Capital gains classification upheld for shop sale proceeds where property was consistently held as investment, not trading stock.

Gain from sale of shops forming part of a property was treated as capital gains because the asset had been acquired as an investment, consistently shown in balance sheets as a fixed asset and not as stock-in-trade, and similar gains from an earlier sale of the same property had already been accepted as long-term capital gain. The principle of consistency supported the same tax treatment, and the construction of shops on the land did not by itself convert the receipts into business income. Circular No. 4/2007 was also noted for recognising separate investment and trading portfolios. The sale proceeds were therefore taxable as capital gains, not as business income.

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Issues: Whether the gain arising from sale of shops forming part of the property at 99, Rajpur Road, Dehradun was taxable under the head Capital Gains or as Business Income.

Analysis: The property was acquired in financial year 2008-09 and was consistently reflected in the assessee's balance sheets as fixed assets and investment, not as stock-in-trade. The Revenue did not controvert this treatment. The assessee had also offered similar gains from sale of part of the same property in the subsequent assessment year as long-term capital gain, and the assessment completed under section 143(3) of the Income-tax Act, 1961 accepted that position. In these circumstances, the principle of consistency applied, and the mere fact that shops were constructed on the land did not justify re-characterising the sale proceeds as business income. Circular No. 4/2007 also supports the concept that an assessee may maintain separate investment and trading portfolios.

Conclusion: The sale proceeds were rightly assessed as capital gains and not as business income; the Revenue's objection failed.

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