CAPITAL GAIN OR BUSINESS INCOME

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2011 THERE IS AN AGRICULTURAL LAND WHICH IS WITHIN THE JURRISSDICTION OF MUNIPAL LIMITS AND THEREFORE A CAPITAL ASSET.

THE LAND IS SHOWN UNDER THE GROUP FIXED ASSETS IN THE BALANCE SHEET SINCE LAST FIVE YEARS.

THE LAND IS NOW CONVERTED TO NON AGRI LAND.
AFTER CONVERSION THE ASSESSEE NOW INTENDS TO DO SUB PLOTING AND SELL DIFFERENT PIECES OF LAND.

WHAT IS THE TAX IMPLICATION ?

CAN THE SALE OF NON AGRI CONVERTED LAND BY AN INDIVIDUAL BE TREATED AS BUSINES ?

IF YES IN SUCH CASES HOW WILL THE BREAKUP OF CAPITAL GAIN AND BUSINESS INCOME BE DONE ?

U S Sharma

U S Sharma (Expert)
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14 July 2011 yes its business activity

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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14 July 2011 The land is a capital assets and as it has been converted into non agriculture the identity has not been changed.

If you sale the land by plotting still it is your capital asset and the profit on the sale of land exceeding 36 month is entitled to claim indexation benefit.

In no case the profit on sale of land is a business income. You can use 54EC provisions to save tax if you feel so.

Prof. Bajaj

Prof. Bajaj (Expert)
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16 July 2011 I agree with Shri Agarwal. 54EC could be the best way to save tax in such deals (thereby removing any tax implications irrespective of it being business income or not)

You may mail to saurabh@nidhiinvestments.com in case of further doubt.

Querist : Anonymous

Querist : Anonymous (Querist)

18 July 2011 WHAT WILL BE THE TAX IMPLICATION WHEN THE SAME CAPITAL ASSET IS CONVERTED TO STOCK IN TRADE BY PASSING AN ENTRY
STOCK A/C DR
ASSET A/C CR
CAN IT BE THEN SAID THAT TILL THE POINT OF CONVERSION IT IS CAPITAL ASSET AND THEREFORE CAPITAL GAIN AND THEN BUSINESS INCOME.

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