If Land is treated as Stock-in-Trade, S. 50C does not Apply: ITAT [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the deeming provisions under section 50C of the Income Tax Act, 1961 cannot be invoked when the land is treated as stock in trade and the assessee is not an investor in land and is only a trader in lands.

The assessee is an individual, engaged in the business of purchase and sale of lands. For the assessment year under consideration, the assessee received a sum of Rs. 9,30,000/- from four parties towards advance for the sale of land. While completing the assessment proceedings, the AO treated the assessee as an investor in lands, invoked the provision of section 50C of the Act in respect of lands that were sold during the year and adopted the stamp duty valuation.

Against this, the assessee made an alternative claim before the AO that in case if the assessee is treated as an investor in lands, then correspondingly exemption u/s 54F should be granted to the assessee in respect of lands purchased in the form of re-investment made during the year. However, the claim was rejected on the ground that the same was not registered by the assessee in any way, probably on the ground that the sum was not claimed by the assessee in the return of income.

When the matter traveled to the Tribunal, the bench noted that the assessee was only a dealer in lands i.e. engaged in the business of purchase and sale of lands which is quite evident from the balance sheet and profit & loss account filed by the assessee.

Allowing the contentions of the assessee, the bench also noted that the assessee had duly shown the stock of land in its balance sheet as its stock-in-trade and had brought forward the same as opening stock in his profit and loss account for the next year and had reported purchase and sale of land and profits thereon and offered the same as business income of the assessee year on year.

“In this scenario, there is no reason to treat the assessee as an investor in lands. Hence the lands that were sold to Seema Ganguly and Subarna Dutta during the year are to be considered at the sale consideration actually reported in the registered sale deed and not as per the provisions of section 50C of the Act, being the value determined by the Stamp Valuation Authority, as admittedly the provisions of section 50C are applicable only for capital assets and not for assets held as stock-in-trade.”

“We find that the legislature in its wisdom had introduced a separate provision to adopt the stamp value in respect of assets other than capital assets by introducing section 43CA of the Act in line with the provision of section 50C of the Act. But we find that the provisions of section 43CA has been introduced in the Statute by Finance Act, 2013 w.e.f 01.04.2014 meaning thereby, the same is applicable only for the assessment year 2014-15 and not earlier. Hence the value determined by the Stamp Valuation Authority for the sale of two lands cannot be adopted as full value of consideration. Hence we hold that the action of the ld. AO in this regard as untenable in law,” the bench added.