Taxability in case of illegally encroached land

Illegally encroached land is not a capital asset; profit arising on its sale is taxable as income from other source

IN THE ITAT MUMBAI BENCH 'B'

Income-tax Officer, 21(3)(1), Mumbai

v.

Bhagwan T. Fatnani

JOGINDER SINGH, JUDICIAL MEMBER
AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER

IT APPEAL NO. 7811 (MUM.) OF 2011
[ASSESSMENT YEAR 2008-09]

APRIL  8, 2015 

Section 2(14) read with sections 45 and 56, of the Income-tax Act, 1961 - Capital gains - Capital asset (Immovable property) - Assessment year 2008-09 - Assessee's books had shown long-term capital gains from unauthorizedly encroached school land for which he had no title/right - Whether 'property of any kind held' as per definition of 'capital asset' in section 2(14) means property legally held by assessee and not property illegally encroached by him - Held, yes - Whether capital gains under section 45 accrues only if there is a sale or any transfer of capital asset - Held, yes - Whether since assessee did not have legal right or title over property in question, there was no capital asset owned by assessee within meaning of section 2(14) and, therefore, there was no question of any sale or transfer of capital asset to claim capital gain - Held, yes - Whether such gain would be assessed as income from other sources - Held, yes [Para 2.12] [In favour of revenue]