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2013 (11) TMI 280 - ITAT MUMBAINature of income on sale of flat – Exemption u/s 54 claimed - Assessee along with her husband, Mr. Bhagwandas M. Agarwal entered into a MOU dated 08.08.2002 with M/s Jay Builders, owner of property known as Devki Building at Sanyas Ashram Road, Vile Parle (West), Mumbai, to construct 5th, 6th & 7th Floors, on 50:50 at their cost and peril, along with the TDR, which the owner had acquired. After the construction was over, the assessee sold her share in the flats, i.e. flat no. 502 on 24.01.2007, wherein she declared long term capital gains of Rs.61,34,165/- and claimed exemption under section 54 on this amount – Held that:- Examine the two agreements, both the agreements point to the direction that there is an element of profit and trade involved. The sharing of the constructed part, that too on the premises not owned by the assessee and her husband, goes to indicate trade. In case, the premises belonged to the assessee and in such a situation, the argument of the AR would have borne some weight - On a specific query, the AR informed that the assessee and her husband are in the business of development of real estate. The Developers cause the Society to be formed by the occupants of the said building known as Devaki to admit them as members of the Society and will execute necessary conveyance in favour of the Society - This clause clearly shows that the assessee and her husband would form the society of the residents, which only developer does, after it has sold its stock to the incumbments – Thus, income is in the nature of business, therefore, the deduction u/s 54 not applicable.
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