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TMI Blog1993 (6) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... accrued to the assessee on the transfer of the impugned land. Accordingly, the Assessing Officer issued a notice under section 148 to the assessee. In response to the said notice, the assessee filed a ' nil ' return of income on 12-2-1982. The assessee was of the view that on the facts and in the circumstances of the case, he is not liable to capital gains tax under the provisions of the Income-tax Act, 1961. 4. The Assessing Officer, however, during the course of the assessment proceedings, was of the view that the agricultural land of 2.5 acres was a capital asset as defined under section 2(14) of the I.T. Act. He examined the provisions of section 2(14)(iii)(a) and came to the conclusion that though the land in question is agricultural in nature, yet it is an asset within the provisions of the Act. The Assessing Officer has, as a matter of fact, laid down a very interesting proposition which is extracted below : " ... The reproduction of section 2(14)(iii)(a) is clear that Agricultural land situated in India is also taken as a capital asset which fulfils the condition that any area which has a population of more than 10,000 according to the last preceding census. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, went on an aspect which in fact did not arise out of the order of the Income-tax Officer and gave relief to the assessee by following the decision of the Andhra Pradesh High Court in the case of J. Raghottama Reddy v. ITO [1987] 35 Taxman 298. He did not discuss the issue whether the agricultural land was a capital asset within the meaning of section 2(14) of the I. T. Act as the said land admittedly was situated in a Gram Panchayat and not within municipal limits. 6. The Revenue is aggrieved. The learned departmental representative, Sri K. Vasanth Kumar, draws our attention to the decision of the Supreme Court in the case of G. M. Omer Khan v. Addl. CIT [1992] 196 ITR 269, and points out that the Assessing Officer was justified in treating the transfer of the land as liable to capital gains tax within the meaning of the provisions of the Income-tax Act. The land was situated in the town of Palamaner and the admitted population of the said town was more than 10,000. The learned departmental representative also points out that the CIT (Appeals) was not justifled in placing reliance on the decision of the Andhra Pradesh High Court in the case of J. Raghottama Reddy. He th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 eight kilometres, 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 : " A plain reading of section 2(14) demonstrates that agricultural land in India is not an asset within the meaning of the said section of the Income-tax Act. However, the section itself has provided the exception to this general rule and according to this exception, agricultural land in India would be a capital asset under section 2(14) if such land is situated within a municipality, municipal corporation or cantonment board which has a population of not less than 10,000 according to the last preceding census of which the relevant figures have been published before the first day of the previous year. To take an agricultural land away from section 2(14), therefore, it is essential that the municipal limits or cantonment board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin a municipality, municipal corporation, cantonment board etc., which has a population of not less than 10,000. In the case before us, though the population of Palamaner town is more than 10,000, the said town is not within the limits of a municipality, municipal corporation or cantonment board. 12. The Assessing Officer has also expressed the opinion that the words " municipality, municipal corporation, cantonment board etc. " are mentioned by the Legislature an illustration only. In his opinion, the clause " or by any other name " would also include a Panchayat or a Gram Panchayat also. In the opinion of the Assessing Officer, there is no difference between the expressions " municipality " and " Gram Panchayat ". This observation of the Assessing Officer is also without any substance. There is an enactment governing the affairs of municipalities for the State of Andhra Pradesh which is known as the Andhra Pradesh Municipalities Act, 1965. The provisions of section 2(22) of the said Act assign the following meaning to the word " Municipality " :--- " ' Municipality ' means any of the following grades of Municipality declared as such by the Government from time to time by n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I. T. Act even if their population is more than 10,000. 13. This issue was also examined by the Income-tax Appellate Tribunal, Madras Bench ' C ' in the case of K. Parameswaran v. ITO [1982] 2 ITD 371. In the said case, the assessee sold certain lands belonging to him which were situated in a taluk headquarters with a population of over 10,000 but which was a town panchayat governed by the Madras Panchayats Act. The Income-tax Officer took the view that the term ' municipality ' used in section 2(14)(iii)(a) would cover such town panchayats also and brought the capital gains to tax. On these facts, it was held :--- " The historical evolution of local self-Govemment in the State shows that ' municipalities ' are governed by the Municipalities Act while the panchayats are governed by the Panchayats Act and the concept of the former relates to urban local self-Government whereas the later relates to rural self-Government. The terms ' municipality ', ' notified area committee ', ' town area committee ' and ' town committee ' used in section 2(14)(iii)(a) have legal conceptions and must, therefore, be given their legal meaning and consequently, they would be entirely different c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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