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[2008] 303 ITR 469 (BOM.) HIGH COURT OF BOMBAY Commissioner of Income-tax v. Heritage Estate (P.) Ltd. F.I. REBELLO AND J. P. DEVADHAR, JJ. IT REFERENCE NO. 303 OF 1987 OCTOBER 18, 2007 Section 45 of the Income-tax Act, 1961 Capital gain- Chargeable as Where assessee did not carry on any business and for several assessment years Assessing Officer had treated assessee-company as an investment company, consideration received by assessee-company from its parent company for takeover of its movable properties and liabilities, was liable to capital gain; Assessing Officer was not justified in treating consideration received by assessee as income from adventure in nature of trade [Assessment year 1979-80] As per an agreement, the parent company BJ took over the movable properties and liabilities of the assessee subsidiary company. The Assessing Officer relied on the memorandum and articles of association and held that as per clause 3 of the main objects, for which the company was incorporated, one of the objects was to acquire by purchase, lease, exchange or otherwise deal in, lands and properties of any tenure or any interest in lands and properties in the State of Maharashtra and elsewhere. In the light of that the Assessing Officer proposed to tax the amount received by the assessee from the parent company as business income. The question for consideration was whether the consideration for transfer received by the assessee-company was assessable as capital gain, as contended by the assessee, or as business income. Held that the assessee had not carried on any business and for several assessment years the ITO had treated the assessee company as an investment company. The assessee-company had only received compensation as per the agreements earlier entered into by the parent company from land which was acquired by the company. The ITO had relied upon a number of articles to arrive at a conclusion that the sale of land was one of the activities. Considering the in P.K.N. Co. Ltd. (supra), that could not be a decisive test. Considering the other tests which had to be satisfied before arriving at a conclusion that the company had carried on an activity in the nature of…

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