19 September 2012
Sale of agricultural land by a private limited company is exempted from tax as per the definition given u/s 2(14)(iii) of the Income Tax Act 1961. But is it exempt from MAT also or not u/s 115JB ?
19 September 2012
Thanks Sir. My apprehension also leads to applicability of MAT. But on discussions with some CAs, they say that when there is no tax on sale of agricultural land, no MAT would be there. Is it correct ?
19 September 2012
The answer to your question lies in Explanation 1 ro Section 115JB which prescribes the method for computing book profit for the purpose of MAT.
As per Explanation 1 certain items are to be added to net profit and certain items are to be deducted.
Apart from these items NO addition/deduction is permissible.
Incomes exempt u/s 2 are NOT to be deducted while computing book profits.
Accordingly, MAT shall be payable on sale of agricultural land.
19 September 2012
Many thanks to your expert opinion Sir. But while searching on the query, I have come to a decision made by ITAT Cochin in the case of Harrisons Malayalam Ltd Vs. ACIT (2009) 32 SOT 497 (Cochin) - it has been decided - "In the light of various judicial pronouncements, it is a settled law that the profits arising on transfer of agricultural land partakes the character of agricultural income and the agricultural income is not to be included in the total income as provided in section 10(1) of the Act." Could you give your further opinion please.
20 September 2012
as per 115JB any income exempt by virtue of sec 10 shall be deducted from profit (Negative adjustment). Agriculture income is exempt hence shall be deducted from profit hence mat is not applicable on the same.
20 September 2012
Please understand that there are 2 types of agricultural lands: 1. Situated in rural area. 2. Situated in urban area.
Exemption u/s 10(37) is for land situated in URBAN area. Accordingly, capital gain arising fom transfer of URBAN agricultural land will NOT be considered for MAT. In other words, MAT is NOT applicable on sale of URBAN agricultural land.
Agricultural land situated in RURAL area is NOT a capital asset, so no capital gain arises on transfer of such asset. So, Section 10(37) is NOT applicable on such income.
Since, Section 10 is NOT applicable in this case, such income is NOT governed by the deduction provided under Explanation 1 to Section 115JB to income exempt u/s 10.
Therefore, MAT will be payable on income arising from transfer of RURAL agricultural land.
24 September 2012
Sorry for bothering you again sir, but by virtue of Sec 2, sale of agricultural land is agricultural income u/s 10. The case law stated above contains so many decisions by ITAT, High Court, Supreme Court which say that sale of agricultural land is agricultural income. Please suggest in the light of this.
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