AGRICULTURAL LAND

[manoj gupta]

Is it compulsory to use the land for agricultural operations for at least two years by the assessee before he can claim the benefit of exemption from capital gain on sale of agricultural land if all the other conditions are satisfied. this condition is to be fulfiled for claiming exemption u/s 54B. Is it also applicable to claim exemption for agricultural land not being a capital asset.

[CAGOPALJI AGRAWAL]

Yes, land must be used for agricutural purposes by the assessee or his parents for 2 years. For the purpose of section 2(14), actual operations at the relevat point of time (sale) is not so relevant if the land is agricultural and not used for any other purpose.

[DEV KUMAR KOTHARI]

When benefit of S.54B is considered the land must be held for two years as stipulated in S.54B itself. This provision is really relevant in relation to agricultural land which is a capital asset. In casse the land is rural agricultural land (not within specified limits of municipalties etc.)and it is not a capital asset as per exclusion provision then it will not be a capital asset, so any capital gains will not be taxable.

AI Summary

Agricultural land exemption: two-year agricultural use required before claiming capital gains relief; non-capital rural land excluded. Exemption for agricultural-land capital gains requires the land to have been used for agricultural purposes by the assessee or his parents for two years as stipulated in the exemption provision; this requirement applies when the land is a capital asset. If land qualifies as rural agricultural land excluded from the definition of capital asset, it will not attract capital gains tax on disposal.