Excess share of land received by assessee in executing of partition deed with co-owner: Whether it can be taxed?

Excess share of land received by assessee in executing of partition deed with co-owner: Whether it can be taxed?

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Excess share of land received by assessee in executing of partition deed with co-owner: Whether it can be taxed?

Every income tax case is different. There are often new issue which is involved in various cases.
The issue invoked was with regard to taxation under Section 28(iv) of the Income-tax Act, 1961 which deals with Business income
 The question was with regard to taxation of the Value of any benefit or perquisite arising from business or exercise of a profession (Excess share of land in partition)
 The relevant Assessment year was 2014-15
The citation of the case is as under:
Undavalli Constructions
[2021] 131 taxmann.com 204 (Visakhapatnam – Trib.)
Short overview of the case:
In this case, Assessee-firm purchased a vacant land along with another firm by making equal contribution of investment
 Land was retained for 34 months and later both assessee and co-owner entered into a partition deed
In partition, assessee got excess land than co-owner
Assessing Officer was of view that such excess land received by assessee was an extra benefit and same was chargeable to tax under section 28(iv)
Accordingly, he made addition to income of assessee
 It was noted that there was no dispute that land in question was purchased by assessee and co-owner as capital asset and it remained as capital asset till its partition
 No business activity was carried on same by co-owners
 Land was shown in balance sheet as capital asset and not as stock-in-trade
 The final question before ITAT was “Whether, on facts, such extra land received by assessee on partition would not fall under benefits received or accrued to assessee during course of carrying on business and, thus, same could not be brought to tax under section 28(iv)?”
 ITAT held it as Yes and decide the issue in favour of the assessee.
Conclusion:
IWhere assessee-firm purchased a land with co-owner and it received an excess share of land in partition of land with co-owner, since said land was purchased as capital asset by assessee and co-owner and it remained as capital asset till its partition and no business activity was carried on same by assessee or co-owner, such excess share of land would not fall under benefits received or accrued to assessee during course of carrying on business and, thus, same could not be brought to tax under section 28(iv).

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