COMMISSIONER OF INCOME TAX Vs. RAJA MALWINDER SINGH

JUDGEMENT

(1.) THIS order shall dispose of IT Appeal Nos. 712 and 713 of 2009 filed by the Revenue under s. 260A of the IT Act, 1961 Chandigarh Bench 'B', Chandigarh (for brevity, 'the Tribunal'), in cross -appeals bearing ITA No. 838/Chd/2008 and ITA No. 1007/Chd/2008, in respect of asst. yr. 2005 -06.

(2.) THE question of law in both the cases revolves around the taxability of the income declared by the assessee - respondent on the sale of ancestral property, known as 'Leela Bhawan', situated at Patiala. The assessee -respondent had declared long -term capital gain of Rs. 4,15,47,048 and on that basis claimed deduction amounting to Rs. 2,42,61,810 and Rs. 1,31,15,147 under ss. 54EC and 54F respectively of the Act. Accordingly, a net taxable long -term capital gain was declared for an amount of Rs. 21,17,913 after setting off the brought forward long -term capital loss for the asst. yr. 2004 -05.

(3.) THE question is whether the activity of sale of land is a trading activity or it is long -term capital gain. The AO held that it is in the nature of trade. The aforesaid view was affirmed by the CIT(A). However, the CIT(A) had reduced the long - term capital gain to Rs. 4,90,80,711 by determining the fair market value under s. 45(2) of the Act by fixing the rate at Rs. 8,710 per square yard as against Rs. 15,000 per square yard, as applied by the AO. He further allowed the benefit of exemption amounting to Rs. 2,42,61,810 and Rs. 1,39,17,964 under ss. 54EC and 54F of the Act respectively and determined the net taxable long -term capital gain at Rs. 88,48,758 after granting the benefit of brought forward long - term capital loss of Rs. 20,52,178. As far as business profit is concerned, he adopted the sale consideration at Rs. 9,65,49,135 and determined the business income at Rs. 3,27,59,621.