TMI Blog1993 (5) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... id notice, the assessee filed a 'nil' return of income on 12th Feb., 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 IT 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 s. 2(14) of the IT Act. He examined the provisions of s. 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 s. 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 assessee's claim is that the land in question is situated in Palamaner town which comes under a Panchayat and not a municipality, though the population exceeds 10,000 as per the last census shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 298 (AP). He did not discuss the issue whether the agricultural land was a capital asset within the meaning of s. 2(14) of the IT 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 vs. Addl. CIT (1992) 106 CTR (SC) 288 : (1992) 196 ITR 269 (SC) 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 IT 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(A) was not justified in placing reliance on the decision of the Andhra Pradesh High Court in the case of J. Raghothama Reddy. He, therefore, prays that the order of the CIT(A) should be vacated and that of the ITO restored. 7. On the other hand, the learned counsel for the assessee, Sri M.J. Swamy, argued that the land in question was admittedly an agricultural l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 s. 2(14) demonstrates that agricultural land in India is not an asset within the meaning of the said section of the IT 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 s. 2(14) if such land is situate within a municipality, municipal corporation or cantonment board which has a population of net 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 s. 2(14), therefore, it is essential that the said agricultural land should not be situated within the municipal limits or cantonment board limits which has a population of not less than 10,000 according to the last census. If the land is situated in a village or under a Gram Panchayat or Panchayat, in our view, such agricultural l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as 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 s. 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 notification in the Andhra Pradesh Gazette: (i) 'third grade municipality' means a municipality with an annual income of not more than rupees three lakhs; (ii) 'second grade municipality' means a municipality with an annual income of mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ITO took the view that the term 'municipality' used in s. 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-Government 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 latter relates to rural self- Government. The terms 'municipality' 'notified area committee', 'town area committee' and 'town committee' used in s. 2(14)(iii)(a) have legal conceptions and must, therefore, be given their legal meaning and consequently, they would be entirely different concepts from the term 'panchayat', be it a village panchayat or a town panchayat. The rule of ejusdem generis, relied upon by the Revenue to brings the panchayat under the category of 'any other name' would also not apply since panchayats are a distinct genus by themselves. Panchayats cannot, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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