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2017 (12) TMI 1326 - AT - Income TaxNature of sale of flats - business income or capital gains - renting of unsold flats - sale of undivided shares of land to various flat buyers - Conversion of land into stock in trade by applying the provisions of section 45(2) - source of income of the assessee - Held that:- The assessee has been offering the rental income for taxation. We also note that some of the flats, were sold by the assessee in subsequent years and the assessee offered the capital gain tax thereon. Therefore, reconvergence of stock in trade to capital assets as has been alleged by the Commissioner of Income Tax does not sustain in the eye of law, hence no enhancement is possible. We note that the main source of income of the assessee is from rental income (letting of flats), capital gains and income from other sources. In assessment year 2011-12, the assessee sold some flats and offered capital gain in the year of sale. Based on the above discussion it can be safely concluded that the assessee has not converted the land into stock in trade and the department has not adduced any evidence to prove that the land has converted into stock in trade and the Ld. CIT(A) has not adduced any evidence to prove for re-convergence of flats into stock in trade for capital assets, hence no enhancement is possible. The assessee as per the development agreement got some flats from the developer and rented (let out) them to earn the rental income and the same rental income is being offered by the assessee for taxation. Since the assessee offered the rental income for taxation, therefore, the Assessing Officer cannot bring the said land into the ambit of taxation by applying the provision of section 45(2) of the Act. Applicability of the provisions of Section 28(iv) in respect of the flats retained by the assessee in subsequent Assessment Years - Held that:- Since we have already adjudicated the solitary grievance of the assessee, stating that provisions of section 45(2) of the Act does not apply to the assessee, hence this ground becomes infructuous and does not require adjudication.
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