ACIT Vs Mukesh Shah (ITAT Jodhpur)
Conclusion: Assessee had consistently shown the plots as investments in earlier years and that the nature of income could not be determined solely based on the nature of the business for tax audit purposes. Accordingly the sale of these properties was rightly considered as sale of capital assets rather than stock in trade.
Held: Assessee had claimed Short Term Capital Gain of Rs. 17,19,605/- on account of sale of immovable properties. AO considering the fact that assessee engaged in the business of real estate developer, was asked to explain why the income from sale of properties should not be assessed as business income instead of long term capital gain & short term capital offered by him. In response, assessee contended that few properties were purchased for investment purposes and the same were held as part of fixed assets in the preceding years. Accordingly the sale of these properties was considered as sale of capital assets rather than stock in trade. It was held that if the intention of assessee at the time of the purchase was to keep the same for appreciation than the gain on sale of the same was chargeable to tax under the head income from capital gain. If the intention of the assessee at the time of purchase was to sale the plots and earn profit than the profit on sale of the same was chargeable to tax under the head income from business. CIT(A) had noted that big chunk of land were forming of the stock in trade and small plots which were for investment and consistently shown under the head capital assets even for the earlier years and thereby the claim of the assessee was considered after careful going on all the aspect of the matter. Against that detailed finding of CIT(A), AO did not brough on record anything contrary to the finding of facts so recorded in the order of CIT(A) and therefore, merely based on the nature of the business for tax audit purpose would not determine the nature of other head of income.
