Development agreement receipts on workshop land treated as capital gain, not business income, where asset remained capital in nature.

Income arising from a development agreement over land used as a workshop was treated as capital gain because the land and factory shed were reflected in the accounts as capital assets, the purchase price was debited to the land account, and there was no evidence of any intention to trade in the land or convert it into stock-in-trade. The factual position remained undisputed, and the continued treatment of the land as a capital asset showed no commercial venture in land dealing. On those facts, the receipt was not assessable as business income, and the capital-gains view was upheld.

---

---

Issues: Whether the income arising to the assessee from a development agreement in respect of land used as a workshop was to be assessed as business income or as capital gain.

Analysis: The land and factory shed had been used by the assessee as a workshop and were reflected in the accounts as capital assets. The purchase price was debited under the head land account, and there was no evidence that the land had been intended for resale or converted into stock-in-trade. Even after the development agreement, the assessee continued to treat the land as a capital asset, and the factual position was not disputed by the revenue. On these facts, the transaction did not disclose an intention to deal in land as a commercial venture.

Conclusion: The income derived under the development agreement was not business income and the view treating it as capital gain was upheld, against the revenue.

---