Stock in trade
This query is : Resolved
28 June 2013
Mr.X deals in land.. land development business.
as such land is his SIT
Mr. x sell a land (shown as SIT in books) which is agriculture land as per Income Tax.
Can Mr.x divide his SIT in two part
1. Agriculture Land ( Exempt)
2. Other Land
and can exemption.
as such land is his SIT
Mr. x sell a land (shown as SIT in books) which is agriculture land as per Income Tax.
Can Mr.x divide his SIT in two part
1. Agriculture Land ( Exempt)
2. Other Land
and can exemption.
29 June 2013
thanks for ur kind suggestion..
i repeat u r saying.. even if i m treating agriculture land as stock in trade.. i can claim it as exepmt income.. frm agrl land
i repeat u r saying.. even if i m treating agriculture land as stock in trade.. i can claim it as exepmt income.. frm agrl land
25 July 2025
Great question! Here's a clear breakdown:
---
### Context:
* Mr. X’s **Stock-in-Trade (SIT)** is land held for business (land development).
* He wants to sell a piece of **agricultural land** from SIT.
* Agricultural land is **exempt from Income Tax on capital gains** under certain conditions.
* Can he split SIT into:
1. Agricultural land (exempt)
2. Other land (taxable)
* And claim exemption on the agricultural land portion?
---
### Answer:
1. **Stock-in-Trade (SIT) is normally considered business inventory**, so profits on its sale are **treated as business income**, not capital gains. This is because the land is held for **business purpose and trading**.
2. **Agricultural land exemption under Income Tax** (like exemption on capital gains) typically applies **only to capital assets** and **not to stock-in-trade**. So, if land is held as SIT, income from its sale is **business income**, and **agricultural land exemption does not apply**.
3. Therefore, **even if the land is agricultural in nature, but held as SIT, you cannot treat it as an exempt agricultural capital asset for tax purposes**.
4. **Splitting SIT into agricultural and non-agricultural parts for claiming exemption is not permitted** because the entire land is treated as stock-in-trade, and tax treatment applies accordingly.
5. If Mr. X wants to claim agricultural land exemption, he would need to **reclassify the agricultural land as a capital asset (not SIT)**, which depends on facts like holding intention, usage, etc. This is not simply a book-entry change but requires genuine change in usage or holding pattern.
---
### Summary:
* **Land held as SIT → Profits from sale taxed as business income** (no agricultural land exemption).
* **No dividing SIT for exemption purposes** — all treated uniformly.
* **Agricultural land exemption applies only to capital assets, not SIT**.
---
If you want, I can help draft a note or explanation for Mr. X’s tax filing or further clarify any related points!
---
### Context:
* Mr. X’s **Stock-in-Trade (SIT)** is land held for business (land development).
* He wants to sell a piece of **agricultural land** from SIT.
* Agricultural land is **exempt from Income Tax on capital gains** under certain conditions.
* Can he split SIT into:
1. Agricultural land (exempt)
2. Other land (taxable)
* And claim exemption on the agricultural land portion?
---
### Answer:
1. **Stock-in-Trade (SIT) is normally considered business inventory**, so profits on its sale are **treated as business income**, not capital gains. This is because the land is held for **business purpose and trading**.
2. **Agricultural land exemption under Income Tax** (like exemption on capital gains) typically applies **only to capital assets** and **not to stock-in-trade**. So, if land is held as SIT, income from its sale is **business income**, and **agricultural land exemption does not apply**.
3. Therefore, **even if the land is agricultural in nature, but held as SIT, you cannot treat it as an exempt agricultural capital asset for tax purposes**.
4. **Splitting SIT into agricultural and non-agricultural parts for claiming exemption is not permitted** because the entire land is treated as stock-in-trade, and tax treatment applies accordingly.
5. If Mr. X wants to claim agricultural land exemption, he would need to **reclassify the agricultural land as a capital asset (not SIT)**, which depends on facts like holding intention, usage, etc. This is not simply a book-entry change but requires genuine change in usage or holding pattern.
---
### Summary:
* **Land held as SIT → Profits from sale taxed as business income** (no agricultural land exemption).
* **No dividing SIT for exemption purposes** — all treated uniformly.
* **Agricultural land exemption applies only to capital assets, not SIT**.
---
If you want, I can help draft a note or explanation for Mr. X’s tax filing or further clarify any related points!
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