Presence of a profit motive cannot lead to a conclusion that the transaction has been entered into as an adventure in the nature of trade ; Profit on Sale of TDR held as Capital Gain

ACIT Vs S.K.M. Construction Pvt. Ltd. (ITAT Mumbai)- Land which forms part of investment in balance sheets is capital asset and hence profit derived from it is taxable under the head capital gain. Mere presence of profit motive not enough to decide the head of income.

The assessee has not purchased or sold any other plot immediately before or after this deal. The assessee has further not done any development on this plot. There are no repetitive transactions of this nature and, therefore, this was merely a case of an investment in the hope that the assessee would obtain good TDR rights which could be sold at profit. The presence of a profit motive cannot lead to a conclusion that the transaction has been entered into as an adventure in the nature of trade. Therefore, it is a clear case of investment and the same has been realised after a gap of 4/5 years and the same was rightly held to result in long-term capital gains.

ITAT MUMBAI

ACIT Vs. S.K.M. Construction Pvt. Ltd.

I.T.A. NO. 6272/Mum/2009 

A.Y. 2006- 07

S.K.M. Construction Pvt. Ltd. Vs. ACIT

I.T.A.NO.6499/Mum/2009 

A.Y. 2006-07

 Date of Decision- 30/06/2011

O R D E R

Per T.R.SOOD, AM: