD THAT THE WORDS SUCH CAPITAL IN SECTION 24(1)(VI) DEFINITELY REFER TO THE BORROWED CAPITAL AND, AS SUCH, THE SECTION CONFINES THE BENEFITS OF BORROWED CAPITAL T O REPAY THE ORIGINAL LOAN ONLY. THE LANGUAGE IS NOT CAPABLE OF BEING EXT ENDED TO SECOND OR ANY SUBSEQUENT LOAN. HOWEVER, THE BOARDS CIRCULAR NO. 28 OF 1969 DATED 20.08.1969 (TAXMAN DIRECT TAXES CIRCULARS, 19 85) VOL. 1.P.171 REFERS TO SECOND LOAN TO WHICH THE PROVISIONS OF SE CTION 24(1)(VI) WAS EXTENDED BY THIS CIRCULAR. BUT THIS COULD NOT BE EX TENDED TO SUBSEQUENT LOANS, AS CONTENDED BY THE ASSESSEE. IN THE INSTANT CASE ORIGINAL LOAN WAS PROVIDED BY M /S PATTON INTERNATIONAL LTD., (HOLDING COMPANY) FROM TIME TO TIME FOR THE PURPOSE OF ACQUISITION AND CONSTRUCTION OF HOUSE PROPERTY B Y ITS SUBSIDIARY COMPANY (APPELLANT). THIS IS THE ORIGINAL / FIRST L OAN (FIRST LENDER).SUBSEQUENTLY, THE APPELLANT ARRANGED FROM I TS BANKER, STATE BANK OF MYSORE, SECURED TERM LOAN (UNDER RENT PLUS SCHEME) FROM TIME TO TIME FOR THE PURPOSE OF ACQUIRING/CONSTRUCT ING HOUSE PROPERTY/REPAYMENT OF EARLIER LOAN. AS PER THE BANK ING NORMS, CREDIT LIMIT IS ENHANCED FROM TIME TO TIME DEPENDING UPON THE NEEDS OF THE BORROWER AND DISBURSEMENT FOR ADDITIONAL LIMIT IS M ADE AFTER ADJUSTMENT OF THE EXISTING LIMIT AVAILED. THIS IS EXACTLY WHAT HAPPENED HERE. OUT OF THE ENHANCED LIMIT OF RS.20.00 CRORES, RS.8.37 CROR ES BEING THE EXISTING OUTSTANDING LOAN, WAS REPAID TO STATE BANK OF MYSOR E AND THE BALANCE AMOUNT OF RS.11.60 CRORES WAS PAID TO THE HOLDING C OMPANY AS REPAYMENT OF LOAN. THE LOAN GRANTED BY STATE BANK O F MYSORE IS THE SECOND SUBSEQUENT LOAN (SECOND LENDER). THERE ARE N O OTHER PARTIES INVOLVED (AS MAY BE DESCRIBED AS THIRD OR FOURTH) W HO HAVE PROVIDED LOAN FOR REPAYMENT OF EARLIER LOAN TAKEN FROM STATE BANK OF MYSORE. THEREFORE, THE RATIO OF THE DECISION OF THE ABOVE R EFERRED TRIBUNAL CASE IS SQUARELY APPLICABLE IN THE INSTANT CASE SINCE TH E LOAN TAKEN FROM STATE BANK OF MYSORE REPRESENT ONLY SECOND LOAN FOR REPAYMENT OF ORIGINAL LOAN. III) THE ASSESSEE ALSO RELIES ON THE DECISIONS OF T HE FOLLOWING CASES: ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 4 (A) ITR VS. MAKRUPA CHEMICALS (P) LTD. (2007) 108 I TD 95 (MUM) (B) ITO VS. SATYA CO. LTD. (1986) 19 ITD 596 (CAL.T RIBUNAL) (C) V. GOVINDARJULU VS. ITO (1990) 32 ITD 1 (MAD-TR IB) IN VIEW OF THE ABOVE SUBMISSIONS, IT IS PRAYED THA T THE DISALLOWANCE OF RS.2,11,44,914 WRONGLY MADE BY THE LD. A.O MAY PLEA SE BE DELETED. ON THE BASIS OF SUBMISSION MADE BY ASSESSEE LD. CIT (A) HAS DELETED THE ADDITION MADE BY AO BY OBSERVING THAT INTEREST PAID ON ANY FRESH LOAN TAKEN TO REPAY THE EARLIER LOAN IS FULLY COVERED U/S 24(B ) OF THE ACT. 6. NOW AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE T HE TRIBUNAL. SHRI ALOK NAG, LD. DEPARTMENTAL REPRESENTATIVE APPE ARING ON BEHALF OF REVENUE AND BOTH SHRI DEVKR KOTHARI & SRI MANOHAR A GARWAL LD. AUTHORIZED REPRESENTATIVE ARE APPEARING ON BEHALF OF ASSESSEE. 7. