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2014 (9) TMI 554 - HC - Income TaxTreatment of income gain on sale of land treated as business income against LTCG - Whether the Tribunal had any material to come to the conclusion that, land sold by the assesses was stock-in-trade of the dissolved firm, hence assessable business income Held that:- There is nothing to show that the assessee as also the erstwhile Smt. Amrutben Chheda had dissolved the firm with the intention to carry on the business of the firm in their individual capacities - The assessee and the former partner sold the land to a third party - They did not carry on the business of M/s. Laxmi Construction Co., the partnership firm i.e. of builders and/or contractors - the land was sold to a third party who incidentally might have been in the business of constructio. This was provided for in the dissolution deed itself which records in clause (3) that the parties have agreed to take over the plots of land as co-owners and as capital assets and they shall have co-ownership and as a test of conversion if applied, the assessee has indeed provided for conversion - the property does not seem to be stock-in-trade by the execution of the dissolution deed - there is no mode which provides for conversion of stock-in-trade into capital assets except by agreement of parties - the deed of dissolution achieves that objective - In the case of Khatau Valabhdas, the Court was concerned with the division of stock-in-trade i.e. grocery products - the business of the partnership was of builders/contractors and not of buying and selling the land and the partners at the material time were not engaged in any construction activity and no such construction was being carried out on the land - A building was to be put up on the land purchased by the erstwhile partnership firm but the land remained vacant and nothing is done on the land or to the land so as to show it as stock-in-trade and not treat it as capital assets share of the assessee - the Tribunal had no material to come to the conclusion that the land sold by the applicant/ assessee was stock-in-trade and the Tribunal was not justified to treat it as business income Decided in favour of assessee.
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