The Income Tax Appellate Tribunal (ITAT) in Chennai has ruled in favor of the assessee in the case of A. Jesu Rajendran v. ITO. The dispute arose when the revenue authorities assessed the profit derived from the transfer of property as short-term capital gains and invoked Section 50C to determine the value of the property sold. The ITAT held that the property sold by the assessee was a stock in trade and not a capital asset, and therefore, the provision of Section 50C was not applicable.
The assessee had sold a property for consideration of Rs. 95 lakhs and received Rs. 45 lakhs for the assessment year 2007-08. The revenue authorities noted that the stamp value of the property was Rs. 3 crores and assessed the profit derived from the transfer of property as short-term capital gains by invoking Section 50C. The short-term capital gain was determined at Rs. 2.39 crores, which was confirmed by the Commissioner of Income Tax (Appeals) (CIT(A)).
The ITAT, however, held that the property sold by the assessee was a stock in trade and not a capital asset ca in gurgaon. Therefore, the provision of Section 50C was not applicable. The tribunal observed that the profit derived from the sale of such property, which was purchased with an intent to exploit commercially and sold as a stock in trade, cannot be assessed to tax under the head of capital gains. Instead, it should be assessed under the head of profit and gains of business or profession.
The ITAT dismissed the revenue authorities’ argument that the income was assessable under the head of capital gains since the assessee did not invest any amount for the development of the property. The tribunal explained that the nature and head of income on a particular receipt are dependent on the assessee’s intent and the treatment given in the books of accounts for the relevant assessment year ca in gurgaon. The ITAT noted that the land in question was situated in the location adjacent to Bangalore International Airport, where there was a lot of scope for commercial exploitation of property. The assessee had filed necessary evidence, including financial statements for the relevant assessment years and a tax audit report to prove that the amount received from the transfer of property was treated as business receipts.
The ITAT held that the assessee, at the time of purchase, intended to commercially exploit the property, considering its location and the fact that the property was recorded as stock in trade in the books of accounts. Therefore, the profit derived from the transfer of property should be assessed under the head of profit and gains of business and profession.
The ITAT also observed that Section 50C was not applicable when the asset transferred was not a capital asset. Since the property transferred by the assessee was a stock in trade, the provision of Section 50C was not applicable ca in gurgaon. Therefore, the addition on account of computation of short-term capital gains from the transfer of property was deleted.
In conclusion, the ITAT’s ruling in A. Jesu Rajendran v. ITO provides clarity on the treatment of profit derived from the transfer of property held with commercial intent. The ruling emphasizes that the nature and head of income on a particular receipt depend on the assessee’s intent and the treatment given in the books of accounts for the relevant assessment year. Furthermore, the ruling highlights that the provision of Section 50C is not applicable when the asset transferred is not a capital asset.
