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Tax Publishers
Imputation of land
as capital contribution in a firm for redevelopment alleging stock in trade - Applicability
of section 45(3)
Facts:
Assessee firm had a land which was infused as a capital contribution in another
firm for real estate development where the assessee was also a partner. The
amount recorded in the books of the new firm was Rs. 6 crores. The AO taxed the
difference of 6 crores and its cost of acquisition 1.2 crores as deemed capital
gain under section 45(3) in the hands of the assessee firm. Plea of the
assessee was that section 45(3) will not apply to stock in trade but only to a
capital asset. On appeal CIT(A) upheld views of the AO. On higher appeal by the
assessee -
Held against the assessee that the plain reading of section 45(3) warrants
taxing it thus. It does not become stock in trade at the point of capital
contribution but only subsequently.
Applied:
DLF Universal v. DCIT (2010) 123 ITD 0001 SB (Del-Trib) : 2010 TaxPub(DT)
1260 (Del-Trib)
Dissented:
Income Tax Officer v. Orchid Griha Nirman (P) Ltd (2022) 134 Taxmann.com 281
(Cal.) : 2022 TaxPub(DT) 0698 (Cal-HC)
Case: Sai Teja
Constructions v. Dy. CIT 2023 TaxPub(DT) 6433 (Hyd-Trib)
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