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2016 (5) TMI 1462 - AT - Income TaxNature of income - sale of land - business income or capital gains - assessee is a partnership firm, engaged in the business of development and construction - Held that:- assessee has capitalized interest cost in the cost of Badlapur land and this conduct of the assessee is in consonance with the treatment for a Capital Asset. It is a settled legal position that interest in respect of a Capital Asset is required to be added to the cost of Investment/Capital Asset. Although the assessee has shown the Badlapur Land as WIP (i.e. inventory) in its books of accounts, yet since its inception, the accounting treatment given to Badlapur land in its books of accounts is that of/as applicable to a Capital Asset (i.e. Investment). The Hon'bIe Supreme Court has clearly held in the case of Kedarnath Jute Mfg. Co. Ltd. Vs. CIT [1971 (8) TMI 10 - SUPREME COURT] that the entries in books of accounts are not conclusive and that the true nature of income/expense is determinative in deciding the taxability of income or allowability of an expense. AO directed to treat the gains on sale of Badlapur Land as LTCG in place of business income. - Decided in favor of assessee.
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