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2014 (2) TMI 744 - AT - Income TaxNature of Profit - Whether the profit on sale of this property is business profit or capital gain – Held that:- The basis adopted by the CIT(A) for holding that the profit on sale of land in question is assessable as business profit is not proper - Since the land in question was acquired by originally seven persons and later by five persons and these persons are not doing business together, it shows that atleast this property was not acquired by these persons as a business asset and the same was acquired as a capital asset for earning capital gain – thus, the order of the CIT(A) reversed and the matter remitted back to the AO. Treatment of profits - Whether the profit on sale of land is to be distributed among the five co-owners in whose name the land was registered in equal proportion – Held that:- From the combined reading of the purchase-deed and rectification-deed it has to be held that the property was jointly held by five persons including these two persons - any agreement of these persons with two other persons for share of profit on sale of the land in question can be only out of post tax profit and not pre-tax profit - when the property is jointly owned by these five persons and sold by these five persons, profit on such sale has to be assessed equally in the hands of these five persons and after paying tax thereon as per law they can deal with the money remaining with them after such payment of tax in the manner they like but for the purpose of taxation of the profit on sale of the property - no deduction can be allowed on account of any payment to outsider because for the purpose of computing capital gain, only allowable deduction is cost of the property and cost of improvement and cost of transfer and no other deduction is allowable - Even if such profit is assessable is business income, then also from the sale proceeds, one can get deduction on account of cost of purchase and expenses incurred for that business and no deduction is allowable in respect of any payment which is given to outsiders as share of profit – the order of the CIT(A) set aside and the matter remitted back to the AO – Decided in favour of Revenue.
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