Case Law Details
Shrijee Developers Ltd. Vs ITO (ITAT Chennai)
ITAT Chennai held that profit or loss derived from sale of land held as stock-in-trade is assessable under the head ‘income from business or profession’ and not under ‘capital gains’.
Facts- During AY 2003-04, the assessee company had transferred a land at Vadapalani to M/s.Macro Marvel Projects Ltd., Chennai, for a consideration of Rs.2.46 crs. and computed long term capital loss at Rs.10,58,177/- after claiming indexed cost of acquisition.
AO noticed that the assessee main business activity is construction and real estate development and further, the assessee has classified land sold for the impugned assessment year as stock-in-trade up to AY 2002-03. However, from AY 2002-03, the land has been converted into investment and treated as capital asset. Therefore, opined that profit or loss derived from sale of asset is assessable under the head ‘income from business’ and hence, called upon the assessee to furnish necessary details, including explanation to justify its case.
Rejecting the arguments of the assessee, AO held that profit or loss derived from sale of land under the head ‘income from profit/gains of business’.
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