Excess share of land received on partition cannot be treated as business income

ITO Vs Undavalli Constructions (ITAT Visakhapatnam)

In the instant case there is no dispute that the land in question was purchased as capital asset and remained as capital asset till the partition. No business activity was carried on by the co-owners and the assessee has received the land on partition. The share of land received on partition cannot be treated as income arising from the business. As discussed earlier the asset was shown in the balance sheet as capital asset but not stock in trade. Thus the contention of the assessee that the excess land received in partition was not taxable u/s 28(iv) is also supported by the decisions referred supra.

Subsequent to taking the land on partition, the assessee has sold the property after the development and declared the average sale value of Rs.24488/- per sq.yard which is more than the value adopted by the AO in the assessment. The reason for postponement of taxation was explained by the assessee as disadvantageous location for marketing. The Ld.CIT(A) followed the decision of Hon’ble Supreme Court in the case of CIT Vs. Excel Industries (2013) 358 ITR 295 (SC) and viewed that there was no loss of revenue. Therefore, we agree with the finding of the Ld.CIT(A) that the excess area of land received was not taxable u/s 28(iv) of the Act and there is no loss of revenue. Hence, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue is dismissed.

FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM

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