The case deals with the characterization of profit/receipts from ...

Land sale profit: Business income or long-term capital gain? Intention key, not just dealer/trader status.

Case Laws     Income Tax

November 22, 2024

The case deals with the characterization of profit/receipts from the sale of land, whether it should be treated as business income or long-term capital gain. The Supreme Court in CIT vs. Madan Gopal Radhey Lal held that a trader may acquire an asset for personal purposes and hold it separate from their business stock. There is no presumption that every acquisition by a dealer is for business purposes; the intention must be determined based on the acquirer's conduct and dealings with the asset. In this case, since the assessee held the land for more than five years without developmental activity, and the Revenue accepted the treatment as long-term capital gain in preceding and succeeding years, the CIT(A)/NFAC correctly deleted the addition made by the AO, treating the profit as long-term capital gain. The Appellate Tribunal upheld this decision.

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