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. BEFORE US LD. DR SUPPORTED THE ORDER OF AO WHEREAS LD. AR SUPPORTED THE ORDER OF LD. CIT(A). THE LD. AR SUBMI TTED A PAPER BOOK CONTAINING PAGES 1 TO 106 AND PLEADED THAT INTEREST PAID ON THE MONEY BORROWED FROM THE BANK WAS VERY MUCH ELIGIBLE FOR D EDUCTION U/S. 24(B) OF THE ACT AND IN SUPPORT OF HIS CONTENTION, LD. AR CITED FOLLOWING CASE LAWS:- A) SALTEE INFOTEX (INDIA) PVT. LTD. VS. DCIT IN IT( SS) A NO. 05/KOL/2012 DATED 11.06.2013 B) ITO V. M.S FAITH REAL ESTATES P. LTD. AND OTHERS IN ITA NO. 5070 & 5181/DEL/2011 DATED 11.06.2011 C) ACIT V. SUNIL KR. AGARWAL IN ITA NO.641/LUCK/201 0 (2011) 139 TTJ (LUCK)(UO) 49 D) REALTY FINANCE & LEASING (P) LTD. V. ITO (2006) 5 SO 348 (MUMBAI) FROM THE AFORESAID DISCUSSION, WE FIND THAT THE DIS PUTE IS AS TO WHETHER THE ASSESSEE-COMPANY IS ENTITLED DEDUCTION FOR INTEREST EXPENDITURE OF RS. 2,11,44,914 /- FROM THE INCOME EARNED UNDER THE HEAD HOUSE PROP ERTY U/S ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 5 24(B) OF THE ACT. THE AO FOUND THAT ASSESSEE HAS TA KEN LOAN FROM SBM DURING THE MONTH OF AUGUST, 2008 AND REPAID THE LOAN OF TH E HOLDING COMPANY. THE AO CLAIMED THAT THERE IS NO PROVISION UNDER THE ACT TO ALLOW DEDUCTION OF INTEREST ON A SUBSEQUENT LOAN TAKEN TO REPAY THE OR IGINAL LOAN. THEREFORE, HE HELD THAT ASSESSEE-COMPANY WAS NOT ENTITLED TO CLAI M DEDUCTION IN RESPECT OF INTEREST PAYABLE FOR FRESH MONEY BORROWED TO REPAY THE EARLIER LOAN AND ACCORDINGLY, HE DISALLOWED. BEFORE LD. CIT(A) LD. A R OF ASSESSEE SUBMITTED THAT THE FRESH LOAN TAKEN TO REPAY THE ORIGINAL LOA N WAS WITHIN THE AMBIT OF LAW AND ACCORDINGLY LD. CIT(A) HAS DELETED THE ADDITION WHICH MADE BY AO. IT IS ALSO OBSERVED THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY LD. DR TO CONTROVERT THE ABOVE FINDING OF LD. CIT(A). A PLAIN UNDERSTANDING OF SECTION 24 (B) OF THE ACT READS AS UNDER:- [DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY] 24. INCOME CHARGEABLE UNDER THE HEAD INCOME FROM H OUSE PROPERTY SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCT IONS, NAMELY:- (A) A SUM EQUAL TO THIRTY PER CENT OF THE ANNUAL VA LUE; (B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCT ED, REPAID, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL; PROVIDED THAT IN RESPECT OF PROPERTY REFERRED TO IN SUB-SEC TION (2) OF SECTION 23, THE AMOUNT OF DEDUCTION SHALL NOT EXCEE D THIRTY THOUSAND RUPEES : PROVIDED FURTHER THAT WHERE THE PROPERTY REFERRED TO IN THE FIRST P ROVISO IS ACQUIRED OR CONSTRUCTED WITH CAPITAL BORROWED ON OR AFTER THE 1 ST DAY OF APRIL, 1999 AND SUCH ACQUISITION OR CONSTRUCTION IS COMPLETED [WITHIN THREE YEARS FROM THE END OF THE FINANCIAL YEAR IN W HICH CAPITAL WAS BORROWED], THE AMOUNT OF DEDUCTION UNDER THIS CLAUS E SHALL NOT EXCEED [TWO LAKH RUPEES]. EXPLANATION. WHERE THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST, IF ANY, PAYABL E ON SUCH CAPITAL BORROWED FOR THE PERIOD PRIOR TO THE PREVIOUS YEAR IN WHICH THE PROPERTY HAS BEEN ACQUIRED OR CONSTRUCTED, AS REDUCED BY ANY PART THEREOF ALLOWED AS DEDUCTION UNDER ANY OTHER PROVISION OF T HIS ACT, SHALL BE DEDUCTED UNDER THIS CLAUSE IN EQUAL INSTALLMENTS FO R THE SAID PREVIOUS YEAR AND FOR EACH OF THE FOUR IMMEDIATELY SUCCEEDIN G PREVIOUS YEARS;] ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 6 [ PROVIDES ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THE SECOND PROVISO UNLESS THE ASSESSEE FURNISHES A CERTIFICATE , FROM THE PERSON TO WHOM ANY INTEREST IS PAYABLE ON THE CAPITAL BORROWE D, SPECIFYING THE AMOUNT OF INTEREST PAYABLE BY THE ASSESSEE FOR THE PURPOSE OF SUCH ACQUISITION OR CONSTRUCTION OF THE PROPERTY, OR, CO NVERSION OF THE WHOLE OR ANY PART OF THE CAPITAL BORROWED WHICH REMAINS T O BE REPAID AS A NEW LOAN. EXPLANATION - FOR THE PURPOSES OF THIS PROVISO, THE EXPRESSION NEW LOAN MEANS THE WHOLE OR ANY PART OF A LOAN TAKEN B Y THE ASSESSEE SUBSEQUENT TO THE CAPITAL BORROWED, FOR THE PURPOSE OF REPAYMENT OF SUCH CAPITAL.] FROM THE AFORESAID EXPLANATION, IT IS VERY MUCH CLE AR THAT THE SUBSEQUENT LOAN TAKEN BY ASSESSEE TO REPAY HIS ORIGINAL LOAN IS VER Y MUCH COVERED FOR CLAIM THE DEDUCTION U/S. 24(B) OF THE ACT. IT IS ALSO IMP ORTANT TO NOTE THAT ASSESSEE HAS TAKEN A LOAN FROM SBM AND SAME LOAN FROM THE SA ME BANK WAS ENHANCED AS A RESULT OF RESTRUCTURING OF THE EXISTI NG LOAN. THEREFORE, IN THIS CASE NO THIRD LOAN WAS OBTAINED BY ASSESSEE. THEREF ORE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE IN THE ORD ER OF LD. CIT(A). HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 8. COMING TO REVENUES SECOND GROUND. THE ISSUE RAI SED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) HAS ERRED IN DELETIN G THE ADDITION MADE BY AO ON ACCOUNT OF TREATING LONG TERM CAPITAL LOSS (LTCG FO R SHORT) AS SHORT TERM CAPITAL GAINS (STCG FOR SHORT) AS BUSINESS LOSS. IN THIS CASE, ASSESSEE- COMPANY PURCHASED 1.80 LAKH SHARE OF PREMIER LTD. I N THE MONTH OF FEBRUARY, 2008 AS INVESTMENT FOR A TOTAL CONSIDERATION OF RS. 2,06,48,950/- IN THE FINANCIAL YEAR 2007-08 AND THIS INVESTMENT IN SHARE S WAS SHOWN AS LTCG INVESTMENT. HOWEVER, ASSESSEE-COMPANY CONVERTED THI S LTCG SHARE INTO STOCK-IN-TRADE BY PASSING A RESOLUTION ON 01.04.200 8 ON THE DATE OF CONVERSION THE MARKET VALUE OF THE SHARE WAS RS.1,5 0,84,000/- AS A RESULT OF CONVERSION THERE WAS A LOSS FOR AN AMOUNT OF RS.55, 64,950/- WHICH THE ASSESSEE-COMPANY CLAIMED IN ITS BOOKS OF ACCOUNT. T HIS LOSS WAS BOOKED AT THE TIME OF CONVERSION OF LONG TERM INVESTMENT AS S TOCK-IN-TRADE DURING THE ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 7 FY 2008-09. THE ASSESSEE-COMPANY SOLD THESE SHARES FOR AN AMOUNT OF RS.53,03,228/-. AS A RESULT OF SALE, THERE WAS A BU SINESS LOSS FOR AN AMOUNT OF RS.97,80,772/- AND ASSESSEE-COMPANY CLAIMED THIS LO SS AS BUSINESS LOSS IN THE FY 2008-09. HOWEVER, AO HAS DISREGARDED THE ABO VE TRANSACTIONS BY OBSERVING THAT ASSESSEE HAS NEVER BEEN A TRADER IN SHARE AND NEITHER PURCHASE NOR SOLD ANY OTHER SHARES DURING THE YEAR UNDER CONSIDERATION. SO THE CONVERSION INTO STOCK-IN-TRADE DONE BY THE ASSE SSEE-COMPANY WAS NOT IN NORMAL COURSE OF THE BUSINESS OF ASSESSEE. ACCORDIN GLY, THE AO TREATED THE LOSS ARISING OUT OF THE PURCHASE-SALE TRANSACTIONS AMOUNTING TO RS.1,53,45,722/- (2,06,48,950 53,03,228/-) AS LTC G LOSS AND COVERED U/S 10(38) OF THE ACT.. 9 AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) WHO HAS DELETED THE ADDITION MADE BY AO BY OBSERVING THAT A S PER CBDT CIRCULAR NO. 4/2007 DATED 15.06.2007 THE ASSESSEE CAN