INCOME TAX ACT, 1961

Section 14

Head of income - Business income or Capital gains - Profit on sale of agricultural land after conversion - No adventure in the nature of trade

Assessee after conversion of agricultural land into non-agricultural plots sold the same and declared long-term capital gain on sale of plots of land and claimed exemption under section 54F against such long-term capital gain for purchase of house property. AO held that plotting of land by converting agricultural land into non agricultural land was 'adventure in the nature of trade' and, therefore, resulting profit was taxable as business income. Held: Land was purchased by assessee since long back as capital asset and was continuously held for 20 years as capital asset. There was no intention of assessee to trade for the land so purchased, contrary it was used for agricultural purposes continuously till the year of sale. Agricultural income so earned was offered in the return of income of respective years and accepted by the department. Merely conversion of agricultural land into non-agricultural land would not give rise to the taxable event until it was actually sold. Thus, assessee sold the capital asset held for long-term, accordingly, gain arising from sale was eligible for deduction under section 54F assessable as capital gain and was eligible for deduction under section 54F.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 48

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