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Capital gain or Income from other Source

nikunj (CA Final (New)) (34 Points)

05 February 2010

Hello.. If person gets payment from gas company for putting up gas line on his land(Agriculture) and the payment is one time only then how should be such income treated? CApital gain or Other Income? Please describe the treatment in brief...

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29 Replies

Amir (Learner) (4016 Points)
Replied 05 February 2010

Dear Nikunj,

I think that it is neither Agriculture Income nor will be taxed as Income from other sources, It is a receipt of a capital nature & therefore shall not be subject to tax.......

RD Verma (CA. Student) (314 Points)
Replied 05 February 2010

Dear Nikunj and Amir

I think that it is Income from Other Source

nikunj (CA Final (New)) (34 Points)
Replied 05 February 2010

What is impact of capital gain arising from sale of agriculture land situated in urban area? Is there any provision for exeption or tax saving?

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

HI nikunj.... The above income u mentioned will be considered as INCOME FROM THE OTHER SOURCES.....

A. It can't be termed as AGRICULTURE INCOME..,, for very obvious reasons..

B. Its not the capital gain FROM AGRICULTURE LAND (as u asked in ur Q2)... as no part of land is sold or there is no gain from any land involvement

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

Moreover, my general understanding says that CAPITAL GAIN is only when it arises from a capital asset.....

There is no transaction ovehere involving any capital asset which is bought or sold... Its just that gas company is paying amount for installing its own pipe line.... There is no appreciation or depreciation to the land of assessee..........

Amir (Learner) (4016 Points)
Replied 05 February 2010

Hi Dhiraj,

Look

House property cannot be applied beacuse no building is involved

Capital gain cannot be computed in this question, since no transfer is involved

Since assessee is not carrying on the business therefore PGBP also gets ruled out

Now, only thing is other sources - Now my point is the above receipt cannot be said as rent beacuse it is not for any particular period, the amount is given just to put a pipline & it ends there only, nothing further is required to be done..Therefore this receipt is capital in nature & hence not taxable

Look at this judjement - I know it is away from the present context but try to see the principle that every receipt cannot be taxed under othersources simply beacuse it is not falling under anyother head.

Sale receiptsprior to commencement of business - Where the assessee’s business has not commenced, amounts realised by assessee by sale of tender forms and empty bags would be capital receipts and cannot be brought to tax in the assessee’s hands as ‘income from other sources’

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

Ok, i got something to show and then do reply ....

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

INCOMES NOT SPECIFIED IN SECTION 56

Following incomes are not mentioned in the Income Tax Act but are to be

charged to tax. Therefore, these incomes are also included in the head of income

from other sources.

1. Income from subletting

2. Interest on bank deposits and loans and securities.

3. Agricultural income from a place outside India.

4. Rent of plot of land

5. Mining rent and royalty.

6. Casual income under a will, contract, trust deed.

7. Salary payable to a member of parliament.

8. Income from undisclosed sources.

9. Gratuity paid to a director who is not an employee of a company.

10. Any casual income exceeding Rs. 5,000.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

So... dont u think that its a CASUAL INCOME EXCEEDING RS. 5000......

Max Payne (employed) (2569 Points)
Replied 05 February 2010

Hi i also think its a capital receipt not chargeable...

capital receipts are outside tax net unless they are chargeable specifically, and this case is not covered by charging section 45 (cos there appears no transfer)..... Its one time so certainly a capital receipt to me....

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

Originally posted by : G.K..
	Hi i also think its a capital receipt not chargeable... capital receipts are outside tax net unless they are chargeable specifically, and this case is not covered by charging section 45 (cos there appears no transfer)..... Its one time so certainly a capital receipt to me....

Buddy..., u know even what r u saying???????????????/

I mean, u want to say that, whole of such income is EXEMPT.... Just tell me, is that kind of a joke???

I really dont understand, how can u think of the same???

Amir (Learner) (4016 Points)
Replied 05 February 2010

Dear Dhiraj,

I could't find any such clause of Rs. 5,000 CAN U PLZ HELP ME WHERE IT IS...

But still brother it cannot be said as casual income.........

If u say then anything & everthing can be covered under "casual income" , which i am sure u will also agree that is not the case......

Max Payne (employed) (2569 Points)
Replied 05 February 2010

I don't see casual income in excess of 5,000 in the act anywhere dhiraj bhai...

Are u sure u dint refer anything before finance act 1992, when section 10(3) was deleted????

What u have said as "casual income" is winning from lottery, card game isn't it?

Even that there is no limit of 5,000 now bhai.....

This is a capital receipt and not casual income..... hence not taxable to me....

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 February 2010

Amir.... i found it in SOME TAX site.... Its copied and pasted.....

Moreover, buddy, its just a casual income.., which is recieved all & sudden out of the blue.... it was never recieved earlier and cant be recieved in future.... So, ofcoarse its a income earned casually and not in normal circumstances.....

I FIND IT AS THE BEST OPTION to appeal.. But one thing is sure, its not at all a CAPITAL GAIN, just becoz its capital in nature..., i mean, how can one say that a income of capital nature is to be considered as CAPITAL GAIN.. or an income of capital nature NOT TO BE CONSIDERED AS IOS.... ????