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Capital Gains on barren land?

Chris Cairns (None) (36 Points)

03 July 2009

I have a rural agricultural land. It is not within 8 kms from the municipal limits.

However, it is now barren. It cannot be cultivated.

Is sale of such land liable to capital gains tax?

Thanks.

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9 Replies

(Guest)

Hi Chris,

Rural land which is not within 8 km. of the local limit of munipality, etc. having population 10,000 or more is not a capital assets u/s 2(14). So capital gain taxation will not be applicable on this land.

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CA. Varun Soni (Chartered Accountant) (201 Points)
Replied 04 July 2009

Hi there,

as per the provision of the income tax, Rural agriculture land is not a Capital Assets. Since it is not a capital assets how can it be taxed..

Hence no Capital Gain Tax on sale of rural agriculture land

Enjoy!!!!!!!!!!!!!!!

Chris Cairns (None) (36 Points)
Replied 04 July 2009

Thanks for the promt reply. Can you also tell me the tax implications if the land is situated within 8 kms?

(Guest)

It will be treated as capital asset and hence there will be capital gain or loss.

CA Devanshi Gandhi (Ajani) (FCA DISA Mcom CIFRS & LLB) (9060 Points)
Replied 04 July 2009

its not a capital asset and hence not taxable

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sudarshan (CA) (745 Points)
Replied 21 July 2009

Agricultural land means agri operations should be carried on at the time of sale.Temporary suspension of activities is ok. But if it is not used for a long time or no income is shown then exemption may not be available.

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Anumanchipalli Sathikonda (Tax Consultant) (1559 Points)
Replied 21 July 2009

Mr.Chris Cairns

Ms.Tinku

Mr.Varun Soni

Mr.Born to rule

Mr.CA Devansh Gandhi

Mr.Sudarshan

I would like to add to the matter discussed herein.

In the case Commissioner of Income-tax Vs. Sashiben [2007] 288 ITR 319 (Guj) where in it was held that:

“if the land is recorded as agricultural, it would continue to be agricultural land. If the land is so recorded and it has not been put to any other use by the holder/owner of the land and even I it remains barren or uncultivated for some time and even grass is raised on the land, it would continue to be agricultural land.”

Please note that the Assessing Officer is under no obligation to follow the above case law unless the decision cited is deliivered by the juridisctional high court.

The assessees in Gujarath can take advantage of the above case if it is not overruled by the Supreme Court.

Best Wishes

Sathikonda

sudarshan (CA) (745 Points)
Replied 22 July 2009

In order to avail of exemption from the Capital Gains Tax on sale of Agricultural Land, three conditions have to be satisfied:

You should actually cultivate the land;
The land should not have been converted into non-agricultural land; and
It should not be situated within municipal , town limit or 8 kms. of a notified town whose population exceeds 10,000.

the above stipulation w.r.t to cultivation is valid for claiming exemption from agri.income and compulsory acquisition by Govt.