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2019 (11) TMI 630 - AT - Income TaxIncome earned from sale of development rights in respect of a partially constructed project - Correct head of income - “Capital Gain” or “Business Income” - HELD THAT:- Undisputedly, the assessee is engaged in the business of developing real estate. It is also the claim of the assessee that it is developing or has developed various other housing projects and the development rights of the subject property was also acquired for development purpose. Commissioner (Appeals) himself has stated that in respect of some other housing projects developed by the assessee, the receipts and expenses have been routed through Profit & Loss account and the income has been offered subsequently as business income. Assessee’s claim that development rights acquired were for the purpose of business requires consideration. While concluding that the income from sale of development rights is capital gain, since, neither Commissioner (Appeals) nor the AO have properly appreciated the submissions of the assessee and examined all the attending facts and materials relating to the issue and have merely harped upon the accounting treatment given by the assessee at the time of purchase of the development right, we are inclined to restore the issue to the file of the Assessing Officer for denovo adjudication after due opportunity of being heard to the assessee. Since, the applicability of section 50C and claim of indexation on cost of improvement is dependent upon the ultimate outcome of the nature and character of the income received by the assessee, whether business income or capital gain, we also restore these issues to the AO for denovo adjudication depending upon his decision on the nature and character of the income received from sale of development right. Consequently, grounds raised are allowed for statistical purposes.
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