Case Law Details
Ashok Kumar Chouta Vs DCIT (ITAT Bangalore)
The issue under consideration is whether land sold by assessee engaged in property development taxable as capital gains or business income?
ITAT states that the assessee has converted the business asset into Capital asset and accordingly sold the same as Capital asset only. ITAT notice that the assessee has not brought any material to substantiate the above said contentions. The assessee has held the property for about 3 years and 2 months. The assessee has not explained as to when he has decided to convert the business asset into Capital asset. Without explaining the date-wise sequence of events which persuaded the assessee to abandon the project, it would be difficult to appreciate and accept the explanations of the assessee. Further, upon abandoning of project, the land can also continue to be held as business asset and sold as business asset. ITAT notice that the assessing officer has pointed out that the assessee has sold another land located at Kodical during the AY 2007-08 and disclosed the profit as his business income. The assessee as well as the Ld CIT(A) has placed reliance on the statement given during the course of search. In our considered view, the statement given by the assessee u/s 132(4) of the Act and declaration/non-declaration of the land for wealth tax purposes are collateral facts and hence they cannot be considered as deciding factors in order to decide the character of land. The Ld CIT(A) has also observed that the amount paid to tenants has been capitalized and not claimed as deduction In case of execution of project of construction of multistoried apartment, it is the trade practice to bear the rent paid by tenants who are going to be allotted flats in the proposed building and further, those expenses are usually claimed against the revenue generated from the said project only. Hence the question of claiming the rent so paid as deduction against other income of the assessee does not arise, since they are project specific expenses. In view of the foregoing discussions, we are of the view that the various reasons given by Ld CIT(A) to treat the land as capital asset would fail. On the contrary, uncontroverted fact is that the intention of the assessee, at the time of purchase of the land, was to hold the same as business asset only, which is evident from the purpose for which the land was purchased. ITAT have noticed that there is no material to show that the assessee has really converted the business asset into capital asset. Accordingly, ITAT are of the view that the character of the impugned land is to be considered as “business asset” only and consequently, the profit arising on its sale is required to be assessed as business income only. Accordingly, ITAT set aside the order passed by Ld CIT(A) on this point.
FULL TEXT OF THE ITAT JUDGEMENT
Please become a Premium member. If you are already a Premium member, login here to access the full content.
