INCOME TAX ACT, 1961

Section 14

Head of income - Business income or Capital gains - Profit on sale of land - Proporties held as investment

Assessee sold 19 properties/land which were in the nature of agricultural land some of the pieces of land were sold through the development agreements after converting into non-agricultural lands in such a manner that the assessee was executing the sales deed/handing over the possession to the party, whereas the developer ws acting as the confirming party and declared resulting profit under the head Capital gains. AO took the view that assessee was carrying on a systematic actiity of purchasing and selling of land which was in the nature of business and thus, AO taxed profit on sale of land as business income. Held: There was a considerable time lag between purchase and sale of land and other properties. The land/properties had been declared as 'capital investment' by assessee all along. Also, some of the properties were let out and rent thereon was earned as a yield on such investments. Agricultural income had been consistently declared year-after-year on agricultural land so held before its sale. The non-agricultural land so held were shown as investment and subjected to wealth-tax being capital asset. Coupled with this, assessee had large capital of its own at its disposal which was far in excess of corresponding investments made in land/properties over years. On cumulative reading of these glaring facts, intention at the time of purchase to hold impugned land/properties as a capital asset was manifest and, therefore, profit on sale of land was to be taxed as capital gains.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 68

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