LIVE GST Audit Course by CA Sachin Jain. Register Now!!

urgent : sale of Agricultural land

CA. ANiRuDDhA RAthi (CA) (554 Points)

05 October 2010

DEAR SIR / MADAM

on of my clients had purchased an agriculture Land in 2002

This land is NOT a Capital asset u/s 2(14)

The thing is, he had sold the land after developing & plotting it in various parts to various different persons

some parts sold within 3 years and some after 3 years

now problem is, Will ITO add the same in Business Income as Assessee had made parts of a single land in various lands (by the way of plotting) & sold such parts of lands to various persons ?

Plz Reply

kindly provide Section / Case law / circular / notification on the same ...

Its very urgent ...

Thanks a lot in advance

aniruddha.rathi @ gmail.com

Thanks a lot

Reply
Follow
Share

7 Replies

C.A. LINESH PATIL (CA) (910 Points)
Replied 05 October 2010

Where plotting is carried out as a organized activity wherein the assessee exercise his dis discretion as to saleability to a particular buyer then such activity being exercised through application of skills shall fall within the ambit of business and accordingly chargeable under the head B&P.

Further as per section 2(13)-Business means trade,commerce,buying ,selling activity carried on continuously & systematically by application of labour & skill with a view to earning income.

so the activity carried out by your client is in nature if business as its involves use of skills & labour.

1 Like

Ashish Tibrewal (job) (80 Points)
Replied 05 October 2010

i thnk it could be a capital asset.......n it shud be treated as under CG..........becoz th law says RURAL AGRO LAND is not an capital asset....

1 Like

Dinesh N (pursuing CS professional programme) (52 Points)
Replied 06 October 2010

sir am a student , if im not wrong, plz consider my point.......if the assesse business is land developing and plotting,,, it can be shown as stock in trade for ten years of his business, so the profit eared by him will be treated as income from b/p .

1 Like

CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 06 October 2010

As rightly said by Mr.Dinesh, if the assessee engages himself in the business of buying land, plotting them and selling the same, the income must be treated as IFBP. in any case, gain on transfer of agri land will not be treated as agri income

1 Like

(Guest)

As if ur client is in the view to develop the land and not for agricultural the income gained by him shall treated as business income and taxed accordingly

1 Like

krishna Teja (CA Final) (85 Points)
Replied 06 October 2010

Originally posted by : linesh
	Where plotting is carried out as a organized activity wherein the assessee exercise his dis discretion as to saleability to a particular buyer then such activity being exercised through application of skills shall fall within the ambit of business and accordingly chargeable under the head B&P. Further as per section 2(13)-Business means trade,commerce,buying ,selling activity carried on continuously & systematically by application of labour & skill with a view to earning income. so the activity carried out by your client is in nature if business as its involves use of skills & labour.

I support this.

But the crucial point here is whether the business of assessee is plotting and sale of land. If not then 2 situations arise

1) If the agicultural land is sold for agricultural purposes, then it is not a capital asset and hence not liable to capital gains.

2 If the agricultural land is sold for non agricultural purposes - then it is a capital asset and is liable to capital gains (Mohamed Ibrahim & others 204 ITR 631 (SC) )

1 Like