Income from occasional dealings in property by companies falls under the head Capital Gains not PGBP

Many companies and business occasionally deal in real estate and properties. Who doesn’t enjoy an occasional capital gain if an opportunity presents itself?
What makes us refrain from doing this is the Accessing Offices terming these incomes as ‘Adventure in the nature of Trade’. Accommodate it under the head Profits and gain form Business and Profession. This increases our taxable income by a huge margin draining our funds as taxes.

Adventure in nature of trade: Adventure means to participate in the risky work & trade means buy and sell of goods and services. Every business big or small always involves a some risk because risk is the major role player for the success of our business enterprise.

Here is a ruling by ITAT Jodhpur Putting an end to all these issues. The ruling says that if an assessee is not ordinarily engaged in business of purchase and sale of properties, primary inference would be that any transaction of purchase/sale of land is not an adventure in nature of trade.

The Tribunal says – For considering whether or not a transaction is an adventure in the nature of trade, the intention of the assessee in entering into a transaction is critical. One of the essential elements of an adventure in the nature of trade is the intention of trade and that intention must be present at the time of purchase of land.

Hence, an occasional dealing in properties can’t be considered as adventure in the nature of trade. It should be considered as Capital Gains, and it’s tax implications put forward under the head of Capital gains.

Please click here to view the full ruling.

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