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TMI Blog2016 (1) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... f building and developing properties, filed its return of income for A.Y 2007-08 on 31.08.2007 by declaring total income of Rs. 72,52,160. Subsequently, assessee filed revised return of income admitting a total income of Rs. 94,01,960 which included long term capital gain of Rs. 92,51,772. Assessment was completed u/s 143(3) on 17.12.2009 determining assessed income at Rs. 91,01,960 including long term capital gain. Subsequently, the CIT invoked the provisions of section 263 of the I.T. Act on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue as the AO has erred in allowing the business receipts arising in the course of business activity as capital gains, though there was no evidence on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deed and not to various persons and the reference to the assessee in the sale deed as a developer cannot and will not change the character and nature of the property. It was further submitted that the assessee has not carried on any other development activity and has not earned any income from business in any of the years since inception and the only source of income of the assessee has been the rental income and interest income. It was also reiterated that the assessee has been offering the rental income as income from house property and the same was being accepted by the Department for all the A.Ys and therefore, income from sale of such property was also assessable as capital gains only. AO was, however, not satisfied with the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that whenever a business asset is sold even after holding it for a long period of tiome, it would result in business income only. According to her, the CIT (A) has erred in taking the longivity of the period of holding into consideration for holding the business asset held by the assessee to be capital asset and allowing the claim of capital gain. She further submitted that even though the Revenue has accepted the rental income from business asset as 'income from house property', in the earlier years, it would not change the nature of the asset held by the assessee. She therefore, argued that the order of the CIT (A) be set aside and the order of the A.O. be upheld. 4. On the other hand, the learned Counsel for the assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but has treated the gain on sale as 'business income'. This, according to him, is a contradictory stand taken by the Department. He also drew our attention to the balance sheet of the assessee company for the relevant A.Y wherein the building has been shown as an investment and has also drawn our particular attention to the fact that the assessee has never treated the said asset as a business asset. Therefore, according to him, the CIT (A) has rightly treated the asset as a capital asset and treated the income from sale of the same as capital gain. 5. Having regard to the rival contentions and the material on record, we find that the land owners had entered into an agreeement for development and construction of a commercial and reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Property' and the same was scrutinused by the Revenue in the A.Y 1998 after a survey operation and accepted the same. The main argument of the assessee is that the Revenue should take a consistent and a uniform stand from year to year and cannot take a stand contradictory to its stand in the earlier years. Undisputedly, the Revenue has treated the rental income as 'Income from House Property'. Now the moot question before us is whether the treatment of the rental income from an asset as income from house property would determine the nature of the asset ? For treating the income as 'Income from House Property', the assessee must be an owner or deemed owner of the property. In the case before us, the assessee has become the owner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee being in the business of construction and development and the object of the business is to build and construct, the asset would definitely acquire the nature of a business asset and the proceeds from such an asset would become business income of the assessee but income from letting out of the property, would have to be treated as Income from House property only. No doubt as contented by the learned Counsel for the assessee, a business asset can always be converted into an investment and retained by the assessee. The assessee, in support of its contention that the above property was held as an investment, is relying upon the entries in its balance sheet for the year 2007-08 wherein the asset is reflected as an investment. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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