Stock converted to investment to evade tax cannot be considered as valid conversion

Last updated: 10 November 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The brief facts of the case are that the assessee is a private limited company and it has filed return of income on 31.10.2005. The case of the assessee was selected for scrutiny. During assessment proceedings, the Assessing Officer found that assessee had earned a short term capital gain at `.79,19,192/-. The assessee had claimed the capital gain as exempt from tax on the belief that the land in question was agricultural land. The said land was purchased by the assessee company in September, 2002 for an amount of `.40,80,808/-. The Assessing Officer further observed that in the balance sheet for the year ended on 31st March, 2003, the assessee had shown the amount of land as closing stock and at col. 15 of the income tax return as mentioned the nature of business as trading. Similarly, for the assessment year 2004-05, in the return of income, the nature of business was mentioned as trading in properties. However, the amount of land was shifted from closing stock and was shown as fixed asset of the company under the head land & building. The Assessing Officer formed a belief that land was not agricultural land and therefore was not exempt from capital gain tax.

Citation :
ITO, Ward-15(3),New Delhi. (Appellant) Vs. M/s Reema Construction Pvt. Ltd., 634-Ist Floor, Khari Baoli, Delhi. (Respondent)