QUERY:TAXABILITY OF GAIN ON SALE OF AGRICULTURAL LAND
P.D.RUNGTA
QUERY:TAXABILITY OF GAIN ON SALE OF AGRICULTURAL LAND
Dear Professional Colleagues,
I want your valued opinion on the following :-
A Pvt. Ltd. Co. owns agricultural land since several years in a village the
population of which is less than 10,000 as per census of 2006. The company sold
the said land during current financial year.
The said agriculture land is not an asset as per section 2(14) of I. T. Act and
as such the gain on sale is not chargeable as Capital Gain. Will this gain is
chargeable to tax as "Income From Other source".
As this income is not taxable under the I. T. Act, whether the company has to
pay MAT U/S 115JB on the gain arising from sale of such land.
With Regards.
CA Ashok Kumar Agarwal,
1A, Ashutosh Mukherjee Road,
Kolkata - 700 020
Phone : 9830502410
REPLY:1
In my view the capital receipt arising on the sale of agricultural land will
have to be taken into consideration while computing book profits u/s 115JB.
The reasons are as under:
Income from the sale will figure in the company's Accounts which are prepared
in consonance with Schedule VI requirements.The supreme court has acknowledged
in Appollo Tyres(255ITR 273)that the company's accounts prepared for meeting
company law requirements have to be considered as sacrosant.The scope for
making adjustments to the Book profits is restricted only to the items laid
down in the Explanation u/s 115JB.Income of the above genre cannot be reduced
from the Book profit, Income from Sale of agricultural land being a capital
receipt on which no capital gains is exigible.The Explanation to section 115JB
allows inter alia the reduction of the Book profit by any income which is
exempt u/s 10 other than income u/s 10(38).only agricultural income is exempt
u/s 10(1),not income from sale of agricultural land.
In a recent decision not yet reported the Delhi tribunal in Growth Avenue Securities Pvt ltd has held that long term capital gains not chargeable to tax in terms of Section 54EC is not to be deducted while computing the book profits u/s115JB.While coming to the above conclusion the Bench placed reliance on the following decisions:
1)Cit Vs.Veekay lal investments p ltd(249ITR 597(Bombay)
2)M.J.Jose &co vsACIT(174Taxman 141)
where it was held that in the absence of any provision for exclusion of capital gains in the computation of book profits ,capital gains cannot be excluded.
It is somewhat ironic and paradoxical that an item of income which is not taxable under the law has to enter into the computation of Book profits only because it is acknowledged as income in the Books of Account as per schedule VI.
regards
kalidas
REPLY:2
Agricultural land as mentioned in Clause (iii) of sec- 2(14) is not capital
asset & accordingly sec-45 excludes any capital gain arising from such
transfer from chargeability to Income tax.
Income from transfer of rural agriculture land is included in the definition of
Agricultural Income u/s 2(1A). And agricultural income is exempted u/s 10(1).
So income from transfer of agricultural land will be exempted u/s 10 under the
normal provisions.
Fro the purpose of calculating Book Profit under MAT, Sec-115 JB provides that
income exempted u/s 10 shall be reduced from the Profit as per Profit &
Loss A/c
Therefore, the Company will not have to pay MAT on gain arising from transfer
of agricultural Land.
With Regards:-
CA.RUNGTA PRAMOD DAYAL
M.COM., LL.B.,AICWA.,FCA.,DISA (ICAI)
P D RUNGTA & CO.,
Chartered Accountants
21,HEMANT BASU SARANI, 3RD FL.,R.NO. 317 ,KOLKATA 700 001 ,PH:033 3028 2500 (4 LINES) CELL: 9831007253 ,web:www.pdrungta.co.in
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RAJ SINGHANIA
| Dear All, I am not agreeing with the views expressed in Reply 2 as it says that sale of agricultural land is included within the meaning of definition of Agricultural income as given in section 2(1A) of the IT Act, whereas it has been categorically said in the explanation 1 of section 2(1A) that ']For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section.]. This can also be construed from the fact that had the sale of agricultural land be included in the definition of agricultural income, there was no need for specifically keeping it out from the definition of capital asset. And since transfer of land is out of the purview of section 2(1A) and hence 10(1), benefit under section 115JB cannot be availed. These type of replies are misguiding and I would request humbly to all, that before giving a reply they should at least read the content of the section very well. Thanks & regards Raj Singhania, FCA 9830227678 --- On Sun, 27/12/09, P.D.RUNGTA <pdru...@gmail.com> wrote: |
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