Valuation of agricultural land comprised in coffee, rubber and cardamom plantations-Guidelines regarding - Income Tax - 326/1982

Valuation of agricultural land comprised in coffee, rubber and cardamom plantations-Guidelines regarding Circular No. 326 Dated 6/2/1982 Prior to the amendment made by the Finance Act, 1969, agricultural wealth was wholly exempt from wealth-tax. The Finance Act, 1969, extended the levy of wealth-tax to the value of agricultural property with effect from assessment year 1970-71. The Finance (No. 2) Act, 1980, has excluded from the purview of wealth-tax the value of agricultural property other than the value of agricultural land comprised in tea, coffee, rubber or cardamom plantations and trees standing on such plantations. This amendment has come into force with effect from 1st April, 1981, and, accordingly, applies in relation to the assessment year 1981-82 and subsequent years. Therefore, agricultural lands comprised in tea, coffee, rubber and cardamom plantations are liable to wealth-tax from assessment year 1970-71 onwards. However, the value of agricultural lands comprised in tea, coffee, rubber or cardamom plantations continues to enjoy a limited exemption along with the value of specified financial assets up to Rs. 1.5 lakhs. 2. So far, no rules have been framed for the valuation of agricultural lands or lands comprised in tea, coffee, rubber or cardamom plantations in particular. In order to have some uniform procedure for the valuation of agricultural land comprised in these plantations, the following broad guidelines have been laid down for the valuation of such lands. 3. The agricultural land in the specified plantations may be classified into the following three categories, namely:- (a) lands covered by plants which have started yielding; (b) virgin land which is in the process of being developed and land covered by plants which have not started yielding; (c) virgin land capable of being planted but which has not been planted and lands not falling in any of the specified categories. 4. The value of the lands at 3(a) above will be determined by employing the "income capitalization method". For this purpose, land utilised for constructing roads, paths, farm houses, store houses, yards, buildings for processing, buildings for housing the coolies and the supervisory staff will not be worked out separately, but will be deemed to be covered by the value of the land with reference to the yield. The following procedure will be adopted: (a) The net annual income of the estate will be computed by taking the average of the aggregate gross income as per accounts for 6 years including the relevant accounting year as reduced by the average of aggregate expenditure for the same years. (b) If any expenditure for self-management is not debited to the accounts, the average aggregate expenditure will be increased by an amount equal to 5% of the average of the gross income from the plantation as an allowance for self-management of the plantation. (c) In computing expenditure, the expenses will be allowed on commercial principles but will not include the following: (i) Interest on borrowals for preparation and development of the estate. (ii) Provision for gratuity. (iii) Expenses of personal nature. (iv) Wealth-tax. (v) Depreciation on plant and machinery (excluding tools and implements). (vi) Expenses of capital nature. (d) The net annual income as computed above will be reduced by an ad hoc of deduction of 25% of such net annual income. (e) The annual income as so arrived at will be capitalised by adopting a multiplier of 6. 5. The value of land at 3(b) above will be determined by adding the actual cost of the improvement to the market value of the virgin land. 6. The value of land at 3(c) above will be determined by the usual method of valuation, i.e., to ascertain the market value on the basis of what it would fetch if sold in the open market. While doing so, due regard may be given to the value of the land recommended by the Tea, Coffee, Rubber and Cardamom Board for the purpose of granting development loan relevant to the valuation date. 7. Pending wealth-tax assessments involving valuation of specified plantations may be finalised on the above basis. (Sd.) P. Ranganathan Under Secretary, Central Board of Direct Taxes.