Because it was owned for a significantly longer amount of time, the sale of the property is taxable as a capital gain

Fact and issue of the case

The present appeal filed by the assessee for the assessment year 2013- 14 is directed against the order of Ld. CIT(A)-14, New Delhi dated 18.12.2018. The assessee has raised following grounds of appeal:-

1. “On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts.

2. On the facts and circumstances of the case, Id. CIT(A) has erred both on facts and in law, in confirming the action of A.O. in holding the capital gain arising on sale of investment by the assessee to be income assessable under the head ‘business and profession’.

3. That the above said has been held despite the fact that the properties, which were sold, were being held by the assessee as investment and there was no intention to deal in those as her business.

4. Without prejudice to the above, Id. CIT(A) has erred both on facts and in law, in confirming the action of the A.O. in computing the gain on sale of properties at Rs. 46,29,992/- as against Rs.3,91,539/- declared by the assessee.

5. The appellant craves leave to add, amend or alter any of the grounds of appeal.”

The only dispute in this case is related to the treatment of surplus fund out of the sale of properties whether it should be the business income as treated by the Assessing Authority or the capital gain as claimed by the

Facts giving rise to the present appeal are that the assessee e-filed return of income declaring total income of Rs.3,55,190/- on 3 1.03.2015 for the year under consideration. The case was selected for scrutiny assessment. The Assessing Officer (“AO”) observed that the assessee had claimed capital gain out of sale of the properties. However, looking to the facts, same ought to have been treated as income from business.

Observation of the court

On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He submitted that looking to the facts for the present case and in view of the fact that the assessee is regularly involved in sale and purchase of the immovable properties. Therefore, it cannot be inferred that the assessee is making investments and earning capital gain out of the transactions.

In re-joinder, Ld. Counsel for the assessee pointed out that it is the intent of the seller which should be the basis whether a particular transaction is for business purpose and it is an investment. Ld. Counsel for the assessee relied on the judgement of the Hon’ble Bombay High Court rendered in the case Indian Human Pipe Co.Ltd. vs CIT 195 ITR 386 (Bom.). It is also pointed out by the Ld. Counsel for the assessee that in the Assessment Year 20 18-19, the AO himself has treated the transaction of investment and accepted the capital gains offered by the assessee.

I have heard Ld. Authorized Representatives of the parties and perused the material available on record. The short question that arises for consideration is whether the Assessing Authority justified to treat the transaction under the different head of income. The assessee claimed it as gain arising out of transfer of capital asset. On the other hand, the AO treated it as business receipts arising from real estate business. Ld. Counsel for the assessee laid great stress on intent of the assessee. Considering the fact that the properties in quantum were held for considerable longer period of time, it is not the case where the properties have been sold within a short span of time after their acquisition. Coupled with the fact that the assessee is not engaged into any systematic real estate business activity. I therefore, respectfully following the binding precedents as cited by the Ld. Counsel for the assessee hold that the authorities below erred in treating the transaction as real estate business transaction under the facts and circumstances of the present case. I therefore, hereby direct the AO to delete the impugned addition. Thus, grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 30th January, 2023