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2016 (7) TMI 532 - AT - Income TaxLoss on sale of land - ‘Business Loss’ or ‘Capital Loss’ - Held that:- Revenue has not disputed the fact that the assessee in its books of account right from beginning has shown the land as stock in trade. During the scrutiny assessment proceedings for the assessment year 2005-06 the Assessing Officer accepted that the assessee is engaged in land development business and no query was raised for treating the land as stock in trade. The principle of consistency in treating the land as stock in trade has to be followed. The ld. AR of the assessee has placed on record a copy of the Memorandum and Article of Association of M/s. T.K. Infrastructure Pvt. Ltd., a sister concern of the assessee. A perusal of Memorandum & Articles of Association show that one of the main objects of the company was land development. The proprietor of the assessee firm is one of the promoter Director of the aforesaid company. Thus, the findings of the Assessing Officer that the assessee is not engaged in the land development business are not based of proper appreciation of the facts. The present land transaction may be the first transaction of the assessee firm but the sister concern of the assessee is already engaged in similar business. Therefore, it cannot be said that the assessee was not connected in any way with land development activities. The second ground for making addition by Assessing Officer was that the co-owner of the assessee in its return of income has declared loss as capital loss. As has been stated earlier that a close scrutiny of Development Agreement clearly shows that the assessee had entered into Development Agreement for construction of residential and commercial building on the land in question. The co-owner of the assessee may have shown the loss arising from sale of Development Rights as capital loss inadvertently or out of ignorance, but it would not bind the assessee to give the same treatment in its books of account, when the facts on record distinctly indicate that the Development Rights were acquired by assessee as business venture. We do not find any infirmity in the findings of Commissioner of Income Tax (Appeals) admitting the claim of the assessee on this issue. Hence, no interference is called for in the impugned order. - Decided against revenue
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