Government empowered to notify areas situated within a distance not exceeding 8 kilometres from local limits of any municipality or cantonment board with population exceeding 10,000. - Income Tax - 1181/CBDT

INSTRUCTION NO. 1181/CBDT Dated : June 2, 1978 Section(s) Referred: 2(14)(iii)(b) Statute: Income - Tax Act, 1961 Under the above section the Central Government has been empowered to notify areas which are situated within a distance not exceeding 8 kilometres from the local limits of any municipality or cantonment board with population exceeding 10,000. Such areas are to be specified having regard to the extent of and scope for urbanisation thereof and other relevant considerations. These provisions came into force on 1st April, 1970. The effect of this notification is that any agricultural land falling within the areas specified therein comes within the ambit of the definition of the term capital asset u/s.2(14). 2. The question for consideration is whether the profits or gains arising on the transfer of any agricultural land falling within the areas specified in the aforesaid notification would be chargeable to income-tax under the head capital gains where the transfer has taken place on or after 1st April, 1970 but before 6th February 1973. U/s.45(1) of the I.T.Act, any profits or gains are deemed to be the income of the previous year in which the transfer took place. The Board are advised that since the notification dated 6th February 1973 is prospective in its operation, the profits or gains arising on the transfer of any agricultural land, situated within the areas specified in the aforesaid notification, effected after 31st March 1970 but before 6th February 1973 would not be chargeable to tax under the head capital gains. However the profits or gains arising on the transfer of such agricultural lands on or after 6th February 1973 would be chargeable to tax under the head Capital gains.