2013 (3) TMI 715 - AT - Income Tax

Summary

Issues Involved:
1. Whether the sale of lands should be assessed as 'business income' or 'Long Term Capital Gain'.
2. Whether the assessee is entitled to claim deduction u/s 54EC of the Income-tax Act.

Summary:

Issue 1: Assessment of Sale of Lands as 'Business Income' or 'Long Term Capital Gain'

The revenue challenged the orders of the Ld.CIT(A), Pune, which granted relief to the assessee by treating the Long Term Capital Gain from the sale of lands as 'business income'. The Assessing Officer (AO) argued that the transactions should be assessed under 'business income' due to the nature of the assessee's activities, including share trading and real estate development. The AO cited several reasons, including the assessee's involvement in real estate through her proprietary concern and partnerships, and the lack of "pride possession" in the lands sold. The AO also referenced Circular No.4/2007 of the CBDT and relevant case laws to support his stance.

The Ld.CIT(A) disagreed, noting that the lands were held as investments and not business assets. The Ld.CIT(A) emphasized the long holding period of the lands, their status as agricultural lands in revenue records, and the absence of any development or conversion to non-agricultural use. The Ld.CIT(A) concluded that the AO's assessment was based on presumptions rather than hard facts and that the sale transactions should be treated as 'Capital Gain'.

The Tribunal upheld the Ld.CIT(A)'s decision, noting that the long holding period and lack of development indicated an investment rather than a business motive. The Tribunal found no reason to interfere with the Ld.CIT(A)'s order, confirming that the sale consideration should be assessed under 'Capital Gain'.

Issue 2: Deduction u/s 54EC

The AO denied the benefit of Section 54EC to the assessee, arguing that the sale consideration should be treated as 'business income'. However, since the Tribunal upheld the Ld.CIT(A)'s decision to treat the sale consideration as 'Capital Gain', the assessee is entitled to claim the deduction u/s 54EC.

Conclusion:

The Tribunal dismissed the revenue's appeals, confirming the Ld.CIT(A)'s orders that the sale consideration from the lands should be assessed as 'Capital Gain' and not 'business income'. The assessee is entitled to claim the deduction u/s 54EC of the Income-tax Act.