Taxation on agricultural land

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manoj mahimkar (Querist)
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05 September 2009 Section 2(14)(iii) of the Income Tax Act, 1961 clearly defines the agricultural land. the definition is in relation to the location of the land in certain area. If the said test is satisfied then the land is clearly comes under the definition of Agricultural Land. Such land is hence not capital assets whether the same is held for the period of less than 36 months or more.
when the act clearly defines the agricultural land, why is then the attempt being made to provide certain guiding factors for determining the whether particular land is agricultural land or not.(As decided in case in gujarat High Court in CIT vs Siddharth J. Desai(1982) 10 Taxman 1.

Even I could not understand the relevance of the section 54B, which provides for exemption in respect of capital gain arising transfer of agricultural land.

when once the agricultural land satifies the conditions specified in para 1 above, what is the sense in putting the said land to test as specified in para 2. And when the said land with reference to section 2(14)(iii) is not capital assets, how the section 54B will come to rescue?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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06 September 2009 Please read the sections slowly and carefully.

Section 2(14)(iii) defines agricultural land. Generally what the assessees do is they say that their land is agricultural land and fits into this definition. That is the reason whyc the court has given judgements stating the factors to be considered while arriving or deciding whether land is agricultural land.

Section 54B speaks of a land which is not being used for agriculture on the date of sale but it was a agriculatural land before 2 years and the proceeds is to be reinvested in agricultural land.

Sections are clear. Please read slowly and thoroughly.

CA CHINTAN AJMERA

CA CHINTAN AJMERA (Expert)
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06 September 2009 Agree with expert

manoj mahimkar

manoj mahimkar (Querist)
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06 September 2009 thanks for reply, but i need further clarification on the following matter:

Capital gain tax in respect of sale of Agricultural land situated in rural area

On going through various relevant provisions of the Income Tax Act, 1961, it is being understood that the â€œAgricultural Landâ€ is divided in two parts
1. Agricultural land situated in rural area
2. Agricultural land situated in urban area

Agricultural land situated in the rural area is one which satisfies the conditions laid down in section2 (14) (iii) of the Act. And,
Agricultural land situated in urban area is one which do not satisfies the conditions laid down in section2 (14) (iii) of the Act.

Exemption under section 54B is applicable to the capital gains arising in respect of sale of Agricultural land situated in urban area, subject to conditions stated therein.

If the land is situated in the area which satisfies the conditions laid down under section 2(14) (iii) of the Act, any gain whether Short term or long term is exempted for the capital gain tax.

Pls correct me if I am wrong