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TMI Blog1996 (2) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... n made to the provisions of section 2(14)(iii), which are reproduced below for the sake of convenience :--- "(14) ' Capital asset ' means property of any, kind held by an assessee whether or not connected with his business or profession but does not include ......... (iii) agricultural land in India, not being land situate--- (a) in any area which is comprised within the jurisdiction of a Municipality (whether known as a Municipality, Municipal Corporation, Notified Area Committee, Town Area Committee Town Committee or by any other name) or a Cantonment Board 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 ; or (b) in any area within such distance, not being more than 8 Kms. from the local limits of any Municipality or Cantonment Board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for urbanisation of that area and other relevant considerations specify in this behalf by Notification in the Official Gazette ; " 4. The learned counsel submitted that the relevant Municipality in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas, wherein Dera Mandi is situated, is within the jurisdiction of the Gram Panchayat. He also invited our attention to the provisions of section 150(3) of the Delhi Land Reforms Act, 1954 which provide that upon issue of a notification under section 507 of the Delhi Municipal Corporation Act, the Gaon Sabha constituted for the area covered by such notification shall stand dissolved and on such dissolution, all properties --- movable and immovable --- and all interests of whatsoever nature, including the money held in Gaon Sabha Area Fund (GSAF) vested in the Gaon Sabha immediately before such dissolution, shall, with all rights of whatsoever description, used, enjoyed or possessed by Gaon Sabha, vest in the Central Government. In view of the foregoing, the learned counsel concluded that the land in question is not under the jurisdiction of the Delhi Municipal Corporation. In support of this proposition, he also relied on the case of ITO v. Surjan Singh [1983] 3 ITD 438 (Delhi), as also on the case of K. Parameshwaran v. ITO [1982] 2 ITD 371 (Mad.). Copies of the said decisions of the Tribunal, as also of the relevant enactments, are placed in the paper book at pages 119-142. He fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to the municipality as a whole and not with reference to any area within the municipality. He also made a reference to the provisions of section 2(14)(iii)(b) and submitted that under the said provisions, the limits can be further extended upto a distance of 8 Kms. from the local limits of any municipality or Cantonment Board referred to in item (a) by issuing a notification. He, therefore, stressed that under the said provisions of item (b), the municipal limits referred to in item (a) can be further extended upto a radius of 8 Kms. from such municipal limits which automatically implies that the expression used in the said item (a) refers to territorial limits. He, therefore, contended that the municipality cannot be further categorised into urban areas or rural areas for the purposes of attracting the provisions of section 2(14)(iii) and levy of long-term capital gains in the present case. In this connection, he further submitted that if such a construction was placed on the interpretation of the provisions of section 2(14)(iii)(a), it would lead to absurd results and will be against the intention of the Legislature, as the agricultural land in notified areas under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DMC Act and the areas which were not rural areas as they are defined were called urban areas. He further submitted that though it is true that certain special provisions have been made for such rural areas under section 507, but that itself shows that such rural areas are also covered by DMC Act, 1957. He also submitted that it is a different matter that such rural areas are also covered by other Acts like the Delhi Land Reforms Act, 1954 and the Delhi Panchayat Raj Act, 1954. He urged that the applicability of the latter two Acts does not take out the rural areas situated within the Union Territory of Delhi outside the jurisdiction of the Delhi Municipal Corporation. He further stressed that if the provisions of section 507 are read with the provisions of section 113 of the Delhi Municipal Corporation Act (DMC Act), it will clearly show that the special provisions in section 507 are made for the rural areas for the purpose of levying different taxes, giving exemption from certain taxes in those areas. In this connection, he made a specific reference to the provisions of section 507(b)(ii), whereunder the taxes, rates, fees and other charges in the rural areas or any portion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras Bench of the Tribunal was entirely different. The facts in that case as reported at page 372 were that the land in question was situated in Town Panchayat, governed by the Madras Panchayat Act. The ITO had taken the view in that case that the term " Municipality " used in section 2(14)(iii)(a) would cover such town Panchayat also. The AAC confirmed the said view by holding that all self governing bodies known by any local name would be included in the term " Municipality ", in view of the words " by any other name " and that the emphasis was on the local Self-Government and not on the difference in name or structure or the composition of the units. The learned DR submitted that it would be clear that in the said case land was not situated within the jurisdiction of any municipality but was situated in a Town Panchayat and so the issue was whether such Town Panchayat could be treated as a Municipality. He submitted that the Madras Bench of the Tribunal had held that Panchayats could not be treated as Municipalities under section 2(14)(iii)(a) of the Income-tax Act. He further referred to the discussion at page 376 of the said order and submitted that the land in question was si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the plea of the appellant that even though his village was falling in the municipa area of Hyderabad, it retained its identity as a village and hence an ' area ' so as to stand a part for the purposes of section 2(14)(iii)(a) of the Act." The learned DR, therefore, urged that the Hon'ble Supreme Court has taken due cognizance of the legislative intent and interpreted the provisions of section 2(14)(iii)(a) and according to the said interpretation, the entire agricultural land situated in an area within the municipality falls within the purview of section 2(14)(iii)(a) and that the land in question is a capital asset and has been correctly taxed by the lower authorities. 6. The learned counsel, in his written submissions dated 3-4-1995, has filed a rejoinder to the arguments advanced by the learned DR. The said written submissions are at pages 6 to 8 of the paper book. The learned counsel has referred to the decision in the case of Charandas Haridas v. CIT [1960] 39 ITR 202 (SC) for the proposition that in the case of an issue about the existence or otherwise of a Hindu Undivided Family, the provisions of the Hindu Law have to be referred to and in doing so the Income-tax La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat for an area where there was no municipality and there was only a Panchayat, section 2(14)(iii)(a) was out of place. They further held that the movement lands in the rural areas were urbanised, in exercise of the power vested in the Corporation u/s 507(a) the provisions of section 2(14)(iii) would be immediately applicable to those areas as they would come within the purview of urban local Self-Government of Delhi Municipal Corporation. In this connection we feel that the learned DR has rightly brought out the distinction between the facts before the Tribunal in the case of Surjan Singh and the facts in the present case. The details of distinction between the facts are outlined in pare 5.2 of this order. We feel that the submissions made by the learned DR have force and the case of the department is supported by the decision of the Hon'ble Supreme Court in the case of G.M. Omer Khan, whereby the decision of the Hon'ble Andhra Pradesh High Court in the case of G.M. Omer Khan has been affirmed. In the said decision the Hon'ble Supreme Court have examined the provisions of section 2(14)(iii)(a) of the I.T. Act and their observations made at pages 272-273 have already been extracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the above extracts that their Lordships have categorically stated that the above portion states the correct position and the interpretation put upon the provisions of section 2(14)(iii)(a) is unexceptionable and rational. In view of the foregoing we feel that the decision of the Tribunal in the case of Surjan Singh is no longer a good. law and the same is overruled by the aforesaid decision of the Hon'ble Supreme Court. A reference to the speech of the Finance Minister given at the time of introducing the Finance Bill, 1970, and the note on clauses relating to the amendment of section 2(14)(iii) also makes it very clear that the words jurisdiction of a municipality'referto the territorial jurisdiction of a municipality in this case the Municipal Corporation of Delhi. We also agree with the plea of the learned DR that any other interpretation would run counter to the principles of harmonious interpretation of the provisions of items (a) and (b) of sub-clause (iii) of clause (14) of section 2 of the I.T. Act, 1961. In the said item (b) it is clearly provided that the limit of 8 kms. has to be with reference to " the local limits of any municipality or cantonment board referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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