Business income or capital gain

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This query is : Resolved

Nihal Joshi (Querist)

28 March 2016 Dear Sir,

I have gone through the Landmark judgement of Chennai Properties & Investments Ltd ruled by SC.

I have one query in connection to this, which is as follows:

In this case they have let out the properties and income deriving from that should be treated as Business income. I just want to ask that what would have happen if they would have sold instead of letting out? Consideration received should be treated as business income u/s 28(i) or Capital gain u/s 45(1)? Citation of any case law will also do.

Your cooperation in this work will be highly appreciated.

Thanks and regards,
Nihal Joshi.

Amol S Joglekar

Amol S Joglekar (Expert)

28 March 2016 For "properties" held as "stock in trade", the income is regarded as "Business Income", in the year in which the property/ies is/are sold. There arises no question of Capital Gain under such circumstances.
(The capital gain arises when the "stock in trade" is converted into asset and then sold out.)
Your views please.)

Nihal Joshi

Nihal Joshi (Querist)

28 March 2016 Amol Sir, Thank you for your quick reply.Any case law in support of your claim?

Amol S Joglekar

Amol S Joglekar (Expert)

28 March 2016 There are many. But basically in all the cases of "builders and Promotors", the properties are held as "stock in trade" and the same are taxed under business income. You can get any number of case Practical case laws like say DSK developers Pvt Ltd., Naiknavare, Purvankara, Mantri, Raheja and so on.

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