Plot purchases of less than Govt Market Value

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This discussion explores the tax implications of purchasing agricultural land for Rs 13 lakhs when its government market value is Rs 83 lakhs. The core question is whether the Rs 70 lakh difference is treated as 'other income' or business income. The consensus is that this differential amount will likely be considered income, regardless of whether the land is treated as an investment or for trading purposes. If treated as a business asset, the income is realised upon sale, with the purchase cost considered Rs 13 lakhs. Expenses for converting the land to non-agricultural status are also considered business costs.

Pankaj

Pankaj (Querist)
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13 December 2021 Sir
I have purchase agri land of Rs 13 lakhs/- . Govt Market Value of such land is Rs 83 Lakhs. So i have to paid stamp duty on Rs 83 lakhs.
I have to ask you :

1 )In such case difference between Rs 70 lakhs ( Govt Market Value 83 lakh - purchased cost Rs 13 lakh ) will be considered other income in the my hand ?

2) I have purchased such agri land to build building for sale. So that i have submitted my file to govt department to convert such land into non agri land. But till it is agri land. Sir if I show such agri land as trading purpose & show as stock in hand in trading A/c then in such case difference between Rs 70 lakhs ( Govt Market Value 83 lakh - purchased cost Rs 13 lakh ) will be considered other income in the my hand ?
Sir please reply

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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13 December 2021 Yes, in both the case the differential amount will be treated as Gain/income.

Pankaj

Pankaj (Querist)
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13 December 2021 Sir
If I treat to plot as investment & if i treat to plot as trading , differential amount should be added in income from other sources ??

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 December 2021 In case of it's treated as business assets it will be considered as business income only on sale of plots.
Business cost will be considered as 13 lacs.

Pankaj

Pankaj (Querist)
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13 December 2021 Sir
right now such plot is agri plot. Such plot can be shown as purchases for business ? & shown as stock in hand ?.
Also i am doing government formalities to convert the same agri plot into N A Plot. Such expenses should be added in business cost ?
If i sold such plot less than Government i e Rs 25 lakh . then business profit is Rs 12 lakh or 58 lakh ( 83 lakh - 25 lakh )

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 December 2021 1 yes.
2 yes, it's business expenses.
3 It's 58 lacs without any expenses.

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