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2021 (4) TMI 210 - AT - Income TaxCorrect head of income - income from sale of impugned properties - business income OR long term capital gain - whether sale of 39 plots/land parcels and transaction of capital contribution of 3 plots to partnership firm out of 215 bigha agricultural land cannot be regarded as 'business activity' in the given set of factual matrix? - HELD THAT:- The provisions of Section 2(14) of the Act defines a 'capital asset' whereby property of any kind held by the assessee, whether or not connected with his business or profession would fall within the sweep of expression 'capital asset'. Thus, the law does not expect complete absence of business connection of an asset for the ascertainment of the character of asset. Property of 'any kind' is somewhat sweeping in nature which stipulates that property could be capital asset, even if, connected with business of the assessee. In the instant case, the Revenue could not demonstrate any real substantive and systematic course of activity or conduct on the part of the assessee to characterize the income to be sourced from a business activity induced by commercial spirit. The assessee is entitled in law to hold certain class of asset as 'capital asset' even while he is dealing with the assets of similar nature in business with commercial objectives. In the instant case, the AO has inter alia alleged that the assessee is engaged in a systematic commercial exploitation of land in the capacity as a partner with other co-owners. In our view, cannot be seen as an handicap in the hands of HUF assessee and would not deprive the HUF assessee of treating the assets as capital assets. Thus, in the totality of extenuating circumstances existing in the present case, we find that plea of the assessee has merits and deserves acceptance. We accordingly hold that claim of assessee to characterize the gain arising on sale of land parcels in question to be chargeable under the head 'capital gain' cannot be dislodged and replaced by 'business income'. Hence, we set aside the order of the Revenue authorities and restore the action of the assessee in this regard.- Decided in favour of assessee.
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