Sale of plots
chaitu.....
(Querist) 16 March 2012
This query is : Resolved
hello Sir, i am 54yrs old, i have an agricultural land converted to plots market value is 16lks total of 18 plots can i have to pay tax for that after sale. and also please give suggestion for to invest it.
A V Vishal
(Expert) 16 March 2012
The Income Tax Act, 1961 makes a distinction between a “capital asset” and a “trading asset”.
Sec. 2(13) of the Income Tax Act, 1961 defines the term 'business'. The term 'business' includes -
any trade, commerce or manufacture; or
any adventure or concern in the nature of trade, commerce or manufacture.
The term 'Adventure in the nature of trade' has not been defined in the Income Tax Act, 1961. As far as the dictionary meaning of the word 'adventure' is concerned, it implies a pecuniary risk, a venture, a commercial purpose. The word 'venture' is defined as a commercial activity in which there is a risk of loss as well as a chance of gain.
But, contrary to this even an isolated transaction can satisfy the description of an adventure in the nature of trade. For an adventure, it is not necessary that there should be a series of transactions, i.e., both of purchase and of sales. A single transaction or purchase and sale may be outside the assessee's line of business, can constitute an adventure in the nature of trade. Therefore, neither repetitive nor continuity of similar transaction is necessary to constitute a transaction then it is nothing but carrying on a business and in such situation, the question of adventure in the nature of trade can hardly arise.
On the other hand Whether a sum is received on capital or revenue account depends or may depend upon the character of the business of the recipient and upon other factors related thereto - CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549 (SC).
In view of the same the income can be taxed as buisness income or capital gains.
C. P. CHUGH
(Expert) 20 March 2012
Dear Sam,
Donot get confued what Mr Vishal has said, simple is that you have to pay LTCG/STCG on sale of Plotted Land as and when you sell them. Whether it is a longterm or short term would depend upon the period of holding of land, which you have not mentioned in your querry. Amount of tax would depend on various factors and calculation for which detailed information is required and for the purpose you may contact your local tax advisor.
For Mr Vishal, please note even otherwise he was required to pay tax on conversion of agricultural land into a trading asset which amount to transfer of capital asset and LTCG/STCG was payable in the year in which he converted his capital asset into trading asset. I donot think he would discharged his liability at that time. Better he should do it now.
