Querry:Income from sale of trees grown on Agricultural Land

[P.D.RUNGTA]

Querry:Income from sale of trees grown on Agricultural Land

I want your valued opinion on the following :-
An assesse grows trees on agricultural land owned by him, and after 8 to 10 years when trees grows then the assesse cut the trees and sale them. What will be the tax treatment of the income generated out of sale of such trees?

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Regards.

Sultania Sanjay & Co.
Chartered Accountants

Reply:1

The query can be answered based on the following assumptions:

1)If the land is sold along with the standing trees.In such a case the income would be capital in nature as held in CIT Vs.Ramaiah Reddy(158ITR 611(Karn.)

2)If only the trees which have been felled are sold the income would be revenue in nature as held in Raja priyanand prasad singh Vs.CIT(32 ITR 320(All.)

3)If the income is from the sale of forest trees,fruits and flowers growing on land naturally ,spontaneously and without intervention of human agency,the income cannot agricultural income as held in MustafaVs.CIT (16ITR330),consolidated coffee vs Agricultural CIT(76ITR29) and a number of other cases.4)If the trees have been cut leaving the stumps intact so that they are capable of regeneration the income thereon would be on revenue account as held in venugopala varmah raja vs CIT(76ITR460)(SC).

5)If the trees are socut along with their roots so as to make regenaration impossible the income would be on capital account as in such a case,the sale affects the capital structure as held in Vishnudatta Antharjanam vsAgri CIT(78ITR 58)(SC).

All the above possibilities have been considered so as to make the answer comprehensive.

regards

kalidas

Reply:2

Any rent or revenue derived from agricultural land is agricultural income and exemt from tax.Income on sale of tree is also a agricularal income and hence it is exemted from tax

raysin...@yahoo.co.in

Reply:3

Income from sale of trees grown on Agricultural Land

Please inform the following:
Where is land- whether any agricultural income tax is levied in that state?
Whether land is assesseed to land revenue?
Any information about planting given to any authority/ board?
Whether, any revenue is derived from land in intervening period by some crops as inter croppings, incidental crops in vacant portions?
Whether there were any revenue derived from these trees by way of sale of fruits, flowers, gum/ shellac or any thing else collected from these trees?
whether, trees are uprooted and sold or cut above ground and roots left for regeneration?
Whether regular expenses for development, growth of trees are incurred during last 5-6 years?
When last expenses were incurred for improvement orgrowth on old trees ?

First ascertain all facts on above lines, and other related issues and then look at the latest Central and/ state provisions with help of a large number of decided cases.

Let group contribute on the subject matter.
CA Dev Kumar Kothari

Reply:4

If all agricultural process such as ploughing/sidling/sapling/irrigation/harvesting is done it is agicultural income. however sales of trees by sponteneous growth in forest is not agricultural income.
regards
daya shankar tiwari  

 

With Regards:-

CA.RUNGTA PRAMOD DAYAL
M.COM., LL.B.,AICWA.,FCA.,DISA (ICAI)
P D RUNGTA & CO.,
Chartered Accountants

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[Money Managers]

AN ASSESSEE HAD PURCHASED A HOUSE PROPERTY FOR 20 LACS+ REGN COST 2 LAC  . DURING ASST PROCEEDINGS THE AO HAS REFERRED IT FOR VALUATION U/S 142A WHO HAS VALUED THE SAME FOR 25 LACS. AO HAS ADDED  5 LAC AS INCOME U/S 69.IS AO CORRECT OR WHAT REMEDY LIES??

Rgds
CA.Anurag singal 

33/1 N S Road, 332 Marshall House
Kolkata-700001
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Fax : 033 22107539

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[sanjay sultania]

We are explaining the details asked by you:-

1.      Where is land- Land is situated in Bihar.

2.      Whether land is assesseed to land revenue – Yes. The assesse is paying the land revenue tax on regular basis.

3.      Any information about planting given to any authority/ board? – No.

4.      Whether, any revenue is derived from land in intervening period by some crops as inter croppings, incidental crops in vacant portions? – No.

5.      Whether there were any revenue derived from these trees by way of sale of fruits, flowers, gum/ shellac or any thing else collected from these trees? – No.

6.      whether, trees are uprooted and sold or cut above ground and roots left for regeneration?- trees are uprooted and sold.

7.      Whether regular expenses for development, growth of trees are incurred during last 5-6 years? Yes, the assesse is debiting regular expenses on plantation like soiling, watering, labour charges and other plantation expenses.

8.      When last expenses were incurred for improvement or growth on old trees? – No.

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[D.K.KOTHARI]

 

----- Original Message -----

From: sanjay sultania

To: eserve...@googlegroups.com

Sent: Thursday, January 07, 2010 11:23AM

Subject: Re: e-Serve Querry:Income from sale of trees grown on Agricultural Land

We are explaining the details asked by you:-

1.      Where is land- Land is situated in Bihar.

2.      Whether land is assesseed to land revenue – Yes. The assesse is paying the land revenue tax on regular basis.

3.      Any information about planting given to any authority/ board? – No.

4.      Whether, any revenue is derived from land in intervening period by some crops as inter croppings, incidental crops in vacant portions? – No.

5.      Whether there were any revenue derived from these trees by way of sale of fruits, flowers, gum/ shellac or any thing else collected from these trees? – No.

6.      whether, trees are uprooted and sold or cut above ground and roots left for regeneration?- trees are uprooted and sold.

7.      Whether regular expenses for development, growth of trees are incurred during last 5-6 years? Yes, the assesse is debiting regular expenses on plantation like soiling, watering, labour charges and other plantation expenses.

8.      When last expenses were incurred for improvement or growth on old trees? – No.

 

Considering ans. 3, whether the land is considered as forest, in that case approval of forest departmetn will be required before cutting or felling  trees.

 

Considering ans. 7 above

(I believe debiting imply really incurring)  in that case the gains can be considered as agricultural income because the cultivation activity still continue for the trees, till the crop mature for harvest. so check agricultural tax in Bihar. 

 

These expenses may be considered as 'cost of improvement' for computing vapital gains.

 

If there is no cost of improvement, and there was natural growth after planting or initial growth was also natural , then the  sale value may not fall under catagory 'profit' or' gain' in S. 45. You may check CIT Vs. Suman Tea & plywood  226 ITR 34 (Cal) a case prepared and represented by me upto ITAT.

 

There are many more aspects whihc need consideration before making a claim of capital receipt.

 

CA Dev Kumar Kothari