ACIT Vs Neel Siddhi Developers (ITAT Mumbai)
Summary: The ITAT Mumbai held that the gain arising from sale of land at Mihan, Nagpur by the assessee, a real estate development partnership firm, was taxable under the head “Capital Gain” and not “Income from Business and Profession”. The assessee had acquired the land for Rs.25 crores and intended to develop it for leasing out the constructed area, but development could not commence because of various legal and procedural impediments, including mutation issues, reservation for DP roads, discrepancies concerning a natural nalla, outstanding property tax, revocation of non-agricultural permission, a claim by Nagpur Improvement Trust and title disputes. The land was ultimately sold on 15.12.2010 for Rs.46.55 crores. The assessee offered Rs.12,15,10,183/- as Long Term Capital Gain after indexation.
The Assessing Officer treated the gain as business income and alternatively as Short Term Capital Gain, while the CIT(A) treated it as capital gain and accepted the Long Term Capital Gain position. On the first issue, the Tribunal noted that the land had been acquired for development and leasing rather than trading, the development could not take place because of the stated impediments, the sale was an isolated transaction, the land had been classified as investment as on 01.04.2010, and the assessee had used its own funds. Referring to the principle that all attendant facts and circumstances must be considered, the Tribunal held that the transaction was not an adventure in the nature of trade and upheld the CIT(A)’s conclusion that the gain was taxable under “Capital Gain”. The Tribunal’s reasoning was consistent with the principle discussed in TaxGuru’s material on G. Venkataswami Naidu & Co. vs. CIT.
