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2014 (11) TMI 680 - AT - Income TaxSurplus amount on sale of property under Income from capital gains – Business income or not u/s 54EC – Rental income realized from the asset has been offered to tax under the head “business income’ in earlier years and various expenses claimed against it - Held that:- Assessee has acquired property namely, “Sukanraj Centre’ in the year 1978 - the property was acquired and held by assessee for 30 years, which is sufficient to establish that property was capital asset only and not acquired for sale in the normal course of business - While acquiring the property assessee was having long term prospective, which is evident from schedule in which it was shown as “land asset’ and not as “land stock’ - The very nature of transaction i.e. whether trading or investment is decided at the time of acquisition of property - The treatment given by the assessee in the books of account is one of the most important factors that determines the nature of assets as to whether “investment’ or “stock-in-trade’ - From the very year of its acquisition i.e. 1978 assessee has consistently shown the property as investment rather than as stock-in-trade – in K.C. Thappar Vs. CIT [1971 (8) TMI 29 - SUPREME Court] it has been held that a particular asset owned as investment in the books as well as balance sheet, is one of the most relevant factor even though not conclusive to hold that assets were held by assessee as investment - merely because rental income earned on the property was shown as business income, the property so held as investment cannot be treated as a stock-in-trade of the business ignoring the fact that “real estate business’ is separate from “rental income’. Claim of rental income as business income will not change the character of property so held as capital investment on which assessee has earned the rental income - The intention of the assessee since beginning was only to hold the capital asset for the purpose of exploiting the same and earning regular income from it – revenue itself has accepted assessee’s claim of land asset insofar as none of the earlier years, the AO has objected the treatment of property as “land asset’ in the nature of capital investment. Claim for exemption u/s 54EC – Held that:- There was no infirmity in the order of CIT(A), that assessee has sold the long term capital asset which is held for investment purpose - The Hon’ble Bombay High Court in the case of CIT Vs. Ace Builders [2005 (3) TMI 36 - BOMBAY High Court] - exemption u/s 54EC is allowable on asset where it is depreciable or non-depreciable asset, therefore, exemption available to depreciable asset u/s 54EC cannot be denied by referring to fiction created u/s 50 - gain on sale of capital asset “Sukanraj Center’ have rightly been treated as capital gain by CIT(A) – Decided against revenue.
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