Sections 2(47) and 45 — Purchase and sale of land and flat necessary parts of business of construction. Loss arising on sale of these properties is business loss.

Sections 2(47) and 45 — Purchase and sale of land and flat being necessary parts of the regular business of construction carried on by the assessee, the losses arising on sale of these properties have to be considered as loss incurred in the course of carrying on its regular business.

The Assessing Officer was of the opinion that such loss was not proved to have been incurred in the course of the assessee’s business of civil construction but, on the other hand, incurred due to purchase and sale of land. Further, according to him, the purchase and sale were effected in close proximity of time and land value could not have depreciated to such a large extent in a prime location of the city. The CIT(A) allowed the assessee’s claim. The Tribunal held in favour of the assessee. The Tribunal noted as under:

(1) Both the assertions of the Assessing Officer were misplaced.

(2) The assessee was engaged in the business of promoting commercial and residential flats and was authorised by the partnership deed to carry on any line or lines of business.

(3) Even if one considers the authorisation given in the partnership deed ‘to carry on any other line or lines of business’, to be ejusdem generis with the earlier terms of ‘promoting commercial and residential flats’, sale and purchase of land would still come within the ambit of the ‘business’ of the assessee.

(4) In a business of promoting commercial and residential flats and other lines of business, it cannot be said that purchase and sale of land would be alien and not a part of the business.

(5) Further, the land was treated as stock-in-trade and this has not been disputed by the learned Department representative. When stock-intrade is sold result can only be business profit or business loss. The assessee might have been forced to sell it at a loss for a myriad of reasons. It is not for the Revenue to sit on the armchair of a businessman and to decide appropriate point of time in which a sale or purchase has to be effected in the course of his business.

(6) Neither the sale deed, nor the purchase deed had been doubted. Neither books of account have been rejected, nor the seller or purchaser were called up by the Revenue for any verification. Without doubting the purchase and sale deed, the loss could not have been disallowed.