Income Tax on Sale of Agriculture Land

By Accommodation Times News Service

By CA VIMAL PUNMIYA

Amendment in definition of Agriculture land By Finance Bill-2013-14

By the provision of “Sec.2(14) Capital Asset”, Rural agriculture land was exempt from capital gain. For being rural agriculture land, land must be satisfied certain condition laid down in section 2(14).The Finance Minister amended this conditions through Finance Bill 2013-14. For, Simplicity we discuss effect of this amended in two part.

A. Criteria for being rural agriculture prior to 01/04/2013
B. Criteria for being rural agriculture after to 01/04/2013

Criteria for being rural agriculture prior 1-04-2013:

Prior to 01/04/2013 this section are applicable:

2(14)(iii) [Agricultural land in India, not being land situate-

(a) in any area which is comprised within the jurisdiction of a municipality (whether

known municipality, municipal corporation, notified area committee, town area committee, town

committee, or by any other name) or a cantonment board and which has a population of not less

than ten thousand according to the last preceding census of which the relevant figures have

been published before the first day of the previous year; or

(b) in any area within such distance, not being more than eight kilometers, from the local limits  of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;]

Thus, if these conditions are satisfied than land will agriculture land.

• Land is situated in any within the jurisdiction of a municipality or a cantonment board having population of less than 10000.

• Land is situated outside the notified distance from jurisdiction of municipality. Govt. can notified maximum distance of 8Km.

If this condition was satisfied than land is rural agriculture land. And not liable for capital gain tax.

How to measure distance was not given in the definition. Therefore it was taken by road.

And same view was followed in following judicial pronouncement.

(1) CIT V.LAL SINGH [2010] 195 TAXMAN 420 (PUNJ. & HAR.)

(2) CIT V. SANTINDER PAL SINGH  [2010] 188 TAXMAN 54 (PUNJ. & HAR.)

(3) LAUKIK DEVELOPERS V. DY .CIT [2007] 105 ITD 657 (MUMBAI)

Criteria for being rural agriculture After 1-04-2013:

After  01/04/2013 this section are applies as follow:

As Per Section 2(14 )” capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-

(iii)  Agricultural land in India, not being a land situated

a) In any area which is comprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand [according to the last preceding census of which the relevant figures have been published before the first day of the previous year]; or

b) In any area within the distance, measured aerially,-

(I) Not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) Not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) Not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

Thus, This condition is satisfied than agriculture land will be rural agriculture and accordingly not liable for capital gain tax.

• Land is situated in any within the jurisdiction of a municipality or a cantonment board having population of less than 10000.

• Distance of land from municipality  and population limit.

The distance from the Municipal Corporation measurement:

Such distance is to be measured on straight line aerially as crow flies. The shortest aerial distance has to be considered. Such shortest aerial distance is defined as “A straight line distance between two places.’’ A human would travel further to get from one point to another due to obstacles or lack of roads or trails, but a crow can go in a straight line between them. Humans have to follow roads which have their twists and turns. But, a crow does not have to face the barriers that humans face. Hence, we measure the straight line distance between two places.

“the distance as the crow flies is a way to describe  the distance between two locations without considering all the variable factors. As an example, traveling from California to maine involves a rather indirect route around, over and through mountain ranges and so forth. The driving distance might be about 3,500 miles, but the distance as the crow flies is about 2,800 miles.

Human                                                            By road

Crow’s flight                   straight line distance (aerial measurement)

These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years.

Effect of the amendment

a) Distance from jurisdiction or municipality or cantonment board within which agricultural land is to be considered as urban land has been changed from uniformly km to within 8 kms depending on population of municipality or cantonment board .

b) Distance to be measured straight line aerially as crow flies and not by road method which was used by courts in various decision. This amendment overcomes above court decisions which say that distance should be measured by road.

c) More land will be covered under the urban land because aerially distance covered more area.

d) Earlier only notified area were covered under the distance criteria but from now any area will covered under the distance criteria.

e) Impact on Wealth Tax

The term agricultural land is not defined in Wealth tax act. However, it is defined in Section 2(14) of the Income tax Act. The definition for non-urban land and agricultural land is similar. Hence the above analysis will also be applicable for the purpose of determination of net wealth as per the wealth tax act. Thus a person owning land will need to re-assess on whether the land owned by him will qualify for exemption from wealth tax or not.





Similar Articles

Leave a Reply

Top