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Issues involved: Classification of profit earned on sale of landed property as business income or capital gain.
Summary: The judgment by the Appellate Tribunal ITAT Hyderabad involved three appeals by the Revenue against orders of CIT(A)-VI, Hyderabad regarding the classification of profit earned on sale of landed property by three independent assessees. The main issue in all three appeals was the classification of the profit earned on the sale of the property. The Revenue argued that the assessees' activities, including dividing the land into housing plots and selling them, indicated an adventure in the nature of trade, thus the profit should be considered as business income. On the other hand, the assessees contended that the property was initially purchased as an investment and not for business purposes, and the subsequent sale did not change its nature. After considering the arguments, the Tribunal emphasized that the intention of the assessees at the time of property purchase was crucial in determining the nature of the income. The Tribunal noted that the property was held for 35 years without any business activities related to it, indicating an investment intent rather than a business motive. Additionally, the Tribunal highlighted that the assessees' partnership in a construction firm did not automatically imply real estate business activity in their individual capacity. The Tribunal concluded that there was no evidence of systematic business activity by the assessees, and therefore, the profit from the property sale was rightly treated as capital gain by the CIT(A). Ultimately, the Tribunal dismissed all three appeals by the Revenue, confirming the order of the lower authority.
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