The Tax Publishers2021 TaxPub(DT) 1028 (Mum-Trib)

INCOME TAX ACT, 1961

Section 14

Where partnership deed was duly amended bringing into account the fact that assessee was dealing in the business of real estate developer prior to the purchase of land and no cogent reason was brought on record by the authorities to dispute the facts, further, except for mentioning about the assessee's classification in earlier year, authorities will have not at all commented upon the assessee's explanation that the said purchase of land happened after assessee started the business of dealing in land and real estate, thus, gain was directed to be treated as business income with necessary consequences.

Head of income - Income from Capital gains or Business income - Surplus on sale of land -

Assessee sold an immovable property and showed in the audit report that nature of business as Dealers in Electronic Items and Trading. AO further observed that assessee had shown nature of business of sale and purchase of Electronic/Electrical Appliances. That profit/gain was credited in the profit and loss account as profit on sale of plot. Net profit was set off with brought forward business loss and brought forward depreciation. AO held that assessee had shown the plot in its Audited Financials under Fixed asset Schedule. That also there was nothing qualified in Tax Audit Report of either assessment years 2014-15 or 2015-16, that a capital asset has been converted into stock-in-trade. This clearly showed that asset transacted is a capital asset which was sold within a period of 36 months, to a short-term capital gain. Held:— It is the settled preposition of law that description in the books of account is not the determinative of the true nature of the transaction. Partnership deed was duly amended bringing into account the fact that assessee was dealing in the business of real estate developer prior to the purchase of land and that tax audit report also showed the assessee to be in the said business cannot be ignored. No cogent reason was brought on record by the authorities to dispute the facts. Except for mentioning about the assessee's classification in earlier year authorities will have not at all commented upon the assessee's explanation that the said purchase of land happened after the assessee started the business of dealing in land and real estate and the fact that auditor in the auditor's report did mention the same as the assessee's business. Thus, gain was directed to be treated as business income with the necessary consequences.

Relied:Sanchit Software and Solutions (P) Ltd. v. CIT [Writ Petition No 783 of 2012, dated 7-9-2012 : 2012 TaxPub(DT) 3030 (Bom-HC)].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16



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