Capital contribution of land by incoming or taking on rent

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2012 A & S are partners of a poultry farm,VEF.Now for expansion,they need around 15 acres of land.

Spouses of A & S OWN 10 & 14 acres of agrl.land adjacent to poultry farm.

option I
taking spouses of A&S AS PARTNERS WHO BRING their land as capital contribution.

option 2
Taking spouse's land on lease and paying them rent for their land.

kindly advise me which option is better from tax planning and inform me any problems from Assessing officers during scrutiny assessments.i know the problem of TDS which will be taken care of.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

26 February 2012
I do not know, whether poultry farm can be developed on the agriculture land only.
.
However, Mrs. A and Mrs. S are more happy while enjoying the tax free agriculture income. It is not prudent if they lose higher tax free income for the smaller share in taxable income / or just for taxable lease rentals.
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It is not advisable to surrender permanent
interest in land. The partnerships are entered into for breaking them.
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Nowadays, Substantial Income can also be raised from Agriculture Produces, like vegetables, Oil Seeds, Pulses, Garlic or other cash crops.
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So, in spite of expanding poultry farming,
business in adjacent land, another option -- to convert poultry farm land into agriculture land may also be considered.
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