Law:

Section:

Section 45, read with section 28, of the Income-tax Act, 1961 - Capital gain - Chargeable as - Assessment years 1982-83 and 1983-84 - Assessee claimed that it had started a new business in real estate by converting part of its vacant land into stock-in-trade by passing a resolution to that effect and presented minutes of proceeding of such resolution to prove same - He also submitted that he sold certain acres of land during previous years and incurred a loss for same - Tribunal found that alleged conversion of land into stock-in-trade was not genuine inasmuch as assessee was not in possession of property in question and said land had already been sold in earlier years - Tribunal also rejected minutes produced by assessee in order to prove conversion on ground that minutes had been entered into loose sheet of paper and it was only an afterthought to avoid liability of capital gain - Whether, on facts, Tribunal was justified in holding that land in question had not been converted into stock-in-trade and treating transactions as sale of immovable property resulting in capital gain - Held, yes FACTS The assessee-company engaged in textile business claimed that it had started a business in real estate by converting part of its vacant land into stock-in-trade to carry on the new business. The assessee claimed that a resolution to that effect was passed and entries had been made in the books of account. The assessee claimed to have sold certain acres of land for loss during the previous year and claimed such loss as business loss. The Assessing Officer, however, did not accept the claim of the assessee of conversion of land into stock-in-trade and found that such property was sold as per agreements of sale entered into by the assessee in earlier years. He further concluded that the assessee made a higher valuation of property in order to avoid capital gain tax. Thus, the Assessing Officer treated the transaction as sale of immovable property and computed the long-term capital gain. The Commissioner (Appeals) allowed the assessee's appeal. On the revenue's appeal, the Tribunal held that the land in question was not in the assessee's hand at the time of passing the…

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