TMI Blog1978 (10) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and brought to tax, the capital gains of Rs. 79,160. 4. The assessee appealed to the AAC and contended that Musiri was a place governed by the Madras Panchayats Act, 1958 and not by the Madras District Municipalities Act, 1920 and, therefore, the agricultural lands sold, situated in Musiri, were not capital assets within the meaning of section 2(14). 5. The AAC referring to the provisions of section 2(14)(iii)(a), stated that the provisions referred to the terms municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name, or a cantonment board and, therefore, 'all self-governing localities' known by any local name would be included in the term 'municipality'. The AAC had referred to the dictionary meaning of 'municipality' as a town or district having local self-government and according to her, the emphasis was on local self-government and not on the difference in names or the structure or the composition of the units. The AAC was of the view that the population criterion of 10,000 incorporated in the provision was for judging the extent of urbanisation and since Musiri was a town panchayat with a population e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn panchayat was clearly a 'municipality' by any other name. If a town panchayat is included in the said term, the assessment is in order. Otherwise not. For deciding on this issue, it would be necessary to spell out with reference to the factual position what are municipalities, municipal corporations, notified area committees, town area committees, town committees as also cantonment boards vis-a-vis the institution of Panchayat in India. 9. The powers and functions of local bodies in India following the English practice have been determined by the method of specific grant. By such grant there are obligatory functions as well as permissive functions and such functions are exercised by all local bodies, i.e., whether rural or urban. In the book Essays in Urban Government by Mohit Bhattacharya (1970 edition), there are certain statistics at page 2 which gives as its source 'A.H. Marshall, Local Government, Finance, International Union of Local Authorities, the Hague 1969'. This is as under: Urban Local Bodies in India: Types Number a. Municipal Corporations 29 b. Municipal Councils 1483 c. Cantonment Boards 62 d. Notified Area Committees 164 e. Town Area Committees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng opinions about the connotation and origin of the term 'Panchayat'. According to some of them the term has historically implied more or less self-governing village bodies looking after the manifold civic, administrative and political needs of the citizens of the area. A number of such scholars go so far as to equate the term 'panchayat' with what has been rather dramatically called the village republic by some of the early British district administrators including the more well known Metcalfe. The majority of scholars in India on the other hand believe that the term Panchayat never conveyed any sub-meaning and the function of panchayat was merely to act as judicial bodies in civil or criminal cases at the villages or other levels and to settle religious and ritual problems of various kinds." As far as Madras is concerned, there was originally, the Madras Village Panchayat Act which was replaced by the Madras Panchayat Act, 1958. When the Bill in this regard was introduced, it was stated that the proposed Bill was intended to provide the statutory basis for reorganising the local administration in the rural areas of the State. The most important change proposed was abolition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." "(32) 'town' means any local area which is declared to be a panchayat town under section 3, sub-section (1)." "(33) 'town panchayat' means panchayat classified as a town panchayat under this Act." "(35) 'village' means any local area which is declared to be a panchayat village under section 3, sub-section (1) and 'revenue village' means any local area which is recognised as a village in the revenue accounts of Government after excluding therefrom the area, if any, included in--- (a) the city of Madras including Fort St. George with the glacis; (b) municipalities constituted under the Madras District Municipalities Act, 1920 ; (c) cantonments constituted under the Cantonment Act, 1924 (Central Act II of 1924) ; and (d) the townships constituted under the Mettur Township Act, 1940 (Madras Act XI of 1940), the Courtallam Township Act, 1954 (Madras Act XVI of 1954) and the Bhavanisagar Township Act, 1954 (Madras Act XXV of 1954)." In terms of section 3, every local area comprising a revenue village or any portion of a revenue village having a population estimated at not less than 5,000 and an annual income estimated at not less than ten thousand rupees is to be decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usive were well known and well established by the time the amendment to section 2(14)(iii) was made with effect from 1-4-1970. Since the concepts were well known, it would follow that if the intention of Parliament was to include Panchayats also in the term 'municipality' it would have been so mentioned in the statute along with such terms as notified area committee, town area committee and town committee. This has not been done. Apart from this there is also the well known canon of construction to quote from CIT v. Gaekwar Foam Rubber Co. Ltd. [1959] 35 ITR 662 (Bom.) where it is stated : "It is well established that the words which express a legal conception must have attributed to them their legal meaning. Technical words, where we find them, must have their technical sense ascribed to them and not their popular sense---uti loquitor vulgus. The principle is of cogency when the words in question represent legal conceptions...." From what we have set out earlier, it is clear that the terms 'municipality', 'notified area committee', 'town area committee' and 'town committee' have legal conceptions and the terms must be given their legal meaning. If given their legal meaning, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain and natural meaning and there is no justification for restricting the wide comprehension of the last of the four words to voluntary transfers by the application of the ejusdem generis rule." 17. Looking to the aforesaid, we cannot ignore the indications of the intention of the Legislature. The intention always was to exclude transactions in agricultural land from capital gains but where urbanisation was advanced there was very little difference in the value of the land irrespective of the use to which it was put. Government accordingly decided that transactions in agricultural lands situated in sufficiently developed urban areas should be brought to tax. This is amply clear, if further authority is required from the provisions of section 2(14)(iii)(b) which states that areas may be notified within 8 kilometres of municipalities or cantonment boards having regard to the extent of, and scope for, urbanisation of that area'. Such extension has to be done by notification. The category of words used, i.e., 'municipality', 'municipal corporation', 'notified area committee', 'town area committee' and 'town committee' all refer to urban local self-government institutions. Panchayats ..... X X X X Extracts X X X X X X X X Extracts X X X X
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