INCOME TAX ACT, 1961

Section 14 Section 50C

Head of income - Income from sale of land/building - Business income or capital gains - Addition invoking provisions of section 50C

Assessee had purchased a residential plot land (1/3rd share of total land) and immediately after the purchases, construction of basement and shops was started on the said plot. Assessee constructed Hall in basement and eight shops on the ground floor. One of the shops was sold in financial year 2008-09 and basement, Roof rights and balance shops were sold. Another plot was purchased and was sold in the same year. Intention of the assessee in making above referred transaction of sale purchase was of business nature and was, therefore, assessable under head Income from Business. Although in the return of income, assessee made a bona fide mistake by showing all such transactions under the head Income from capital gains, instead of Income from Business. Later, assessee claimed the transaction as business/ adventure in the nature of trade on this logic that his nature of transactions is of business. Assessee made a plea that provisions of section 50C were not applicable on him as the said section is applicable on capital assets only. Held: Intention of the assessee in making above referred transaction of sale purchase was of business nature and was therefore, assessable under head Income from business. Although in the return of income, assessee made a bona fide mistake by showing all such transactions under the head Income from capital gains, instead of income from business. Assessee was not liable to pay capital gain tax. Income from sale of land and building is taxable under the head 'Income from business or profession' where provisions of section 50C are not applicable in so far as the shops were sold on agreement basis prior to 1-10-2009 when the provisions of section 50C were not applicable. Thus, AO was not justified in invoking provisions of section 50C and accordingly, was directed to delete the addition made under section 50C.

Distinguished on facts :CIT v. Rewashanker A. Kothari. (2006) 283 ITR 338 (Guj) : 2006 TaxPub(DT) 1357 (Guj-HC)Applied :Chandrashekhar J. Bahirwani v. Asstt.CIT [ITA Nos. 7810/M/2010 & 6599/M/2012, dt. 17-6-2015].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 69C Section 69

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