Sale consideration
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
24 April 2012
Dear expert,
Income tax officer has issued a letter to one of my client on the basis of AIR furnished by bank, and asking him to submit response in respect of cash deposit of Rs. 2868000/- in FY 2008-09.
Actually my client (an agriculturist) was migrating from native village to another village by selling his agriculture land, tractor, animals etc. His main bank transactions for FY 2008-09 are as follows –
Deposits –
1. Rs. 3578/- Opening balance of bank a/c on 1st april 2008.
2. Rs. 1490000/- deposited in cash which were received as advance amount for the sale agreement of his agriculture land which is 20 KM far from municipality area.
3. Rs. 39422/- payment received from sugar mill for sugarcane crops.
4. Rs. 400000/- deposited in cash of sale consideration of old tractor which were purchased two years ago in Rs. 530000/-
5. Rs. 48000/- deposited in cash of sale of his two milk animals.
6. Rs. 887000/- deposited in cash which were received on the execution of final sale deed of agriculture land, tube-well boring and trees on that land mentioned in clause 2 of deposits.
Withdrawals –
1. Rs. 1200000/- for purchase of new agriculture land.
2. Rs. 70000/- for purchase of 2nd agriculture land from another landlord (this property was under charge of bank loan and subsequently purchaser had to pay the said loan on behalf of vendor).
3. Rs. 475000/- for payment of loan which was taken by the vendor of clause 2 of withdrawals.
4. Rs. 60000/- for purchase of milk animals
5. Rs. 110000/- for purchase of bricks for house construction.
6. Rs. 35000/- for purchase of cement etc.
7. Rs. 150000/- for purchase of a old tractor.
8. Rs. 70000/- for personal use.
9. Rs. 697078/- Closing balance on 31st March 2009.
Hereby, I have following queries-
1. Total sale consideration in clause 2 and 6 of deposit is Rs. 2377000/-, however, on sale deed, sale consideration is shown at Rs. 1750000/- and stamp duty is paid on Rs. 2049000/- as to circle rates. Therefore in response, which amount, I should take as sale consideration to avoid any tax liability.
2. Whether the sale of tractor and animals shall attract capital gain or not.
3. My client had purchased the new lands in the name of his wife, whether it can cause any problem.
4. If I takes the Rs. 1750000/- as sale consideration, then what excuse can be taken for Rs. 627000/- to avoid any tax liability.
5. Whether the closing balance of bank a/c of Rs. 697078/- can be use in personal expenses or it has to invest only in land purchase.
Please advise me.
Income tax officer has issued a letter to one of my client on the basis of AIR furnished by bank, and asking him to submit response in respect of cash deposit of Rs. 2868000/- in FY 2008-09.
Actually my client (an agriculturist) was migrating from native village to another village by selling his agriculture land, tractor, animals etc. His main bank transactions for FY 2008-09 are as follows –
Deposits –
1. Rs. 3578/- Opening balance of bank a/c on 1st april 2008.
2. Rs. 1490000/- deposited in cash which were received as advance amount for the sale agreement of his agriculture land which is 20 KM far from municipality area.
3. Rs. 39422/- payment received from sugar mill for sugarcane crops.
4. Rs. 400000/- deposited in cash of sale consideration of old tractor which were purchased two years ago in Rs. 530000/-
5. Rs. 48000/- deposited in cash of sale of his two milk animals.
6. Rs. 887000/- deposited in cash which were received on the execution of final sale deed of agriculture land, tube-well boring and trees on that land mentioned in clause 2 of deposits.
Withdrawals –
1. Rs. 1200000/- for purchase of new agriculture land.
2. Rs. 70000/- for purchase of 2nd agriculture land from another landlord (this property was under charge of bank loan and subsequently purchaser had to pay the said loan on behalf of vendor).
3. Rs. 475000/- for payment of loan which was taken by the vendor of clause 2 of withdrawals.
4. Rs. 60000/- for purchase of milk animals
5. Rs. 110000/- for purchase of bricks for house construction.
6. Rs. 35000/- for purchase of cement etc.
7. Rs. 150000/- for purchase of a old tractor.
8. Rs. 70000/- for personal use.
9. Rs. 697078/- Closing balance on 31st March 2009.
Hereby, I have following queries-
1. Total sale consideration in clause 2 and 6 of deposit is Rs. 2377000/-, however, on sale deed, sale consideration is shown at Rs. 1750000/- and stamp duty is paid on Rs. 2049000/- as to circle rates. Therefore in response, which amount, I should take as sale consideration to avoid any tax liability.
