Whether the income derived by the Assessee firm on purchase and sale of the agricultural land will be assessed as income from business instead of capital gains, where the Assessee is engaged in buying and selling of properties and the land was held by the Assessee firm for the purpose of business.
Afonso Real Estate Developers Vs. CIT, Tax Appeal No. 30 of 2013,
Date of Pronouncement: 21.02.2020, High Court of Bombay at Goa
The appellant-assessee is a partnership firm and filed return of income on 30.01.2008 for the A.Y. 2007-08 declaring a total income of Rs.1,57,069/-, claiming deduction to the extent of Rs.1,69,20,000/- inter alia on the ground that the amount received towards the sale of the properties were assessable as long term capital gains which were entitled to be deducted in terms of Section 54E and 54EC of the Income Tax Act, 1961 (I.T. Act). However, the ld. AO computed the entire income of the appellant-assessee as “business income” and bringing the same to tax. The appellant-assessee therefore, preferred appeal to the CIT (Appeals) and the order of the AO were set aside. Thereafter, the Revenue instituted appeal before the ITAT and the ITAT allowed the Revenue’s appeal and thereby, restoring the orders made by the AO that the income derived by the appellant-assessee from the sale of the properties was “business income”. Hence the appeal was made on the aforesaid substantial question of law.
The Hon’ble Court held that in the partnership deed, it is clear that the business of the appellant-assessee is buying and selling properties situated in various places in Goa either wholly or in plots. Considering the wide phraseology employed, it is obvious that the business of the appellant assessee includes buying and selling even agricultural properties. Therefore, the findings recorded by the AO and the ITAT that the income derived by the Assessee on purchase and sale of the agricultural land will be assessed as income from business, were sustained.
Therefore, the substantial question of law was answered against the appellant-assessee and in favour of the respondent Revenue.
Narain Swadeshi Weaving Mills v/s Commissioner of Excess Profits Tax – AIR 1955 SC 176