Short term capital gain on agricultural land

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This query is : Resolved

shreyans kothari (Querist)

19 January 2012 An assessee has purchased an agricultural land in the fy 2011-12. Registry is for 10 lakhs and due in the month of march 2012.. Has sold it to another party, but that registry is in fy 2012-13. the land is sold for 80 lakhs, and the buyer is a company which wants the whole 80 lakhs in pucca, that is in cheque. Now if the assessee accepts 80 lakhs cheque, the amount of capital gain is to high. So what should be done for tax planning so as to reduce or waive off the capital gains on it considering that the assessee is going to register it in the month of march and then the buyer would purchase the land. as of now only sale agreement has been entered. If the agricultural land is beyond 8 kms of muncipality limit, the asset itself is not a capital asset, but what if the land is urban agricultural land?

CA Hardik Bunha

CA Hardik Bunha (Expert)

19 January 2012 If land is urban agriculture land then it will be liable to capital gain tax.

If an assessee buy another agriculture land then exemption u/s54B is available.

shreyans kothari

shreyans kothari (Querist)

19 January 2012 can the assessee get the registry done in the name of a company whose main object is to trade in lands. so fr that company it will be stock in trade. and then the company will sell the land. so that will not be a transfer. how about it.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

19 January 2012 In my view, the land must be used by the assessee or any of his parent in preceding 2 years for agriculture purpose. 54B will not be applicable here. STCG will arise and tax has to be paid.
.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

19 January 2012 Sale is also a transfer. In this case it will be Business Income.
Taxation slqbs for STCG and Business Income are not different.
.
If the assessee wants to run this type of business and does not restrict it to this
maiden deal, then formation of such a concern or company may be thought for otherwise not.
.
Lastly, if we see the exemption provisions, these are having intention of promoting Housing Sector, Investment in Bonds, Agriculture etc. Exemption provisions are not meant for taking undue advantage.

CA Hardik Bunha

CA Hardik Bunha (Expert)

20 January 2012 Sir Please refer section 54 B.
exemption will be available if capital gain is short term or long term.

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