A transaction of purchase and sale of land cannot be assumed,without more, to be a venture in the nature of a trade.

[CIT vs. Jawahar Development Association 127 ITR 431 (MP)(1 981)] The activity of an assessee in dividing the land in to plots andnot selling it as a single unit as he purchased, goes to establish that he was carrying on business in real property and it is a business venture.

[Raja J. Rameshwar Rao v CIT 42 ITR 179 (SC)(1961)] also see CIT vs Tridevi (V.A.) (1988) 172 ITR 95 (Bom)]

Mode of payment i.e. payment in installments is not a determinative factor if the income is in the nature of trade or capital gain.

[ CIT v Radha Bai 272 ITR 264 (Del) (2005)]

Where assessee constructed shops which were let out and rent has been received for 3 years, thereafter the shops were sold – Income from sale of shop is capital gain.

[ACIT v Janak Raj Chauhan 102 TTJ 297 (Asr.)(2006)]

The assessee, after dividing the land into plots, sold the land situated in a  village which was beyond 8 kms, of the municipal limit. Such land was sold pursuant to an agreement to sell executed earlier. It was held that land in question was rural agriculture not eligible to capital gain.

[CIT vs Sanjeeda Begum 154 Taxman 346 (All) (2006)]

• When the land was acquired on the basis of a will on the death of her husband & she sold the same in parcels because the huge area could not be sold in one transaction. Such an activity could not amount to trade or business with in the meaning of the Act.

[CIT v Sushila Devi Jain 259 ITR 671 (P&H) (2003)]

• Selling of own land after plotting it out in order to secure a better price is not in the nature of trade or business, more so when the land was gifted to the assessee.

[CIT v Suresh Chand Goyal 209 CTR 410 (MP)(2007) see also Ram Saroop Saini (HUF) v ACIT 15 SOT 470 (Del)(2007)]

• Relinquishment of right in property against consideration shall attract capital gain.

[CIT v Smt Laxmidevi Ratani 296 ITR 0363 (MP)[2008]]

Extract From the Books of CA Agarwal Sanjay ‘Voice of CA’  titled ‘Capital Gains Under Income Tax Act, 1961’ –

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