| Question And Answer | |
|---|---|
| Subject: | COA for Urban Agri. Land or NA Land (Converted from Urban Agri. Land) as on 01-04-2001 |
| Category: | Income-Tax |
| Querist: | Rajan Patel |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Agricultural Income, Agricultural land, capital asset, Capital Gains, valuation |
| Date: | September 20, 2021 |
Ancestral Urban Agri. Land had been converted into NA Land in FY 2017-18 and ultimately sold in FY 2021-22.
For the purpose of computing capital gains, while determining COA as on 01-04-2001, whose FMV is to be taken – i.e. applicable to Urban Agri. Land or NA Land?
Also whether is it possible to take COA as on the date the Urban Agri. Land was converted to NA Land?
Thanks.
Section 55 and the head of capital gains refers to the transfer of a capital asset. A rural agricultural land is not a capital asset under the scheme of Income-tax Act, 1961.
Therefore, FMV of NA on the date of conversion may be taken into consideration, also the period of holding will be considered from the date of conversion.
However, an urban agricultural lnd qualifies to be a capital asset and will attract Capital gains. Therefore, Fair Market Value as on April 01, 2001 has to be taken as The cost of acquisition.
It would be advisable to get the value determined by a valuation report.
The urban land being ancestral must have been acquired before 01.04.2001 and therefore the Fair Market Value as on 01.04.2001 as per the guideline value for stamp purposes has to be considered as the cost of acquisition and indexation shall be made accordingly.
I am of the opinion that since at the time of sale of land it is a Non-Agricultural Land i.e. diverted land the FMV as applicable to Non-Agricultural Land as per guideline value as on 01.04.2001 should be considered to be cost of acquisition and not the FMV as Agricultural Land though on 01.04.2001 it was an Agricultural Land but diverted later. The period of holding shall also be taken from 01.04.2001 for the purpose of indexation of cost of acquisition.