INCOME TAX ACT, 1961

Section 14

Head of income - Business income or Capital gains - Profit on sale of housing plot after conversion of agricultural land with commercial motive -

Assessee purchased certain parcels of agricultural land and said parcels of land were immediately converted into non-agricultural land within two months from last purchase and assessee incurred various development expenses to put up residential housing plot scheme while providing for common infrastructure and internal roads. The residential housing plots were shown by assessee as stock-in-trade and she declared gain arising on sale of such plots as business income. AO taxed the same as capital gain. Held: Assessee had acted in a synchronized manner with continuity. Parcels of land were converted into non-agricultural land to pave the way for its commercial utilization. Competent authorities were approached immediately on purchase of land for conversion and demarcation of layout. Assessee had demonstrated carrying out development of land parcels and incurring of expenditure thereon. Collector's letter granting permission for conversion and commencement letter from AMC proved the case in point towards commercial motive. The layout plan suggested demarcation of commission infrastructure and internal roads in housing plot scheme named Krish Villa. Also assessee had issued brochures for sale of plots to potential buyers and sold the plots in putting up residential housing plot scheme named Krish Villa. Also assessee had issued brochures for sale of plots to potential buyers and sold the plots in putting up residential housing plot scheme as approved. Such organized course of commercial exploitation of land portfolio carried all trappings of adventure in the nature of trade, commerce, etc., and thus fell within the ambit of expression 'business' as defined under section 2(13). As a sequel thereto, profits arising from such adventure had to be taxed as 'business income'.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09 to 2011-12

INCOME TAX ACT, 1961

Section 153A

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