Behind the panic button the Punjab government has pressed over wealth tax on agricultural land also seems to be an amendment proposed in the Finance Bill, 2013 that the income from farmhouses on agricultural land in urban areas will not be considered as agricultural income, it has emerged.
While the state government and the Congress woke up on Thursday on this emotive issue, the income tax (I-T) department had, in 2006, dropped the bombshell in the form of wealth tax on some farmers whose agricultural land has now been attached after they failed to get relief from the Supreme Court. The rhetoric of the SAD-BJP government notwithstanding, so abysmal is the preparation of the government on this front that it has no material evidence to back its case that farmers were actually receiving notices from the I-T department. The state government did not even have the official copy of the proposed amendments in the Finance Bill, 2013.
Top government sources say that at the root of the promptness the government has shown in launching an offensive against the union government is the "eye-opening" case of two Jalandhar farmers, who owe allegiance to the ruling SAD, and various other amendment proposals of the Finance Bill, 2013, including imposition of wealth tax on agricultural land by declaring all lands falling within the aerial radius of 8 km of municipal limits as "urban lands."
Rajinder Singh Nagra and his brother Gurdeep Singh of Jalandhar had been jolted in 2006 by the wealth tax on their agricultural land when they received a notice from the I-T department for 1999-2000 assessment year.
After exhausting the legal remedies before the I-T department, the Nagra brothers petitioned the Punjab and Haryana high court, where their petition was dismissed in April 2011. The high court held that the agricultural land within the urban area falling under the definition "urban land" was clearly covered by the definition of "asset" under section 2 (ea) of the Act".
Later, the apex court also upheld the high court verdict, Rajinder Nagra told Hindustan Times.
Now, the 30-acre land of Rajinder Singh Nagra, SAD's circle president of Jalandhar, and his brother Gurdeep Nagra, a former councillor, has been attached by the I-T department for recovering over Rs 51 lakh from them for the assessment years 1999-2000 to 2008-2009.
Government sources pointed out that one of the proposed amendments to the Finance Bill was that income from farmhouse situated in urban agricultural land would not be considered as agricultural income. The urban agricultural land has also been included within the definition of the term "asset" for the purpose of charging wealth tax.
It is being estimated that at least 85% cultivable land would come under the ambit of this tax if the proposed amendment bill in question, which is likely to be tabled in the Lok Sabha on May 6, is passed. Under this move, all types of agricultural land within the parameters fixed will be treated as urban land and will be subject to wealth tax at the rate of 1% of the collector rates.
While the urban agricultural land is also included within the definition of the term "asset" for the purpose of charging wealth tax, the existing provisions define the term "capital asset" as property of any kind held by an individual, whether or not connected with his business or profession. Besides, certain categories of properties, including rural agricultural land, have been excluded from this definition in the existing provision, according to government functionaries.
Ashok Manchanda, chief commissioner of income tax and income tax ombudsman (J&K, Himachal Pradesh, Haryana, Punjab and Chandigarh), said, "Under the Income Tax Act, if agricultural land is in a city or within 8 km of municipal limits, wealth tax can be imposed on it. It is not a new thing."
It is learnt that in and around Jalandhar, about 100 such notices have been issued for wealth tax on agricultural land. With land prices high in many cases, the annual wealth tax on these plots is turning out to be equal to or even more than the income from agriculture in a year.
Another farmer, Alep Parkash Singh, who owns agricultural land in Khurla Kingra village of Jalandhar district, said his family was being asked to pay over Rs 11 lakh as wealth tax alone from 2003 onwards. "We are getting notices for penalties also," he said.
It is learnt that the I-T department started levying wealth tax around a decade ago. After some farmers, including the Nagra brothers, lost their cases, the I-T department started issuing notices for the recovery of wealth tax at a faster pace.
In Finance Bill, 2013, it is proposed to provide that the land situated in any area within the distance measured aerially (shortest aerial distance), (1) not being more than 2 km from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1 lakh; or (2) not being more than 6 km from the local limits of any municipality or cantonment board and which has a population of more than 1 lakh but not exceeding 10 lakh; or (3) not being more than 8 km from the local limits of any municipality or cantonment board and which has a population of more than 10 lakh, shall be considered as urban agricultural land and hence forms part of capital asset. Further, the income from farmhouse situated in the urban agricultural land will not be considered as agricultural income.