Please all professional friends take care in advising to your clients at different time or part of his/her life or if you are assessee then take utmost care on regular basis – in case of Agricultural Income – Revenue or Capital.
Why this message is – Mumbai & Pune ITAT have give mostly similar judgments on “Capital Gain Tax on sale of Agricultural Land” – where exemptions denied by both Authorities, grounds are as under:
1. Condition – The land must be in use as Agricultural Land for at least till 2 years before the sale of agri land. It means land which is of course a Agri Land but not being used for Agri land – may be idle or used for Mandap or using as gathering of people / festivals etc. will be out of ambit of Agri Land.
2. Condition – Not only proof of income derived from Agri Land are enough – like assessee generally preserved Mandi Receipts of crop selling. That will not alone help you.
3. Condition – There must be proof of expenses incurred to earn Agri income on Agri Land in question. For, example Mumbai ITAT observed that the land in question was primarily annex to the sea side – and sea water can not be used for irrigating crops hence your land is difficult to prove as Agri produce land.
4. Condition – Only income showing in ITR as Agri Income is not sufficient or claiming exemption on capital gain tax on sale of Agri Land but no Agri income reported in ITR even before two years of land sale will also go against you.
These type of observations have been taken by both ITAT of Maharshtra and of course it will be a paradigm for other authorities. So, if you are an advisor then do not advise wrongly to your client and if you are an assessee then please keep proper record of Agri Activity Income & Expenses otherwise you or your client will be in serious trouble – because with the development of highways / peripheral roads many Agri lands are now valued at very high rates and at the time of selling heavy Capital Gain Tax arises which will be taxed at 20% straight if your preparation is not up to the mark.
*Action Points* – Start Immediately –
1. To keep proper receipts of crop selling with the commensurate with the size of land.
2. To keep expenses’ records of producing the crop which was sold – say seeds, fertilizers, labour, water, electricity, rentals, cartage, agri equipment, godown cost etc.
3. Show in ITR proper income at proper place.
4. Get proper receipt from Mandi Shulk
5. Get Crop Insurance
6. Get inspected by some Institutes for Agricultural with certificate.
Please pay correct tax and take a deep and tension free sleep.
Regards Rajiv Nigam, Your Friend