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2019 (10) TMI 293 - ITAT VISAKHAPATNAMDeduction u/s 54F - whether the sale of plots by the assessee is business income or ‘capital gains’? - Entitled for deduction u/s 54F if construction of house is commenced prior to the transfer of the asset - HELD THAT:- In the instant case, the assessee carried on the agricultural activity till 31.03.2008 and subsequently sold the land in plots. Though the assessee has taken permission for conversion of land for plotting into various units, no evidence was brought on record by the AO that the assessee has carried on any developmental activity. The assessee has not incurred any other expenditure except for payment of conversion fees, transport charges, labour charges etc. From the assessment order, we observe that the AO did not make out a case that the assessee has carried on the business activity. Therefore, the assessee being the agriculturist, not carried on any business activity except conversion of land into plots and disposing them without being developed there is no business activity involved and the income required to be taxed as capital gains, but not business income. It is established that the department also has accepted the assessee’s contention that the sale consideration on account of sale of plots to be brought to tax under the head long term capital gains. Accordingly, first question is answered in favour of the assessee and against the revenue. Eligibility for deduction u/s 54F if the asset is transferred prior to the transfer of the land - As relying on SRI BOLLINA SRIHARI RAO AND VICE-VERSA [2017 (4) TMI 117 - ITAT VISAKHAPATNAM] and CHAMARTHI MOUNICA [2019 (8) TMI 847 - ITAT VISAKHAPATNAM] assessee is eligible for deduction u/s 54F even if the construction is commenced before transfer of the capital asset and completed the construction within the period provided in 54F of the Act. Therefore, we set aside the orders of the lower authorities and allow the appeal of the assessee.
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