Urgent...tax implication of following transaction...

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 December 2011 Hello, What will be the tax implication if the Agr. land is purchased on 07.08.09 and on 01.01.2011 it is being converted in to Non-Agr. Land for residential purpose (plots from 01 to 46 plots) and then from 20.02.2011 these plots are being sold to different individuals??? Whether any gain generated out of this transaction would be treated as Agr / Non-Agr. income...???

Thank you in advance...

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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20 December 2011 Agriculture land gives grains and gains both.
Since the land has not been cultivated or rented for Agri.Purpose.. the income, whatever may be, but can not be agriculture income.
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The land has been converted into Non Agri. Land on 01.01.2011 and sold out in the form of plots. Technically, the land may not have been shown as stock in trade and as such it is possible that it has been shown as a capital asset. Further, it becomes important to know whether the land is situated in Rural Area or Urban Area.
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In first case , when it is shown as Stock in Trade, whether be the Rural or Urban land, the arising profits will be Business Income.
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In the First Part of Second Case when the Land originally purchased was Rural Agriculture Land and subsequently converted into plots, in my view, Fair Market Value as on 01.01.2011 will be required here to compute the Business Profit.
Business Profit= Sales Consideration of plots - FMV -Expenditure incurred for conversion and land development.
Business Profit alone will be taxable here.
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In the Second Part of Second Case- when the Agri land is Urban Land,
for the Ay 2011-12 income has been computed in 2 parts.
1. Short Term Capital Gains= FMV- Cost of Purchase of the Land.
2. Business Profit= As mentioned in the earlier para.

Querist : Anonymous

Querist : Anonymous (Querist)

21 December 2011 Thank you...so much Sir....

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