Capital Gain

Tax queries 606 views 4 replies

Suresh Sharma

Manager Finance & Admin.

42 Points Joined July 2010

Hi Friends

Could anyone help me about the capital gain calculation in case of sale and purchase of agriculture land :-

A land lord sold his agriculture land withing the 8 kM of MC limits
Against the Sale agreement he received 25% amount (Rs. 2,50,000/-) as agreement money in the m/o may 2007 (FY 2007-08)
he then invested this amount immidiately for purchase of new agriculture for land Rs. 2,50,000/- and got the purchae deed executed in his name
After 12 months period he received the balance 75% amount (Rs. 7,50,000/-) in the m/o April, 2008 (FY-2008-09) and executed the deed of this entire land in the name of Purchaser
and again invested this 75% amount ( 7,50,000/-) in new agriculture land in the m/o may 2008.
IS THE ADVANCE MONEY (RS. 2,50,000/-) INVESTED IN AGRICULTURE LAND, PRIOR TO THE DATE( OF SALE OF LAND WILL BE ALLOWED AS DEDUCTION U/S 54B ???...
( here 25% land is purchased prior to the date of sale and in different Financial year)

Replies (4)

Dear Mr Sharma, as per the words used in the statute, the capital gain arising on sale of the asset shall be exempt IF the said is invested in another land WITHIN 2 YRS FROM THE DATE OF TRANSFER. - Therefore in your case, the transfer takes place in 2008. Capital gain arises in 2008 & not in 2007. - The purchase is made in advance which you can treat as normal purchase & advance receipt you can treat as loan taken (against which you can claim interest if you want for tax planning) - After 1 yr when transfer takes place in 2008, you can pay the Loan taken by setting off against sales consideration and claim exemption(BECAUSE THE INTENSION BEHIND THE STATUTE IS ONLY TO PRESERVE AGRICULTURE ACTIVITY CONTINUED BY PURCHASE OF ANOTHER LAND). - - - - - I hope your query is fully resolved. If anything not viable or not proper then please let me know. -----------Thanks. ++++++++++ Ashish Joshi

Amir

Learner

4016 Points Joined December 2009

Dear Sir,

If it is an "Agriculture land" as mentioned in the definition then it is NOT A CAPITAL ASSET & hence no capital gain will arise on its sale.

Anyways, No Acquisition of Land prior to the Date of sale of land will not be treated as an eligible investment for the purposes of Sec 54B

CA Ashish Joshi

265 Points Joined August 2008

Dear Amir, "Rural Agriculture land" is not a capital asset. "Urban Agriculture land" is the capital asset & attracts capital gain provisions. -------------------As I have already mentioned, the statutory provisions mention that THE INVESTMENT SHOULD BE WITHIN 2 YRS OF TRANSFER... If we stick to the words then the prior purchase would not be eligible for exemption. I am not aware about any case law for the similar circumstances but I think the INTENSION BEHIND THE STATUTE IS ONLY TO PRESERVE AGRICULTURE ACTIVITY CONTINUED BY PURCHASE OF ANOTHER LAND....... +++++++++ Thanks. Ashish