Reversal of exemption taken u/s 54b

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

25 January 2013 I sold a land in AY 2010-11, the gain was invested in an agriculture land in same assessment year for claiming exemption u/s 54B. Now i have sold this agriculture land in FY 2011-12. So my question is (1) for which year taxability arise, the year of original sale (AY 2010-11) or the year in which new land is sold (AY 2012-13) (2) Agri Land is not capital asset, so if i reduce COA of new asset by amount of exemption taken (say any amount), the gain should not be taxable because it is not a capital asset (2) if diversion for question 2 then under which head of income calculation of tax shall be made..

Eagerly waiting for reply.

kunal

kunal (Expert)
Follow

25 January 2013 sale of RURAL agricultural land is exempt from income tax because it is not a capital asset..

Querist : Anonymous

Querist : Anonymous (Querist)

25 January 2013 Yes that is what my question is. So we can say that the condition to hold new agriculture land for three year has practically no impact ? because words used for withdrawal of exemption are " to reduce cost of new asset by amount of exemption taken" but by whatever amount we reduce the coa of new asset result shall be same as the difference is not chargeable to capita gain tax because it is not a capital asset by virtue if section 2(14). under any other head of income can this be taxable ???

Querist : Anonymous

Querist : Anonymous (Querist)

25 January 2013 guys it is open for debate.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

25 January 2013 The query is really debatable. In my view the capital gains tax liability can arise in the AY 2010-11 itself unless the query is modified.
.
1. There is no provision in the law which says that exemption can be availed by purchasing agriculture land U/s 54B against Sale of LAND. If you sale land and buy agriculture land I think 54B is not available. In Ay 2010-11 you have to pay tax on long term capital Gains on transfer of Land.
.

Querist : Anonymous

Querist : Anonymous (Querist)

26 January 2013 Sir, appreciate your participation, assume the land originally sold is an agriculture land and exemption u/s 54B is allowable.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

26 January 2013 In the original query it has not been mentioned that the new asset is rural agriculture land. If the facts are not properly stated, the issue of debate may turn into another direction.
.
Considering the clarifications submitted later....the reply to your subsequent query is supporting your view.
.
The Income arising from sale of new asset is not taxable under any head of income. Since the Agriculture land is not a capital asset.
.

Querist : Anonymous

Querist : Anonymous (Querist)

26 January 2013 Sale of any land used for agriculture purpose in previous two years is eligible to claim exemption under section 54B

HUZAIFA HUSSAIN

HUZAIFA HUSSAIN (Expert)
Follow

26 January 2013 IF U R TELLING THAT THE AGRICULTURE LAND WHICH WAS SOLD WAS NOT A CAPITAL ASSET THAN THE QUESTION OF CLAIMING 54B EXEMPTION
DOES NOT ARISE AT ALL.

Querist : Anonymous

Querist : Anonymous (Querist)

26 January 2013 I think we are diverting from main query. Sir the quesrion is for taxability of reversal of exemption already claimed u/s 54B where the new land is sold within three years of its purchade.