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Issues involved: Determination of whether consideration received by the assessee in respect of property 'Indraprastha' should be assessed under the head "capital gains" or "business income".
Summary: The Appellate Tribunal ITAT Mumbai heard an appeal filed by the department against the order of the ld CIT(A) -35, Mumbai for the assessment year 2004-05. The department raised the issue of whether the ld CIT(A) was justified in accepting the claim of the assessee regarding the nature of consideration received for the property 'Indraprastha'. None appeared on behalf of the assessee during the proceedings. The Tribunal proceeded to consider the appeal based on the available material and the submissions of the ld D.R. The ld D.R. relied on the order of the Assessing Officer (AO) but acknowledged that the issue had been previously decided in favor of the assessee by the ITAT for the assessment year 2004-05. The Tribunal confirmed that the transactions were not an adventure in the nature of trade and the income earned was taxable as capital gains. The property 'Indraprastha' was inherited by co-owners in 1938, and an agreement was made with Godrej Properties & Investment Ltd for construction. The AO treated the arrangement as an adventure in the nature of trade, but the ld CIT(A) allowed the appeal by holding that the income should be taxed as capital gains. The Tribunal upheld the findings of the ld CIT(A) and confirmed that the sale consideration was on account of the sale of capital assets. The department appealed to the High Court, which confirmed the Tribunal's decision. Based on these facts and the precedent set in a similar case, the Tribunal upheld the order of the ld CIT(A) that the consideration received from the property redevelopment should be taxed as capital gains, not business income. The appeal filed by the department was dismissed, and the decision was in favor of the assessee.
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