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2023 (9) TMI 1350 - AT - Income TaxCorrect head of income - gain on sale of property - business income or capital gain/income from house property - whether the property constructed is a commercial or a residential premises? - HELD THAT:- From the stand-point of the company, it is immaterial whether, therefore, a part of the property is sold at a profit, as it does a flat at Kakkanad for Rs. 65 lakh on 20.10.2014, purchased on 06.09.2011 for Rs. 45 lakh, after effecting improvement thereto costing Rs. 16.33 lakh, yielding it thus a gain of Rs. 3.67 lakh, or sell it’s building, a godown, let since FY 1997-98, on 13.07.2011, i.e., during the previous year relevant to AY 2012-2013, for the reason that it had become old, necessitating repairs and improvement which may presumably not yield it commensurate return. In each case, the sum realized, as indeed the rent received over the years, is, after meeting expenses, ploughed back in the business, purchasing and constructing landed property for being, similarly, either sold at a profit or leasing it. Where it found the land purchased (purchased for Rs. 78.80 lakhs on 02.05.2012), which was out of the sale proceeds of the godown sold during FY 2011-2012, could not be subject to commercial construction, i.e., its intended user, the same was immediately disposed of on 19.05.2014, i.e., for a business reason, even if at a meager profit of Rs. 1.20 lacs. The same could be held as a capital asset inasmuch as its location would only be appropriate, awaiting again in value over time, but was sold at near par once it was found that it did not serve a business purpose. The assessee is thus undertaking the business of real estate development, of which leasing, as is sale, an integral and a regular part. Thus setting aside the impugned order, uphold the assessment as framed, assessing the capital gains and income from house property as business income. Revenue’s appeals are allowed.
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