TMI Blog2020 (8) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... land - LTCG or business income - HELD THAT:- Initially the assessee has invested in the land in question, however, subsequently when the assessee has decided to develop the residential colony on this land then the capital asset has been converted into stock-in-trade. Bifurcation of the profit arising from the sale of the plots of land ought to have been based on the FMV on the date when the assessee has decided to develop the land into residential colony. The timing and date of such conversion is taken by the LD. CIT(A) as on 1st day of financial year 2015-16 i.e. 01.04.2015. The said date is not the actual date coming from the relevant material/record. The preparation of the site plan for developing the colony shall be the actual date of conversion of the agricultural land into stock-in-trade. CIT(A) has not examined this issue as on when the capital asset was converted into stock-in-trade. The LD. CIT(A) has just taken the 1st day of previous year relevant to assessment year as the date of conversion which is not based on any documentary evidence. Computation of capital gain as well as the business income arising from the sale of land is dependent on the fair market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds :- 1. Whether on the facts and circumstances of the case and in law ld. CIT (A) is justified in deleting addition of ₹ 1,01,774/- made by the AO on account of cash deposited in bank account despite of the fact that sufficient cash was not hand as per cash book. 2. Whether on the facts and circumstances of the case and law, the LD. CIT (A) is justified in deleting the action of the AO in considering ₹ 4,07,77,191/- as business income as against of Long Term Capital Gain of ₹ 3,51,17,040/- declared by the assessee in the return of income, without appreciating material facts of the case. Due to the prevailing situation of COVID 19 pandemic, the hearing of the appeal was concluded through Video Conference. Ground No. 1 is regarding an addition of ₹ 1,01,774/- made by the AO on account of cash deposit in the bank account of the assessee was deleted by the LD. CIT (A). 2. The assessee is an Individual and running a Hospital in the name and styled as M/s. Mayuri Surgical Hospital. The assessee has filed his return of income on 14.10.2016 declaring total income of ₹ 3,80,07,400/- including Long Term Capital Gain of ₹ 3,51,17,040/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Monday i.e. 16.11.2017 a total cash of ₹ 2,90,000/- including ₹ 1,20,000/- was deposited and the contra entry in the cash book was made in the cash book on 17.11.2015 instead of 16.11.2015 due to oversight of the computer operator. I have considered the submission along with the cash book entry and it is my considered view that it is a genuine mistake on the part of data entry operator. The AO has also not rejected the books of accounts. Therefore, the addition of ₹ 1,01,774/- is deleted and the appellant s ground of appeal on the issue is allowed. Thus the entries made in the cash book from 14.11.2015 to 17.11.2015 were considered by the LD. CIT (A) and it was found that it was only a genuine mistake on the part of the Data Entry Operator who has made the entry of 17.11.2015 instead of 16.11.2015. In view of the above facts as discussed by the LD. CIT (A) and no contrary material brought before us, we do not find any error or illegality in the impugned order of LD. CIT (A). Ground No. 2 of the revenue s appeal and ground in the Cross Objection are common regarding the Long Term Capital Gain declared by the assessee was treated as Business income by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was using the land for agricultural purposes till the land was divided into plots and sold. Since the nearby area of the land has been developed and people started residing along with farming their lands, therefore, to avoid the illegal encroachment on the land, the assessee decided to sale the land after dividing the same into residential plots. Thus the ld. A/R has submitted that the assessee has sold the agricultural land though after dividing the same into plots and, therefore, gain arising from the sale of the land is nothing but Long Term Capital Gain as the assessee purchased the land as an investment and at the time of sale it cannot be treated as business activity. He has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Sohan Khan Mohan Khan, 304 ITR 194 (Raj.). 6. We have considered the rival submissions as well as the relevant material on record. The undisputed fact as emerging from the record is that the assessee purchased the agricultural land in question in the year 2000-01. During the year under consideration, the assessee has sold various plots of land and the description of the land given in the sale document clearly reveals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35601 Cost of plots sold on 31.12.2015 97765 Cost of Shops Sold 372513 Cost of shops sold on 12.02.2016 (Cost of land purchase 14675 + Construction Cost 200000) 214675 Cost of shops sold on 29.02.2016 (Cost of land purchase 7838 + Construction Cost 150000) 157838 Development Cost of Colony 1650000 Total Cost of sold property 2387909 Profit from business of real estate 40777191 Thus it is clear that the assessee has sold the plots as well as shops in the colony developed by assessee. The LD. CIT (A) though upheld the finding of the AO to the extent that what was sold by the assessee were the residential plots and, therefore, the activity of developing the colony is a business activity of the assessee which is adventurous in nature. However, the LD. CIT (A) has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted into stock-in-trade. The LD. CIT(A) has just taken the 1st day of previous year relevant to assessment year as the date of conversion which is not based on any documentary evidence. Accordingly, the computation of capital gain as well as the business income arising from the sale of land is dependent on the fair market value of the undeveloped land in question on the date when the assessee decided to develop the land. The documentary evidence on this point would be the lay out plan prepared by the assessee or any other document which was prepared by the assessee for the purpose of development of the land. Therefore, the bifurcation and computation of Long Term Capital Gain and Business income requires a proper verification and re-consideration. Accordingly we set aside this limited issue to the record of the AO for determining the actual date of conversion of the capital asset into stock-in-trade and then apply the provisions of section 45(2) of the IT Act to bifurcate the profit into Long Term Capital Gain and Business income. 6.1. As regards the deduction under section 54F is concerned, the LD. CIT (A) has not considered this issue. The AO has denied the claim solely on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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