TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 680
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.... matter may be decided according to law.' 2. Rival contentions have been heard and record perused. Facts in brief are that the assessee has sold one of its building which was acquired in the year 1978 and offered capital gains thereon. However, the AO was of the view that profit earned on sale of building was in the nature of business income in view of the fact that assessee was engaged in the business of development of real estate and rental income thereon was offered as business income. By the impugned order, CIT(A) after considering various judicial pronouncements and applying the same to the facts of the case reached to the conclusion that property so sold was capital asset held by the assessee since 1986. The CIT(A) further observed that this property was not treated by the assessee as stock in trade in the balance sheet in any of the earlier years nor in the year under consideration. Accordingly, the CIT(A) allowed assessee's claim of long term capital gains. After giving benefit of indexation and investment made in capital gains bonds u/s.54EC, CIT(A) allowed assessee's claim of capital gains after having the following observations:- "2.3 I have gone through the contents o....
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....erence could have been drawn as in that case, the same interest could have been charged as revenue expense in his regular course of business. But it is not the case either of the appellant or the Assessing Officer. Therefore, I do not find any justification in rejecting the appellant's claim to treat the transaction of sale of the impugned property to generate "Business Income" and not "Capital Gains". Hence, in view of above discussion, the Assessing Officer is directed to accept the disclosed capital gains on. this transaction as there is no dispute in the figures and accordingly allow the benefit u/s 54EC of the I.T. Act 1961. The appeal is allowed on 1st & 2nd Ground, both of the appeal.' 3. Against the above order of CIT(A), the Revenue is in further appeal before us. 4. Learned DR relied on the order of AO and contended that since assessee was a developer and builder, the property so acquired and sold by the assessee had constituted stock-in-trade, therefore, the AO was correct in holding the profit on its sale as business income in place of capital gains. 5. It was argued by learned AR that even though assessee engaged in the business of construction, but it was also ....
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....using Corporation. Ltd. h) CIT vs. H.B. Stock Holdings Ltd. i) BOARD CIRCULAR NO.4 DATED JUNE 15(2007) 291 ITR 384 ) 6. With regard to the contention that interest on loan which was capitalized to the asset account and not claimed as Revenue expenditure are liable to be added, learned AR relied on the decision of Hon'ble Supreme Court in the case of Challapali Sugar Ltd., 38 ITR 167, Hon'ble Madras High Court in the case of Rajagopala Rao, 125 taxmann 148, CIT Vs. Mithlesh Kumari, 92 ITR 9 (Delhi HC), ACIT Vs. K.S.Gupta, 119 ITR 372 (Andhra Pradesh High Court), CIT Vs. Shri Hariram Hotels (P) Ltd., 325 ITR 336 (Karnataka High Court), CIT Vs. Settlement Commission, 322 ITR 578 (Kerala High Court) and CIT Vs. Maithreyi Pai, 152 247 (Karnataka High Court). 7. We have considered rival contentions, carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the learned AR and DR during the course of hearing before us, in the context of factual matrix of instant case. From the record, we found that assessee has acquired property namely, "Sukanraj Cen....
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.... note that mere presence of profit motive does not lead to the conclusion that transaction had been entered as an adventure in the nature of trade. Also profit motive would not distinguish a transaction of investment or a trading transaction because even in the case of investment there may be motive that an assessee should be able to sale such investment at premium as held by Hon'ble Delhi High Court in the case of Dinesh Kumar, 2 SOT 126. Mere assessee being involved in business of real estate development will not debar assessee to hold some of the property as investment insofar as same are treated in the books of accounts also as investment not meant for resale in the regular course of business. It is also evident from its audited accounts that there was no much activity in business of development and construction since last 10-12 years. Merely because rental income earned on the said property was shown as business income, the property so held as investment cannot be treated as a stock-in-trade of the business ignoring the fact that "real estate business' is separate from "rental income'. Claim of rental income as business income will not change the character of property so held ....