HAVE TWO P ORTFOLIO I.E., AN INVESTMENT PORTFOLIO AND ANOTHER OF TRADING PORTFOL IO AND SECTION 45(2) OF THE ACT ALSO PROVIDES THAT ASSESSEE CAN CONVERT ITS CAP ITAL ASSETS IN STOCK-IN- TRADE. THE LD. CIT(A) HAS MADE REFERENCE TO THE FOL LOWING JUDGMENTS :- I) ACIT V. JEHANGIR T. NAGREE (2008) 23 SOT 512 (MU MBAI) II) CIT V. WALFORT SHARE AND STOCK BROKERS P. LTD. (2010) 326 ITR 1 (SC) III) UNION OF INDIA V. AZADI BACHAO ANDOLAN (2003) 263 ITR 796 (SC) 10. NOW AGGRIEVED WITH THE ORDER OF LD. CIT(A), REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL. 11. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. BEFORE US LD. DR SUPPORTED THE ORDER OF AO WHEREAS LD. AR SUPPORTED THE ORDER OF LD. CIT(A). IN THIS CASE, AO HAS DISALLOWED THE CONVERSION OF THE CAPITAL ASSET INTO STOCK-IN-TRADE ON THE GROUND THAT THERE WAS NO BUSINESS ACTIVITIES CARRIED ON BY ASSESSEE-COMPA NY DURING THE RELEVANT PREVIOUS YEAR AND LD. CIT(A) HAS REJECTED THE CLAIM OF THE AO ON THE GROUND ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 8 THAT SEC.45(2) OF THE ACT PROVIDES THE ASSESSEE TO CONVERT THE CAPITAL ASSET INTO STOCK-IN-TRADE AT ANY TIME DURING THE YEAR. TH ERE IS NO PROHIBITION UNDER THE ACT, THEREFORE THE ACT OF THE ASSESSEE FOR CONV ERTING THE CAPITAL ASSET INTO STOCK-IN-TRADE IS WITHIN THE AMBIT OF LAW. BEFORE U S, LD. AR DREW OUR ATTENTION ON PAGE-78 OF THE PAPER BOOK OF ASSESSEE, WHEREIN T HE DETAILS OF SHARE HELD AS STOCK-IN-TRADE WAS FURNISHED. A PLAIN READING OF SEC. 45 SUB-(2) ALLOWS AS BELOW:- CAPITAL GAINS. 45 [(1)] ANY PROFITS OR GAINS ARISING FROM THE TRAN SFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHERW ISE PROVIDED IN SECTIONS [***] [54, 54B, [***] [54D, [54E, [54EA, 5 4EB,] 54F [54G AND 54H]]] BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD CAPITAL GAINS, AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YE AR IN WHICH THE TRANSFER TOOK PLACE. [(1A) .. [(2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1), THE PROFITS OR GAINS ARISING FROM THE TRANSFER BY WAY OF CONVERSIO N BY THE OWNER OF A CAPITAL ASSET INTO, OR ITS TREATMENT BY HIM AS STOC K-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 S OLD OR OTHERWISE TRANSFERRED BY HIM AND, FOR THE PURPOSES OF SECTION 48, THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH CONVERSION O R TREATMENT SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET.] FROM THE AFORESAID SECTION 45, IT IS VERY CLEAR THA T ACTION DONE BY ASSESSEE FOR CONVERTING THE INVESTMENT INTO STOCK-IN-TRADE I S WITHIN THE PURVIEW OF THE LAW. THEREFORE, WE DISMISS THE GROUND OF REVENUES APPEAL. 12. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT 24/ 11/2015 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 24 /1 1 /2015 ITA NO.90/KOL/2013 A.Y. 2009-10 DCIT CIR-8, KOL. V. M/S PATTON DEVELOPERS PVT. L TD. PAGE 9 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT-DCIT, CIR-8, AAYAKAR BHAWAN, 5 TH FL. P-7 CHOWRINGHEE SQ. KOL-69 2. / RESPONDENT-PATTON DEVELOPERS PVT. LTD. 3C, CAMAC STREET, KOLKATA-16 3. * +, - - . / CONCERNED CIT KOLKATA 4. - - .- / CIT (A) KOLKATA 5. 012 33+,, - +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,