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)