Income from sell of land is capital gain, if purchase and sell of land is not the business of Assessee

Brief of the case:

Madras High Court held in CIT Vs Ms Vidya Thangakumar that it would vary from case to case that whether the land in the hand of assessee is a capital asset or business stock. In the present case the assessee had got the land under settlement and it had to sell the land, it was not the business of the assessee to purchase and sell the land. So the income from selling the land would be taxable under head capital gain.

Facts of the case:

The assessee got the land under settlement which was sold over the period of 3 years in the form of undivided share so the CITA(A) was of the appeal that the same was taxable under head PGBP not under head Capital gains.

Contention of the Assessee:

Assessee was of the view that she was not in the business of selling of properties so the sale of the same should be treated as income under head capital gains not under head income from PGBP.

Contention of the Revenue:

As per the case law laid down by the supreme court in Raja Rameshwara Rao Bahadur Vs. CIT [1961 (42) ITR 179 (SC] that when the property is acquired by someone and sold in bits and pieces then the same should be treated as income under head PGBP.

 Held by High Court:

High Court held that as the assessee entered into a promoter’s and construction agreement due to which the assessee was compelled to sell the undivided shares in land. Moreover High Court held that the assessee had not acquired the property for development and re-sale but she got the same through settlement and her purpose was just to re-sell the same and not to develop the same and re-sell and earn profit. It was not the business of assessee to purchase and sell the land so the same should not be taxable under head PGBP nut under capital gain.

So the appeal of the revenue stood dismissed.