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2018 (5) TMI 739 - AT - Income TaxDeduction u/s 54B - Agricultural land sold by the assessee as covered U/s 2(14) - Held that:- It is a fact that the assessee was having agricultural land. Two pieces of the agricultural land situated at village Chakna Sarahbad were sold in the immediate preceding year. The assessee himself has considered this sale of the agricultural land as a sale of capital asset as per Income Tax Act and claimed deduction U/s 54B for investing in agricultural land. The assessee had also offered the sale of land in this year as sale of capital asset and claimed deduction U/s 54B. Thus, the issue of the agricultural land held by the assessee at village Chakna Sarahbad, Tehsil- Khairthal, district- Alwra is settled being the ‘capital asset’. Therefore, the issue raised in the ground No.1 of the assessee’s appeal has no merit and the same stands dismissed. Capital gain - Held that:- The assessee has sold ‘residential plot’ on his agricultural land. The same has been treated by the ld. CIT(A) as ‘adventure in nature of trade’ and taxed the receipt in the hands of the assessee under the head ‘profit and gain’ in business and profession. We hold that the assessee has sold small residential plots to various persons. The sale of these residential plots at his agricultural land was definitely an act of business and an adventure in the nature of trade. The ‘annexure’ to the sale deed placed in the paper book clearly establishes that the assessee has sold the residential plots of land after developing roads etc. thus, this establishes sale of the plots on this land and it was an act of adventure in nature of trade. However, we agree with the pleadings of the ld. AR that once this was an adventure in nature of trade and income is to be taxed as per the provisions of Section 45(2) of the Act. The capital gain shall be worked out on the date of conversion of agricultural land to the ‘stock in trade’ and then only work out the profit and gain of business. Therefore, the issue is restored back to the file of the Assessing Officer. The Assessing Officer will invoke the provisions of Section 45(2) of the Act and decide as per law
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