INCOME TAX ACT, 1961

Section 14

Head of income - Business income or capital gain - Profit on sale of land - AO alleging no business carried on by assessee--Reason, assessee doing liasoning work in real estate

Assessee engaged in liasoning of property declared profit arisen on sale of property under the head business income. AO took the view that since assessee's main business was to do liasoning work in the real estate property and, therefore, assessee was not a business man in property and resuling profit was to be taxed as capital gain. Held: Assessee business as contemplated by section 28, is an activity capable of earning of profit which can be taxed. One of the ingredients of 'business' is that it must be carried on with profit motive. However, while doing the business, the loss may also be incurred but the person who starts the business has always a profit motive. In the instant case, as presumption of AO that since assessee did liasoning work in the real estate transaction, therefore, he could not do the business, was not tenable and, therefore, sale of land was to be treated as business income as object of assessee was to purchase land to convert into small plots and then sale the small plots on profit, So there was a profit motive. Accordingly, AO was directed to treat the transaction under the head income from business and compute tax liability accordingly.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

INCOME TAX ACT, 1961

Section ?????

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