The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT)has held that the sale consideration received by a real estate agent towards the sale of property shall be treated as business income for the purpose of taxation.
The Tribunal was hearing an appeal against an order where the Assessing Officer treated such income as a short-term capital gain.
In the instant case, the assessee was engaged in the business of executing real estate transactions and getting commission income. During the relevant assessment year, the Assessing Officer received information that the assessee has sold immovable property vide document no. 3291/2009 dated 05.10.2009 for a total consideration of Rs. 4,52,40,000/- (5OC value) and that the said property was purchased by the appellant vide document no. 1967/2209 for a consideration of Rs. 1,60,00,000/-. The Assessing Officer, based on the information, concluded the assessment proceedings where the assessee was asked to pay income tax under the head short-term capital gain.
Allowing the contentions of the assessee, the Tribunal bench consisting of Judicial Member S.S Godara and Accountant Member L P Sahu observed that the assessee is basically engaged in the business as a real estate agent in Hyderabad deriving commission income.
“The modus operandi of the business activity is that of identifying properties for sale in Hyderabad and simultaneously identify the interested buyers and sell the properties with a marginal profit. Further, the assessee is also engaged in sourcing properties for a commercial lease to derive commission income. The assessee sold a property for a consideration of Rs. 4,52,40,000/-,which was purchased by him at Rs. 1,60,00,000/-. The said consideration was treated by the AO as short-term capital gains on the ground that the assessee has failed to produce any corroborative evidence in support of that he is engaged in the business of executing real estate transactions and getting commission income. The CIT(A) directed the AO to treat the sale consideration received by the assessee on the sale of property under the head business income for giving detailed findings cited supra. Therefore, we do not find any infirmity in the order of the CIT(A) in directing the AO to treat the transaction of sale and purchase of property should be taxed under the head business income and upholding the order of CIT(A), we dismiss the grounds raised by the revenue on this issue,” the Tribunal said.
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