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Discussion > Income Tax > Tax queries >

Capital gain on complusory acquisition of agriculture land

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Proprietor


[ Scorecard : 50]
Posted On 04 April 2012 at 19:25 Report Abuse

The assessee has an agriculture land situated outside the municipality limit. Now the land is compulsory acquired by the Essar during the Accounting year 2006 - 2007 and part payment of compensation was made to assessee. The Gujarat Government has declared it as notified area vide notification GH 4/97(3)(GID)/1096/866/G-1 dtd. 30/01/1997.  A scan copy of the notice is attached herewith. Now the income tax department has issued notice to pay income tax on the compensation received. Sir, i want to know that whether the agriculture land compulsory acquired is taxable ? Wether the assessee is liable to pay Capital Gain Tax ?


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Devendra
M.COM CA Final [Group 2- Cleared] CS Professional


[ Scorecard : 4450]
Posted On 04 April 2012 at 21:17

As per my knowledge, Capital Gain on Compulsory Acquisition of Agricultural land is exempt u/s 10(37) of the Income Tax Act, 1961. But the Agricultural land must have been used for Agriculture purpose for the preceding to previous years from the year of compulsory acquisition by the Assessee or hi parents.

 

 

Regards,

Devendra Kulkarni





CA Anushree jain
CA


[ Scorecard : 1493]
Posted On 04 April 2012 at 22:09

The agricultural land is exempt if it is used , for 2 years  ,preceding to the compulsory acquisition , for agricultural purpose, by the assesee or his parents




Balendra Parmar
Finance Manager


[ Scorecard : 193]
Posted On 05 April 2012 at 12:12

There must be compulsory acquisition of land and building forming part of an industrial
undertaking.
􀂄 The land and building should have been used by the assessee for purposes of the
business of the industrial undertaking in the 2 years immediately preceding the date of
transfer.
􀂄 The assessee must purchase any other land or building or construct any building (for
shifting or re-establishing the existing undertaking or setting up a new industrial
undertaking) within 3 years from the date of transfer.Quantum of exemption
􀂄 If cost of new asset ≥ Capital gains, entire capital gains (short-term or long-term) is
exempt.
􀂄 If cost of new asset < Capital gains, capital gains (short-term or long-term) to the extent
of cost of new asset is exempt.capital gain on Agricultural land is exempt from tax.




Neha Popat
CA in Practice- Direct Taxation


[ Scorecard : 89]
Posted On 05 April 2012 at 12:54

 

Treatment on Capital Gain arising on Compulsory acquisition of Agricultural Land

Urban Agri Land

Rural Agri land/other than urban

If conditions are fulfilled then exemption u/s 10(37)           

(discussed below)

 

Otherwise taxable      

Not a Capital Asset so no question of Capital Gain.

 
 
 
 
 
Section 10(37) reads as follows:

" (37) in the case of an assessee, being an individual or a Hindu undivided family, any income

chargeable under the head “Capital gains” arising from the transfer of agricultural land, where—

(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2 ;

(ii) such land, during the period of two years immediately preceding the date of transfer, was  being used for agricultural purposes by such Hindu undivided family or individual or a parent of his ;

(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India ;

(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.

Explanation.—For the purposes of this clause, the expression “compensation or consideration” includes the compensation or consideration en-hanced or further enhanced by any court, tribunal or other authority;”

Thus, the above Section provides for exemption from Capital Gain arising on compulsory Transfer of Urban Agricultural Land.

The following conditions are to be satisfied:

(i) The land is situated within 8Km from the limits of municipality or cantonment Board

Or

The land is within the jurisdiction of municipality or cantonment board having population of 10,000 or more

(ii) The land was used for agricultural purpose during the period of 2 years immediately preceding the date of transfer by individual,huf or parent of the individual.

(iii) The transfer of land is pursuant to compulsory acquisition under any law or  approved by CG or RBI




swar jh
CA final CWA


[ Scorecard : 39]
Posted On 05 April 2012 at 21:00

actully deepak,

U/s10(37)

Elligible assesee
Individual or HUF

Capital gains on transfer of agricultural land situated in area specified in item (a) or (b) of section 2(14)(iii)
LIMIT OF EXEMPTION :Entire amount

Condition for claiming Exemption:

  1. The capital gains must arise from compulsory acquisition of agricultural land held in an urban area and compensation is received on or after 1st April, 2004

  2. Such land was used by the HUF or in case of individual by himself or his parents, for a period of 2 years immediately preceding the date of transfer.

  3. Such transfer is by way of compulsory acquisition under any law, or a transfer whose consideration is determined or approved by the Central Government or the Reserve Bank of India.

  4. The consideration or compensation for such transfer is received by the assessee on or after 1st April, 2004.

If assesses fulfill all the above condition, he will entitle to receive exemption of entire amount
 



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