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Land purchased by builder aware of encumbrance is "Capital Asset"

ACIT vs. M/s Dattani Development

S. 50C: Land purchased by a builder with the knowledge that there are encumbrances on it and development is not feasible is a “capital asset” and not “stock-in-trade”. The gains on transfer of such land is assessable as capital gains and not as business profits. S. 50C applies to development agreements if the effect of the development agreement read with the conveyance deed is that the entire land with ownership rights are transferred.

 Article referred: http://itatonline.org/archives/acit-vs-ms-dattani-development-itat-mumbai-s-50c-land-purchased-by-a-builder-with-the-knowledge-that-there-are-encumbrances-on-it-and-development-is-not-feasible-is-a-capital-asset/

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