Land Received In Lieu Of Business Loan Foregone, Is A Business Asset Not A Capital Asset: ITAT

The Chennai Bench of the Income Tax Appellate Tribunal has ruled that the land received by the assessee in the normal course of its finance business, in lieu of a business loan foregone, would assume the character of a business asset and not a capital asset, irrespective of its treatment in the assessee's books of accounts. The bench of Mahavir Singh and Manoj Kumar Aggarwal held that since the assignment of debt in favour of another entity in exchange of land, was an integral part of the assessee's business activity, any gain or loss arising on the subsequent sale of such a land would constitute business profits only. Therefore, the CIT held that since the vacant land came into the possession of the assessee in lieu of the loan foregone in the normal course of its finance business, the vacant land would assume the nature of a business asset and thus, it would yield business income as and when it is subsequently sold. While holding that entries in the books of accounts are not determinative of the nature of income, the Tribunal concluded that since the land was received by the assessee in lieu of a business loan foregone, the land would assume the character of a business asset, irrespective of its treatment in the books of accounts.