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2016 (8) TMI 261 - AT - Income TaxForfeiture of advance received against capital asset - whether the sum has to be reduced from the cost of asset and the same cannot be taxed as income on forfeiture - advance for sale of a capital asset v/s business asset - section 51 applicability - Held that:- As in respect of this project transferred by the partnership firm M/s HM Construction to the assessee, the assessee was declaring profit on sale of property of that project as income from business but it does not mean that the assessee cannot hold any real estate property as a capital asset. If said so, then it will be amounting to saying that a person dealing in shares cannot hold any share as investment. This cannot be said and therefore, in the present case also, this fact alone that the assessee was doing some real estate business cannot lead to this conclusion that this property in dispute was also held by the assessee as a business asset and not as a capital asset unless it is shown that this very property was held as a business asset. The revenue has not brought any evidence on record to even suggest that this property in question was also a business asset and the revenue has proceeded on this basis that since in respect of some property, the assessee is disclosing income as business income and showing the closing stock as business stock/ business asset, it cannot be inferred that each and every property owned by the assessee is a business asset and therefore, hold that the property in question is a capital asset because, the revenue could not bring any material on record to establish that this property is also a business asset. Once hold this that the property in question is a capital asset, Sec.51 of the IT Act is applicable regarding the advance received against sale agreement of this property which is forfeited and therefore, such forfeiture of advance has to be reduced from the cost of this asset. Since the forfeiture amount of ₹ 33.00 Lakhs is more than the cost of this asset ₹ 31,76,160/-, the excess amount of forfeiture i.e. ₹ 1,23,840/- has to be brought to tax in the present year in equal proportion in the case of both these assessees who were the owner of this asset in equal proportion and in the year of sale of that property, cost of acquisition should be taken at NIL to compute Capital Gain. - Decided partly in favour of assessee.
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