Buying property jointly with a daughter-in- law indicates an investment intent, not a business motive : ITAT
Dehradun bench of Income Tax Appellate Tribunal, has recently held ruled that where assessee had purchased properties as an investor, and intention of assessee to remain an investor was evident from various factors, such as consideration of sale price determined by Stamp Valuation Authority and purchase of property jointly with her daughter-in-law, gains from property sales were to be treated as capital gains and not business income and thus, assessee would be eligible for deduction under section 54F in respect of reinvestment of capital gains made in house property.
Let us have a short overview of the case:
In this case, assessee was an individual engaged in the business of commission agent of real estate. It had purchased various properties commencing from assessment year 2008-09 to assessment year 2011-12 and sold one of the properties in assessment year 2011-12 and assessment year 2012-13.
It belatedly filed its return of income for relevant assessment year 2013-14 by declaring income, which included capital gains, after claiming deduction under section 54F in respect of reinvestment of capital gains in another residential property.
According to Assessing Officer, the assessee by splitting the land into various plots and thereafter selling the same to different persons would only constitute an adventure in the nature of trade carried and thereby losing the status of being an investor.
Thus, the resultant gain on sale of those properties would only be income from business and not income from capital gains.
Consequently, the Assessing Officer also denied the claim of deduction under section 54F in respect of reinvestment made in new house property. On appeal, the Commissioner (Appeals) upheld this action of the Assessing Officer.
On appeal to the Tribunal it was held as under:
The gains arising on the sale of the property to the assessee has to be taxed only as capital gains and not as income from business. Consequently, the assessee would be eligible for deduction under section 54F in respect of reinvestment of capital gains made in the house property.
