Keshavareddy Krishnareddy Vs ACIT (ITAT Bangalore)
The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) considered an appeal filed by the assessee against the order of the National Faceless Appeal Centre confirming the treatment of gains from sale of plots and agricultural lands as business income instead of capital gains.
The assessee, an individual engaged in the business of running a bar and restaurant, had filed a return declaring income of Rs.97.46 lakh for Assessment Year 2012-13. During scrutiny assessment, the Assessing Officer examined the sale of 25 plots situated at Iggalur, Bengaluru, for which the assessee had offered long-term capital gains.
The Assessing Officer questioned whether the transactions constituted an “adventure in the nature of trade” under Section 2(13) of the Income Tax Act. The assessee submitted that he was not a real estate developer, had purchased the plots as long-term investments, had not converted the land, and had held the property for more than three years before sale.
The Assessing Officer rejected the explanation and held that the dominant intention was to make the plots attractive for sale by incurring development expenses. Reliance was placed on judicial precedents, including R. Dalmia v. CIT and Janki Ram Bahadur Ram v. CIT. The Assessing Officer noted that the assessee had purchased 25 plots in bulk, incurred development expenditure of Rs.11.24 lakh, and sold them to various buyers. He therefore treated the activity as an adventure in the nature of trade and assessed the resulting income of Rs.1 crore as business income.
