Circular No. 357

What this is

Circular No. 357 was issued by the Central Board of Direct Taxes on 26 May 1983. Its subject is Valuation of agricultural land comprised in tea, coffee, rubber and cardamom - Guidelines therefor.

What it does

Lays down a valuation basis for coffee plantation land for wealth-tax, to clear pending assessments in the Karnataka charges. Plantation land is put in three classes: land under plants that have started yielding; virgin land being developed and land under plants not yet yielding; and virgin land capable of being planted but unplanted, together with anything else. Yielding land is valued on yield per acre on a stated scale, from Rs. 5,000 an acre at 250 kg and below, through Rs. 6,000, Rs. 7,000, Rs. 9,000, Rs. 11,000 and Rs. 13,000 for the intervening bands, up to Rs. 15,000 an acre at 751 kg and above, using the average of six years' production of the yielding area, or of as many years as data exists for. Land in the second class is taken at Rs. 3,000 an acre with regard to the peculiar factors of the case, and land in the third class need not be valued at all. Stock of coffee is valued separately on the average of the preceding three years' dividends and added to the land value. Nothing separate is to be added for roads, paths, farm houses, store houses, yards, processing buildings or housing for workers and supervisory staff.

Why it was issued

There were various practical difficulties in implementing the Board's earlier Circular No. 326 dated 6 February 1982 on the same subject, and a uniform procedure was needed to complete pending assessments speedily.

Who it reaches

• Owners of coffee plantations assessed to wealth-tax in the Karnataka charges
• Valuation Officers and Wealth-tax Officers dealing with plantation land
• Assessees with wealth-tax assessments pending on 26 May 1983

The instrument, as the Board published it

Valuation of agricultural land comprised in tea, coffee, rubber and cardamom - Guidelines therefor

1. Attention is invited to the Board’s Circular No. 326, dated 6-2-1982 issued from File No. 319/15/80-WT [printed here as Clari­fication 3] on the above subject. In view of various practical difficulties in implementing this circular the Board makes the following broad guidelines for the valuation of lands comprised in coffee plantations in order to have some uniform procedure for speedy completion of the pending assessments as far as Karnataka charges are concerned.
2. The plantation land in the coffee 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 above specified categories.
3. In valuing lands at 2(a) above, the value will be determined on the basis of yield per acre. As far as coffee plantations are concerned, the following yield/value pattern was considered reasonable:

Yield per acre in kg.

Valuation

Rs.

250 and below

5,000

251-350

6,000

351-450

7,000

451-550

9,000

551-650

11,000

651-750

13,000

751 and above

15,000

The average of six years’ production of the yielding area is to be arrived at on this basis. Where, however, six years’ data is not available, the average is to be worked out with reference to the number of years for which yield is available.
4. In respect of lands at 2(b) above, the value may be taken at Rs. 3,000 per acre with due consideration to peculiar factors in individual cases. With regard to value of lands at 2(c) above, no value need be taken as the value of such virgin lands may be negligible.
5. Regarding the stock of coffee, a value of the same may be separately determined on the basis of the average of the preced­ing three years’ dividends and added to the value of the land.
6. With regard to the other assets, such as land utilised for constructing roads, paths, farm houses, store houses, yards, buildings for processing, building for housing the coolies and the supervisory staff, etc., no separate addition need be made.
7. Pending wealth-tax assessments involving valuation of coffee plantations may be finalised on the above basis.
Circular : No. 357 [F. No. 319/9/83-WT], dated 26-5-1983.

What to watch

• This is a wealth-tax circular issued from a wealth-tax file, not an income-tax one.
• The scale is expressly for coffee plantations and for Karnataka charges, and the circular is framed for finalising assessments then pending.
• The six-year averaging is the operative mechanism for yielding land, and where six years of data do not exist the average is taken over the years available.
• No separate addition is to be made for buildings, roads and worker housing, which is often the point in dispute in a plantation valuation.
• Wealth-tax on such assets is no longer levied following the abolition of the charge, so this records how the valuation was done for those years.

Where you meet it

In an old wealth-tax assessment or appeal on the value of a coffee estate, and in a valuation report prepared on this basis.

An example

An estate has 100 acres under yielding coffee whose six-year average production works out to 500 kg an acre, 20 acres of young plantings not yet yielding and 30 acres of unplanted virgin land. The yielding area is valued at Rs. 9,000 an acre, or Rs. 9,00,000; the young area at Rs. 3,000 an acre, or Rs. 60,000; and the unplanted land at nil. The coffee stock is valued separately on the three-year dividend average and added, with nothing more for the estate roads and labour lines.

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