urgent : sale of Agricultural land

Tax queries 1500 views 7 replies

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

Replies (7)

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 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....

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 .

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

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

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) )

Thanks a lot to all my dear Friends

 

I must mention 1 thing over here that

 

It is NOT the Business of the Assessee to dp Plotting & Developing Because,

 

Assessee had done these transactions (i.e purchase 1 big Agri Land & sale the same in parts by plotting) only once,,,

 

I mean the same activity neither done by him in Pasr nor in future

 

So what will happen now ?


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