Income

Head of income — The presence of a profit motive cannot lead to a conclusion that the transaction has been entered into as an adventure in the nature of trade, as held by MumTrib in ACIT v SKM Construction (P) Ltd — In favour of: The assessee; ITA No 6272/Mum/2009: (AY 2006–2007).

Capital gains — Profits on the sale of TDRs were held to be taxable under the head “Capital Gains”.

The assessee has not purchased or sold any other plot immediately before or after this deal. The assessee has further not done any development on this plot. There are no repetitive transactions of this nature and, therefore, this was merely a case of an investment in the hope that the assessee would obtain good TDR rights which could be sold at profit. The presence of a profit motive cannot lead to a conclusion that the transaction has been entered into as an adventure in the nature of trade. Therefore, it is a clear case of investment and the same has been realised after a gap of 4/5 years and the same was rightly held to result in long-term capital gains.

Decided on: 30 June 2011.