By TIOL News Service

AHMEDABAD, MAY 28, 2018: THE ISSUE RAISED BEFORE THE DIVISION BENCH IS - Whether cancellation of development & construction agreement, will render the consideration earned by cooperative society from sale of open plots, as business income chargeable to tax. NO IS THE VERDICT.

Facts of the case:

The assessee a cooperative housing society, had filed its returns for the relevant AY. During the course of its assessment, the AO observed that assessee had sold six plots for Rs. 4.02 crores and had claimed the same as long term capital gains. He however, made additions of the said sum treating the same as business income of assessee. On appeal, both the CIT(A) as well as the Tribunal took a contrary view.

High Court held that,

++ the material on record shows that the assessee had entered into multiple agreements of sale with various developers for developing its open land for putting up construction thereon. All these agreements for some reason or the other failed. Having cancelled such agreements, finally, the assessee during the said year, sold six of the open plots. It was on the basis of such facts, that CIT [A] and the Tribunal believed that the AO was wrong in holding that the assessee was in the business of development of land. Analysis of the agreements entered by the assessee with the developers suggest that the assessee had at no point of time agreed to take any risk in the process. The conclusion drawn by the CIT [A] as well as the Tribunal are therefore based on factual material.

(See 2018-TIOL-983-HC-AHM-IT)