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2018 (3) TMI 893 - AT - Income TaxSale of property - nature of income - LTCG or busniss income - Held that:- The company was initially formed for the purpose of running a LPG Bottling plant. Since formal approvals were not granted by the authorities, the assessee company could not commence the business. However, no business activities were carried out by the assessee during the year. Ultimately, the land was sold to West Bengal Government for a total sum of ₹ 8.51 crores which was sold in two parts and two deeds were executed in this regard. The assessee has calculated the income/loss from capital gain u/s 50C of the Act. All the investments including improvement made in the earlier years have been duly recorded in the balance sheet and have been accepted under assessment proceedings from time to time, as investments is not under dispute. Therefore the assessee’s investment is treated as investment for the purpose of capital gain alongwith purchase cost and site development and the same has to be allowed under the head capital gain and in no stretch of imagination it can be an adventure in the nature of trade. For compensation paid to VLS capital Ltd as cost of improvement to be deducted from sale consideration for the purposes of Capital Gains - Held that:- As the amount was borrowed from VLS Capital Ltd for setting up LPG Bottling plant where formal approvals were not accorded by the various authorities. Therefore, the project was discarded and the land was sold to West Bengal Government. The West Bengal Government, if has acquired the said land for the purpose of residential colony or whatever, is not a concern of the assessee and therefore, cannot be held to be an adventure in the nature of trade. Thus as relying on CIT Vs. Mithlesh Kumari[1973 (2) TMI 11 - DELHI High Court] the interest part as deduction of ₹ 1.40 crore is directed to be allowed and deduction of ₹ 2 crores is rejected. Thus, on the second aspect of the issue, the same is partly allowed.
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