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2022 (3) TMI 1029 - ITAT PUNECorrect head of income - Capital Gains or Business Income - AO held that the land was purchased for the purpose of carrying on business and not as an investment - HELD THAT:- It is seen that the assessee purchased the land in the financial year ending 31-03-2006. Development expenses were also incurred in that year. Before the close of the year ending on 31.3.2006, the assessee came to know about a litigation going-on on this plot. Development cost incurred from August, 2005 to October, 2005, was before the assessee coming to know of the litigation on the plot. The assessee did not undertake any business activity. Before close of the very first year itself, the assessee declared the cost of purchase of land and development expenses as `Investment’ under the head `Fixed Assets’ in its balance sheet. The position continued to remain the same in its balance sheets on 31-03-2007, 31-03-2008, during which the assessee continued to declare such Plot as `Investment’. The assessee could manage to sell the property by involving the other party to the litigation on the same property, namely, Maruti Builders and Developers, signing as a ‘Consenting Party’. Thus it is clear that the assessee continued to treat such land as Investment ab initio, by showing it under the head `Fixed assets’ in its balance sheets from year to year and not as ‘Stock in trade’, which position has not been disputed by the AO in any of the earlier years. Land purchased by the assessee in the year 2005 has rightly been treated as Capital asset by the assessee, income from whose transfer is liable to be taken under the head `Capital Gains’ and not as Business Income.
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