2. Whether the sale of tractor and animals shall attract capital gain or not.
3. My client had purchased the new lands in the name of his wife, whether it can cause any problem.
4. If I takes the Rs. 1750000/- as sale consideration, then what excuse can be taken for Rs. 627000/- to avoid any tax liability.
5. Whether the closing balance of bank a/c of Rs. 697078/- can be use in personal expenses or it has to invest only in land purchase.
Please advise me.
25 April 2012
Q NO 1. :
As the Land is in Rural Area, it is not treated as a Capital asset.
There will be no capital gains in this case.
The sales consideration received by the farmer towards sale of land has to be shown at 1750000/-, i.e. at the value shown in the Sale Deed.
As the Land is in Rural Area, it is not treated as a Capital asset.
There will be no capital gains in this case.
The sales consideration received by the farmer towards sale of land has to be shown at 1750000/-, i.e. at the value shown in the Sale Deed.
25 April 2012
Q No 2.
The sale of animal attracts tax in case the animals have been used for the purpose of business and acquired by paying certain amount. Here, you may show the proceeds as if received out of sale of personal asset.
It is assumed that no income from sale of milk has been received.
.
Further you may declare the price at which the animals were purchased.
.
In my view, ITO would have to apply his own mind in treating the entire sale proceed as taxable, as it can easily be said by a farmer that he has nourished the cattle like a child. It can not be said a Capital Asset in any case.
.
Sale of Tractor will not attract any Capital Gains as notional Depreciation has to be considered. In such a case the amount received 400000/- is less than the WDV calculated on the basis of 15% Depreciation rate plus Cost (382925) and Cost of New (old) Tractor 150000.
.
The sale of animal attracts tax in case the animals have been used for the purpose of business and acquired by paying certain amount. Here, you may show the proceeds as if received out of sale of personal asset.
It is assumed that no income from sale of milk has been received.
.
Further you may declare the price at which the animals were purchased.
.
In my view, ITO would have to apply his own mind in treating the entire sale proceed as taxable, as it can easily be said by a farmer that he has nourished the cattle like a child. It can not be said a Capital Asset in any case.
.
Sale of Tractor will not attract any Capital Gains as notional Depreciation has to be considered. In such a case the amount received 400000/- is less than the WDV calculated on the basis of 15% Depreciation rate plus Cost (382925) and Cost of New (old) Tractor 150000.
.
Message likes :
1 times
25 April 2012
Q No. 3
The purchase of land in the name of wife does not become a cause of any problem, the prospective problem may find its cause in the relationship of husband & wife only, and I prey may it subsist forever till their life.
The purchase of land in the name of wife does not become a cause of any problem, the prospective problem may find its cause in the relationship of husband & wife only, and I prey may it subsist forever till their life.
25 April 2012
Rs. 627000/ deposited may be explained as deposited -partly out of loan given to the Purchaser of the land (if he is also a farmer only) as well as out of your past savings and sale of Stock kept with the farmer of the produces raised earlier. If you divide this excessive amount in 3 parts Cash in Hand 300000/- Loan 300000/ and balance from produces sold locally then also it can be managed and explained.
25 April 2012
Q No 5 :
He may use the amount at his own wishes.
He may use the amount at his own wishes.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Selecting Tax Regime while for calculating tax relief on under Section89 of income tax act 1961.
- Cloud service
- Relief Calculation u/s 89 of ITax 1961 in TableA Form10E
- Sale of Gold ornaments
- Credit note Issue reg
- Accounting Policies changes
- Running non ac bus under contract with roadways
- GST ITC on Liquidated damages
- SECTION 194T
- Ca final exam registration may-26
- B2B Amendment
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- Regarding Advance Tax not claimed in the Return of Income for A.Y. 2025-26
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
- Address Change to another state of a Registered Trust with 12AB approval
- Updated return in budget 2026
- Clarification Required on GST Rate & HSN Classification – Millet-Based Probiotic Drink
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
