Sec 115 jb
This query is : Resolved
19 September 2012
Sale of agricultural land by a private limited company is exempted from tax as per the definition given u/s 2(14)(iii) of the Income Tax Act 1961. But is it exempt from MAT also or not u/s 115JB ?
19 September 2012
Such income is NOT exempt from MAT. MAT will have to be paid on such income.
19 September 2012
Thanks Sir. My apprehension also leads to applicability of MAT. But on discussions with some CAs, they say that when there is no tax on sale of agricultural land, no MAT would be there. Is it correct ?
19 September 2012
The answer to your question lies in Explanation 1 ro Section 115JB which prescribes the method for computing book profit for the purpose of MAT.
As per Explanation 1 certain items are to be added to net profit and certain items are to be deducted.
Apart from these items NO addition/deduction is permissible.
Incomes exempt u/s 2 are NOT to be deducted while computing book profits.
Accordingly, MAT shall be payable on sale of agricultural land.
As per Explanation 1 certain items are to be added to net profit and certain items are to be deducted.
Apart from these items NO addition/deduction is permissible.
Incomes exempt u/s 2 are NOT to be deducted while computing book profits.
Accordingly, MAT shall be payable on sale of agricultural land.
19 September 2012
Many thanks to your expert opinion Sir. But while searching on the query, I have come to a decision made by ITAT Cochin in the case of Harrisons Malayalam Ltd Vs. ACIT (2009) 32 SOT 497 (Cochin) - it has been decided - "In the light of various judicial pronouncements, it is a settled law that the profits arising on transfer of agricultural land partakes the character of agricultural income and the agricultural income is not to be included in the total income as provided in section 10(1) of the Act." Could you give your further opinion please.
20 September 2012
as per 115JB any income exempt by virtue of sec 10 shall be deducted from profit (Negative adjustment). Agriculture income is exempt hence shall be deducted from profit hence mat is not applicable on the same.
20 September 2012
Please understand that there are 2 types of agricultural lands:
1. Situated in rural area.
2. Situated in urban area.
Exemption u/s 10(37) is for land situated in URBAN area. Accordingly, capital gain arising fom transfer of URBAN agricultural land will NOT be considered for MAT.
In other words, MAT is NOT applicable on sale of URBAN agricultural land.
Agricultural land situated in RURAL area is NOT a capital asset, so no capital gain arises on transfer of such asset.
So, Section 10(37) is NOT applicable on such income.
Since, Section 10 is NOT applicable in this case, such income is NOT governed by the deduction provided under Explanation 1 to Section 115JB to income exempt u/s 10.
Therefore, MAT will be payable on income arising from transfer of RURAL agricultural land.
1. Situated in rural area.
2. Situated in urban area.
Exemption u/s 10(37) is for land situated in URBAN area. Accordingly, capital gain arising fom transfer of URBAN agricultural land will NOT be considered for MAT.
In other words, MAT is NOT applicable on sale of URBAN agricultural land.
Agricultural land situated in RURAL area is NOT a capital asset, so no capital gain arises on transfer of such asset.
So, Section 10(37) is NOT applicable on such income.
Since, Section 10 is NOT applicable in this case, such income is NOT governed by the deduction provided under Explanation 1 to Section 115JB to income exempt u/s 10.
Therefore, MAT will be payable on income arising from transfer of RURAL agricultural land.
21 September 2012
But isn't the income from the sale of agricultural land contributes to revenue derived from land?
21 September 2012
Sale of RURAL agricultural land does comprise revenue derived from land.
However, Explanation 1 to Section 115JB excludes only incomes exempt u/s 10. It does NOT exclude incomes exempt u/s 2.
However, Explanation 1 to Section 115JB excludes only incomes exempt u/s 10. It does NOT exclude incomes exempt u/s 2.
24 September 2012
Sorry for bothering you again sir, but by virtue of Sec 2, sale of agricultural land is agricultural income u/s 10. The case law stated above contains so many decisions by ITAT, High Court, Supreme Court which say that sale of agricultural land is agricultural income. Please suggest in the light of this.
23 July 2025
The issue you raised involves the application of **Minimum Alternate Tax (MAT)** under **Section 115JB** of the Income Tax Act, particularly in the context of the sale of agricultural land by a private limited company. Let me break it down clearly:
### **Sale of Agricultural Land and MAT:**
Under **Section 115JB**, a company is required to pay MAT based on the **book profits** as computed under **Section 115JB**. The concept of "book profit" includes **all items**, except those specified in **Explanation 1 to Section 115JB**.
#### **Agricultural Income Exemption under Section 10:**
* **Agricultural income** is **exempt** from tax under **Section 10** (Section 10(1) covers income from land in rural areas, and Section 10(37) covers income from rural agricultural land transferred for urban development).
* The question is whether **such exempt income** from the sale of agricultural land is subject to **MAT** under **Section 115JB**.
#### **MAT and Agricultural Income:**
1. **Explanation 1 to Section 115JB** specifies that income **exempt under Section 10** should be **deducted** from the net profit in the calculation of book profit for MAT purposes.
