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Issues involved: The judgment deals with the issue of whether the profit on the sale of land should be considered as capital gain or business income.
Summary: Issue 1: Classification of profit on sale of land The Revenue appealed against the decision of the ld. CIT(A) to treat the profit on the sale of land as capital gain declared by the assessee, arguing that it should be considered as business income. The ld. DR contended that the property was initially held as stock in trade and later transferred to investment, but the Revenue considered this conversion as an afterthought to reduce tax liability. The ld. CIT(A) held that the sale of land should be treated as capital gain and not business income, citing reasons such as lack of established business activity, previous conduct of the appellant, and the nature of income derived from the land. The assessee argued that the land was actively involved in construction and development activities, leasing, and was shown as stock in trade in the Balance Sheet. The assessee's business profile was focused on developing land and constructing buildings, indicating a business/trade activity. Various legal precedents were cited to support the contention that even a single transaction can be considered business if it shows clear indications of trade. The assessee's intention from the beginning, commercial exploitation of the land, and subsequent sale were all considered as indicative of a business activity. Issue 2: Compliance with Income Tax Act The ld. Counsel for the assessee supported the order of the ld. CIT(A), emphasizing that the declaration of profit was in accordance with the provisions of the Income Tax Act. The ld. CIT(A) pointed out that the sale of land was an isolated transaction for investment and leasing purposes, not constituting a business activity. The absence of any alterations or modifications to the land, lack of activity or organized purpose for sale, and the intention of the appellant in purchasing the land were highlighted. The AO did not contest the cost of improvement accepted by him, indicating that the particular transaction was not an adventure in the nature of trade as perceived by the AO. Conclusion: After considering the arguments and facts, the Tribunal upheld the order of the ld. CIT(A) regarding the classification of the profit on the sale of land as capital gain. The computation of Long Term Capital Gain was found to be in accordance with the law, and the sale of land was not deemed a business activity for the assessment year. The appeal of the Revenue was dismissed, affirming the decision of the ld. CIT(A).
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