Case Law Details
RELEVANT PARAGRAPHS:
60. Consider that what sections 2(14)(iii)(a) and (b) of the Income tax Act obviously envisage is one single municipality and not two. When the land under consideration admittedly falls outside the Phagwara municipality, as notified by the Central Govt. in accordance with section 2(14)(iii)(b) of the Act. There is no question of it being considered within the limits of the Jalandhar City municipality, as was done by the A.O. It is note-worthy that upto the assessment year 1969-70, the exclusion from ‘capital asset’ in section 2(14)(iii) of the Act was in respect of agricultural land in India. This exclusion, with effect from the said assessment year, was narrowed down as a result of substitution of new sub-clause (iii) in section 2(14) from the assessment year 1970-71, by the Finance Act, 1970. As a result of this substitution, all agricultural lands in India are no longer outside the purview of “capital asset” and only those agricultural lands in India are falling outside the scope, of “capital asset”, as do not fall either under item (a) or item (b) of section 2(14)(iii). In other words, out of agricultural lands in India, the lands felling in these two items would fall within the definition of “capital assets”. These lands are (a) agricultural lands situated within the jurisdiction of municipality and which has a population of not less than ten thousand according to the last preceding census, of which, the relevant figures have been published before the first day of the previous year; and (b) Agricultural lands situated in any area within such distance, not more than eight kilometers, from the local limits of any municipality referred to in item (a), as the Central Government, may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in the Offical Gazette.
61. In this regard, the then Finance Minister, in his Budget Speech, 1970-71, made before the introduction of section 2914) in the statute book by virtue of the Finance Act, 1970, stated that :-
“…………………….the definition of urban area is also being enlarged to include areas within the limits of any municipality or other such authority having a population of 10000 or more, with powers to cover by notification area upto 8 kilometres outside such limits.” (emphasis supplied).
62. The spirit of section 2(14)(iii) is clear from the afore-extracted portion of the Finance Minister’s Budget Speech and this intention is clearly indicative of one and only one municipality, and no more.
72. Thus, the intention of the legislature is explicit that the municipality being talked about in both sections, i.e., section 2(14)(iii)(a) as well as section 2(14)(iii)(b) , is one and the same, i.e., one and only one municipality.
73. Now, as per section 2(14)(iii)(b) , the Central Govt. is required to specify the area falling within eight kilometres from the local limits of any municipality as referred to in section 2(14)(iii)(a) , by notification in the Official Gazette. A plain construction of section 2(14)(iii)(b) reveals that “capital asset” within the meaning of this section excludes agricultural land situated in any area beyond eight kilomteres from the local limits of any municipality having a population of at least ten thousand [as referred to in section 2(14)(iii)(a) ] as notified in the Official Gazette by the Central Government, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations.
74. Therefore, if the Central Government specifies, by notification in the Official Gazette, any area as an area failing outside the local limits of a municipality, having regard to the extent of, and scope for, urbanisation of the said area and other relevant considerations, agricultural land comprised within such area shall stand excluded from the definition of “capital asset” as envisaged by section 2(14), by virtue of operation of the law contained in section 2(14)(iii)(b) .
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