* However, the income **exempt under Section 2** (agricultural income, for example) is **not included** in this deduction. Therefore, agricultural income **does not automatically reduce the book profit** under MAT.
2. **Income from Sale of Agricultural Land in Rural Areas**:
* Agricultural land situated in **rural areas** is **not considered a capital asset**, so no capital gains arise on its sale. Therefore, no MAT would be levied on this income.
* **Rural agricultural land** is **exempt from tax** under **Section 10(1)**, and thus **MAT is not applicable** on the income from the sale of such land.
3. **Income from Sale of Agricultural Land in Urban Areas**:
* Agricultural land situated in **urban areas** can be considered a **capital asset**, and the sale can give rise to **capital gains**. However, this income is still **exempt under Section 10(37)** (which exempts the income arising from the transfer of agricultural land in urban areas).
* **MAT will not be applicable** to income arising from the sale of **urban agricultural land** as it is exempt under Section 10(37).
### **Key Points to Understand from the Query**:
* **Explanation 1 to Section 115JB** excludes income that is **exempt under Section 10** from being added back for the purpose of calculating MAT.
* However, **agricultural income** is **not exempt under Section 2** (which is the relevant section for MAT), and hence, it **is not deducted** from book profit for the purpose of MAT.
* For the sale of **agricultural land** in rural areas, the **income is not taxable**, and therefore **MAT will not apply**.
* **Agricultural income in urban areas** is also exempt under Section 10(37), but since it's considered capital gains, it won't be included in book profit, thus MAT will also not apply.
### **Conclusion**:
* **MAT will not be applicable on income from the sale of agricultural land**, whether rural or urban, since agricultural income is exempt under **Section 10**.
* For rural agricultural land, the income is **not taxable** (no capital gains), and for urban agricultural land, the exemption under **Section 10(37)** ensures **no tax** on the sale.
The **ITAT Cochin case** you mentioned (Harrisons Malayalam Ltd Vs. ACIT) supports the idea that agricultural income (from the sale of land) is exempt and should not be included in the book profit under **Section 115JB**.
I hope this clears up your query! Let me know if you have more questions.
### **Sale of Agricultural Land and MAT:**
Under **Section 115JB**, a company is required to pay MAT based on the **book profits** as computed under **Section 115JB**. The concept of "book profit" includes **all items**, except those specified in **Explanation 1 to Section 115JB**.
#### **Agricultural Income Exemption under Section 10:**
* **Agricultural income** is **exempt** from tax under **Section 10** (Section 10(1) covers income from land in rural areas, and Section 10(37) covers income from rural agricultural land transferred for urban development).
* The question is whether **such exempt income** from the sale of agricultural land is subject to **MAT** under **Section 115JB**.
#### **MAT and Agricultural Income:**
1. **Explanation 1 to Section 115JB** specifies that income **exempt under Section 10** should be **deducted** from the net profit in the calculation of book profit for MAT purposes.
* However, the income **exempt under Section 2** (agricultural income, for example) is **not included** in this deduction. Therefore, agricultural income **does not automatically reduce the book profit** under MAT.
2. **Income from Sale of Agricultural Land in Rural Areas**:
* Agricultural land situated in **rural areas** is **not considered a capital asset**, so no capital gains arise on its sale. Therefore, no MAT would be levied on this income.
* **Rural agricultural land** is **exempt from tax** under **Section 10(1)**, and thus **MAT is not applicable** on the income from the sale of such land.
3. **Income from Sale of Agricultural Land in Urban Areas**:
* Agricultural land situated in **urban areas** can be considered a **capital asset**, and the sale can give rise to **capital gains**. However, this income is still **exempt under Section 10(37)** (which exempts the income arising from the transfer of agricultural land in urban areas).
* **MAT will not be applicable** to income arising from the sale of **urban agricultural land** as it is exempt under Section 10(37).
### **Key Points to Understand from the Query**:
* **Explanation 1 to Section 115JB** excludes income that is **exempt under Section 10** from being added back for the purpose of calculating MAT.
* However, **agricultural income** is **not exempt under Section 2** (which is the relevant section for MAT), and hence, it **is not deducted** from book profit for the purpose of MAT.
* For the sale of **agricultural land** in rural areas, the **income is not taxable**, and therefore **MAT will not apply**.
* **Agricultural income in urban areas** is also exempt under Section 10(37), but since it's considered capital gains, it won't be included in book profit, thus MAT will also not apply.
### **Conclusion**:
* **MAT will not be applicable on income from the sale of agricultural land**, whether rural or urban, since agricultural income is exempt under **Section 10**.
* For rural agricultural land, the income is **not taxable** (no capital gains), and for urban agricultural land, the exemption under **Section 10(37)** ensures **no tax** on the sale.
The **ITAT Cochin case** you mentioned (Harrisons Malayalam Ltd Vs. ACIT) supports the idea that agricultural income (from the sale of land) is exempt and should not be included in the book profit under **Section 115JB**.
I hope this clears up your query! Let me know if you have more questions.
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