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Assistant Commissioner of Income Tax, Circle-2, Ajmer Versus Avijit Singh

2016 (5) TMI 872 - ITAT JAIPUR

Sale of shops/flats - Capital gain v/s business income - Held that:- The assessee had constructed area in form of shops and flats. Originally this land was belonged to his grandmother Rani Sahiba Smt. Rajkanwar Nathawat Ji, who made agreement in 1995 with the builder namely M/s Krisha Pratap & Co. Pvt. Ltd. to build and construct the mall. They made agreement to share the constructed area on 50-50 basis. All the cost was borne by the builder. This land has not been shown as a stock in trade in t .....

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Addition n account of deduction U/s 24(a) - Held that:- The assessee, undisputedly, has disclosed the rental income from shops of mall under the head income from house property. The deduction U/s 24(a) is mandatory, therefore, we uphold the order of the ld CIT(A). - ITA No. 337/JP/2014 - Dated:- 8-4-2016 - SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM For The Revenue : Mrs. Neena Jeph ( JCIT) For The Assessee : Shri Subhash Porwal (CA) ORDER PER: T.R. MEENA, A.M. This is an appeal filed by the .....

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the same was assessed as business income by the A.O., without appreciating the facts of the case. 2. The assessee filed his return on 31/7/2008 declaring total income of ₹ 1,19,83,441/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act) on 14/12/2010. This order of the Assessing Officer was found erroneous and prejudicial to the interest of revenue to the ld CIT(A), Ajmer, therefore, he gave certain direction on the profit by selling the flats/shops was th .....

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ats of the complex of his share and earned profit. His intention was to earn profit. Therefore, income was assessable under the head profit and gain of business or profession. During the year under consideration, he sold flats amounting to ₹ 1,45,97,450/- against stock in trade value of ₹ 11,40,765/- and earned profit of ₹ 1,34,83,725/- out of which 2/3 share derived at ₹ 89,89,150/-. As per ld Assessing Officer, this income was taxable under the head income from business .....

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Officer. Accordingly, he made addition in the income of the assessee. 3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal by observing as under:- 3.3 I have considered the contentions of the appellant as well as assessment order. (i) It is seen that the assessee had developed a multi storied commercial complex known as Mall 21 on inherited land through will of grandmother by an agreement with the .....

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as income from business only on the basis that assessee has sold the multi storied shops/ flats with a intention to earn profit. However, it cannot be said that profits are always attributable to business income and they cannot be attributable to capital gains on sale of capital assets. So, the profits accruing to the assessee cannot be a sole criteria for treating the income of the assessee as income from business. It may be mentioned that the assessee is not maintaining any books of accounts .....

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sing and selling the flats/ shops so as to treat it as a organized business activity of the assessee. The assessee is not in the real estate business of developing and selling the properties of any other party. In fact assessee has even got his own land developed through a developer which shows that there was no intention of entering into real estate business. Further, assessee has offered the sale consideration in the return as per Sec. 50C of the I.T. Act even when the actual consideration rec .....

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s entered between the grandmother of the assessee Smt. Rajkanwar Nathawat with the developer M/s Krishna Pratap & Company Pvt. Ltd. on 08.04.1995. As per the development agreement, the developer was to bear all the expenses and land was made available to the developer only for the purpose of development of the land. In consideration thereof, the assessee had agreed to transfer 50% of the total constructed area to the developer for the recovery of construction cost. From above, it is apparent .....

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vity for carrying on any real estate business. In view of above discussions and submissions of the appellant, above income is taxable as income from capital gains and not from business. Accordingly, this part of ground of appeal is allowed. (ii) As regarding the double taxation of the same income as business income as well as income from capital gains , the assessee has pointed out that the AO has passed the rectification order in above respect. So same need no adjudication. 4. Now the revenue i .....

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e in accordance with the intents of the last will and testaments dated June 29th, 1985 of Rani Sahiba Smt. Rajkanwar Nathawat Ji, the entire (2/3rd) share in the said property belonging to Rani Sahiba Smt. Rajkanwar Nathawat Ji devolved on her demise, on her grandson Kunwar Avijit Singh (assessee) and the assessee became owner of his asset. The assessee entered into a development agreement with M/s Krishna Pratap & Co. Pvt. Ltd.. The developer would construct the mall and thereafter on compl .....

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t is not transferred U/s 2(47) of the Act. This case also not covered U/s 45(2) of the Act. The assessee got the price of the land through constructed area allotted in shape of shops/flats. It is not a case of transfer of assets nor a case of conversion of capital asset into stock in trade and is only form of development of existing capital assets for disposal and is a long term capital gain. Therefore, he prayed to confirm the order of the ld CIT(A). 6. We have heard the rival contentions of bo .....

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he books of account by the assessee. The assessee is not in the activity of regularly purchasing and selling the flats/shops and it is not organized business activity of the assessee. There was no intention of the assessee to enter into real estate business. The assessee has also shown sale consideration on the basis of valuation of stamp authority U/s 50C of the Act. Thus, the assessee rightly claimed long term capital gain on sale of shops/flats during the year under consideration. Accordingly .....

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