Capital Gain

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hitesh sharma (Querist)
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18 December 2010 If some one sell Agriculture land in the plots will it be eligible for exemption u/s 54B. If Yes then tell me the method to save tax

Further whether selling the land in plots will be treated as business income or capital gain.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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19 December 2010 Benefits of Section 54B will be available even if the agriculture land is sold in the form of plots provided in the two years immediately preceding the date on which the transfer took place, the land was being used by the assessee or a parent of his for agriculture purpose.
Section 54B is applicable when the capital gains arises from the transfer of a capital asset being land.Plots are also nothing but land and as such the only requirement for being used for agriculture purpose is in the context of past 2 years.
It will be beneficial to show capital gains as Section 54B benefit will be available even if plots are sold.

But, if the land is sold after conversion
in the forms of plots and it is converted into stock in trade then in the year of sale of the plot, both LTCG and business income will arise.

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Balakrishnan

Balakrishnan (Expert)
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19 December 2010 If you put your land into plots and then sell that is what i understand from your query, then capital gain exemption is gone. Reg taxability whether as capital gain or business income will depend upon whether you have converted the land into stock in trade of your business or not. The best way can be to convert your agri land as it is into your business as conversion of capital asset and offer capital gain which is exempt. Then plot it and sell and offer as your business income

hitesh sharma

hitesh sharma (Querist)
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20 December 2010 Is there any relevant case law. If Yes can you please tell me

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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18 July 2024 There are several judicial precedents where the courts have examined whether the sale of agricultural land in plots should be treated as business income or capital gain. For instance, in cases like CIT vs. Chandra Narayan Sarkar [1981], it was held that merely dividing agricultural land into plots and selling them does not necessarily convert the transaction into a business activity.

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