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2016 (6) TMI 1308 - AT - Income TaxProfit on sale of land - capital gain or busniss income - intention of the partners at the time of purchase of the property - whether the investment made by the assessee in the land at Nolambur is a stock-in-trade or capital asset? - Held that:- Entire circumstances and the material facts need to be taken into consideration to ascertain the intention of the partners at the time of purchase of the property. After considering all the facts available on record, including the payment made before the date of formation of partnership firm, this Tribunal is of the considered opinion that the land in question was intended to be treated as capital asset by the partnership firm. The assessee in order to generate funds for business might have entered into Memorandum of Understanding with another trader who is dealing in real estate. If the intention of the assessee is to deal in real estate, the assessee would have developed the land by itself. In the case before us, the assessee has not dealt with the land by itself. The land was in fact handed over to other trader in real estate for development. The matter would be entirely different if the assessee constructed the multistory building and developed the land. Since the land was simply handed over to other trader for development, this Tribunal is of the considered opinion that the land in question has to be treated as capital asset. Even though the partnership firm was formed 05.04.2005 and the land was registered in the name of the firm on 23.05.2005, the assessee has not commenced any business activities; no other land appears to have been purchased; no supplementary work was carried on by the assessee-firm in the subject land; no organized effort was made other than simply entering into Memorandum of Understanding with the builder. As all risks and rights relating to construction of building were vested with the builder and the assessee has not taken any risk in the construction and development of flats, this Tribunal is of the considered opinion that the profit on sale of the land in the hands of the assessee-firm cannot be treated differently than as it was treated in the case of Mrs. Saroj Agarwal. This Tribunal is of the considered opinion that the profit on sale of land has to be necessarily assessed as capital gain and not as business income. - Decided in favour of assessee
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