The Tax Publishers2021 TaxPub(DT) 0577 (Bang-Trib)

INCOME TAX ACT, 1961

Sections 14 & 54F

Where the intention of the assessee at the time of purchase of land was to construct a house for self-occupation and later on that intention was given up due to the fact that land was outside Mysore city and due to financial crunch, therefore, gain on sale of land was to be regarded as income under the head 'Capital gains' enabling assessee to get deduction under section 54F.

Head of income - Capital gains or Business income - Piece-meal sale of plots -

Assessee offered capital gains from sale of a land in his return. On inquiry, it was found out that he had sold one piece of land which was divided into plots and thus the AO and Commissioner (Appeals) confirmed that this ought to have been assessed as income from business or profession as it was an adventure in the nature of trade. The assessee's plea was that he purchased the land for constructing a house for self-occupation and since he could not do so, he decided to sell the same. There were no buyers to buy such large plot of land due to slump in real estate market. So, he applied to the development authority to divide the land into plots and then sold them piecemeal as plots. Held: The intent of the assessee is to be seen prima facie as deciding factor which was to construct a house for self-occupation. Once there was no intent from him to do business and the division of plots and their sale was only consequential to enable selling the land which was no longer required it cannot be assessed as profits and gains of business and profession but it will need to be assessed as capital gains.

Applied:CIT v. Hotel Sreeraj [ITA No. 282/2002, dated 6-12-2007 Karnataka High Court]; ACIT v. Narendra J.Bhimani [ITA No. 411/Rjt/2012, dated 31-1-2018 Rajkot ITAT] : 2018 TaxPub(DT) 0857 (Rkt-Trib)Dissented from:Raja J. Rameshwar Rao v. CIT (1961) 42 ITR 179 (SC) : 1961 TaxPub(DT) 0226 (SC); CIT v. B. Narasimha Reddy (1984) 150 ITR 347 (Karn.) : 1984 TaxPub(DT) 1625 (Karn-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14



IN THE ITAT, BANGALORE 'SMC-B' BENCH

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