INCOME TAX ACT, 1961

Section 14

Head of income - Capital gains or Business income - Sale of building, which was treated as part of stock in trade because assessee was in construction business -

Revenue challenged order of Tribunal holding that amount of Rs. 6 crores received by assessee on sale of building, was 'long term capital gains' and not 'business income' as held by AO and CIT(A). Held: Except last nine years, property which comprised land and building was let out by assessee for a long period. Assessee had earned income by way of rent and rental income so received was offered for taxation as income from the house property. It had shown property in question as capital asset in its balance sheet. There was no material on record to hold that said property was converted by assessee as an item of stock in trade. On the other hand, said property was treated as capital asset. Merely because assessee was engaged in construction business, it was not a ground that land and building should be treated as part of stock in trade. It was also pertinent to note that assessee did not claim any depreciation in any of assessment years while offering rental income as house property income.

REFERRED : CIT v. Velankani Information Systems (P.) Ltd. [ITA Appeal Nos. 374 & 375/2011 & 273 To 276 of 2012 decided on 2-4-2013] : (2014) TaxPub(DT) 4270 (Karn-HC); D.R. Puttanna Sons Pvt. Ltd. v. CIT', 1986 Scc Online Kar 386 : 1986 TaxPub(DT) 1637 (Karn-HC)

FAVOUR : In assessee's favour

A.Y. :

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