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2018 (4) TMI 494 - AT - Income TaxAssessment of income on sale of land - plots on the agricultural land sold belongs to the HUF or assessee in his individual capacity - land inhereted by the son on the death of his father - Held that:- The share in the subject land inherited by the assessee under section 8 on the death of his father cannot be considered as HUF property in his hands. Therefore, income from disposal of such land will have to be considered as his individual income. We therefore upheld the view of the lower authorities where the income on the disposal of plots of land has been brought to tax in the hands of the assessee in his individual capacity. Treating the sale of plots of agriculture land - adventure in the nature of trade OR capital gain - Held that:- In this case, the assessee itself has developed residential plots and then sold it to individual buyers. Therefore, we affirm the findings of the AO that by such plotting of land, the agriculture land has been converted into stock-in-trade (in form of residential plots) of assessee’s business. Development of residential colony and said conversion has happened by assessee’s own admission during financial year 2009 and the intent of the assessee has thus been demonstrated through his own actions. The fair market value of the asset on the date of conversion as reduced by the cost of acquisition is required to be assessed under the head “capital gain” in the year(s) the stock-in-trade is sold/transferred. Sales realization of the stock-in-trade over such fair market value is required to be assessed as “business income”. During the year under consideration, it is an admitted position that 15 plots have been sold for a consideration of ₹ 54,93,100. Therefore, the taxability arising on conversion of agricultural land into stock-in-trade to the extent it has been sold during the year, arises during the impunged assessment year. The matter is accordingly set-aside to the file of the AO to determine the capital gains in accordance with the provisions of section 45(2) as well as business income on sale of such plots.
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