By Anthony Boadle and Maria Carolina Marcello

BRASILIA (Reuters) -Stung by a Supreme Court rejection of their proposal to restrict recognition of Indigenous lands, Brazil's congressional farm lobby on Wednesday managed to swiftly pass a bill to counter the top court's decision.

The caucus representing agribusiness is also backing bills to amend the Constitution that guarantees the right of Indigenous people to their ancestral lands, its president Pedro Lupion told Reuters.

"We will press ahead with our plans for legislation no matter what the court does," he said in an interview on Tuesday.

The Supreme Court last week voted against establishing a cut-off date for new reservations on lands Indigenous people did not live on by Oct. 5, 1988 when the Constitution was enacted.

A bill fixing the 1988 deadline for land claims was approved by 43-21 votes in the Senate on Wednesday, a few hours after it was passed by the Constitution and Justice Committee.

The offensive could deepen a divide between a conservative-led Congress and a Supreme Court that many lawmakers criticize for judicial over-reach.

The number of land conflicts has increased as Brazil's rapidly expanding agricultural frontier advances into the Amazon region. Across Brazil, Indigenous communities claim land that farmers have settled and developed, in some cases for decades.

Lupion said bill PL 490, which has also passed the lower chamber, faces a probable veto by leftist President Luiz Inacio Lula da Silva, who has promised to legalize some 300 reservations awaiting recognition and protection by the state.

The farm lobby will focus next on passing constitutional amendment PEC 132 that establishes compensation for farmers forced to leave land they settled as far back as 70 years, Lupion said.

Though terms are still being decided by the Supreme Court, compensation for expelled farmers could be expensive for a government that has limited resources and is battling to curb Brazil's fiscal deficit. And Lupion's lobby is pressing for compensation to be paid before evictions and not after.

"If the government wants to demarcate (Indigenous lands), it must know that it will have to pay," he said.

The Ministry of Indigenous Peoples, replying to a Reuters request for comment, said it had no estimate of the cost of compensating for lands occupied by farmers but was working on a "diagnosis " of the situation.

A third proposed amendment, or PEC 48, would insert the Oct. 5, 1988 cut-off date directly in the text of the Constitution.

The farm lobby is confident it can muster the votes for the legislation it seeks. Caucus members account for three fifths of the lower house and half of the senate seats.

Lupion met with leaders of 15 other congressional caucuses on Tuesday to discuss ways to counter the top court for "usurping and invading" the jurisdiction of Congress by ruling on issues such as legalizing drugs and decriminalizing abortion.

"We will take the necessary measures to re-establish balance between the powers," his group said in a statement.

(Reporting by Anthony Boadle; Editing by Barbara Lewis and Grant McCool)