In absence of intention to deal in land on regular basis, income earned from sale of land is taxable as capital gain

Brief of the case

Delhi High Court in case of CIT Vs. Edward Keventer (Successors) Private Limited held that factors like intention of the assessee in purchasing the property, duration of time property was kept by assessee, lack of any transactions of sale or purchase of property throughout relevant period of time, should be considered to determine whether transactions of sale of property resulted in capital gains or in business income.

Facts of the case

• The assessee had purchased leasehold rights in a large parcel of land in 1952 with the object of dairy farming and for production of milk. That venture never took off because the requisite permission for the same was not given by the New Delhi Municipal Council.
• On 02.03.1989, the assessee entered into an MOU with Balarpur Industries Limited and Dalmia Promoters for developing a portion of the said land.
• Anyhow, the said Memorandum of Understanding was cancelled on 08.06.2005 and the development of land, as proposed under the Memorandum of Understanding, did not take place. Prior to the cancellation of the Memorandum of Understanding, on 27.05.2005, two Agreements to Sell were entered into between the assessee and  Mr Niranjan Koirala on the one hand and the assessee and Ms Sheila Aggarwal on the other in respect of the said two properties. Mr Koirala and Ms Aggarwal were both occupying those properties.
• The assessee computed Capital Gains in respect of said properties.
• The A.O. held that the transaction resulted in business income and not in capital gains.
  

HELD by CIT(A)