TMI Blog2013 (3) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... being developed as a residential and commercial area located in close proximity of developed Panchkula city. Haryana Urban Development Authority is a local authority in terms of Section 3 of the Haryana Urban Development Authority Act, 1977. It is a corporate body, authorized to develop property, make plots, allot plots, carve out zones in planning, construct plots and delegate its authority of construction to other agencies. As decided in Union of India & others Vs. R.C.Jain & others [1981 (2) TMI 200 - SUPREME COURT OF INDIA] the local authority in terms of Section 3 (31) of the General Clauses Act means a Municipality. Therefore, conversely, the expression ‘Municipality’ in Section 2 (14) of the Act would include a local authority. Sub-clause (a) of clause (iii) of Section 2 (14) deals with an area which falls within the jurisdiction of a Municipality, whereas clause (b) enable the Central Government to declare an area situated within 8 kms from the local limits of any Municipality referred to in clause (a) to notify having regard to extent and scope for urbanization of that area. The notification dated 06.01.1994 takes into its ambit an area within 5 kms of the Municipali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.05.1995 issued under Section 4 of the Land Acquisition Act, 1894. The said notification was in respect of land measuring 184 acres in Village Jhuriwala and around 30.47 acres in Village Bana Madanpur. The land of the assessee in these two Villages namely Bana Madanpur and Jhuriwala measures 36 Kanal 6 Marla and 149 Kanal 2 Marlas respectively. The assessee received compensation on account of acquisition of land. The Assessing Officer assessed interest on the said compensation as taxable in the year under consideration. Such order was set aside by the Commissioner of Income Tax (Appeals) by holding that since the litigation in respect of compensation is pending finalization, therefore, the amount of interest is not taxable in the hands of the assessee. The said order of the Commissioner of Income Tax (Appeals) was upheld by the Tribunal. Still aggrieved, the Revenue is in appeals under Section 260A of the Act. During the Assessment Year 2003-04, the Revenue had raised the following substantial questions of law in Income Tax Appeal No.955 of 2008: 1. Whether on the basis and in the circumstances of the case, the Hon ble ITAT was right in canceling the order of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders passed by the Commissioner of Income Tax (Appeals) and the Tribunal are not sustainable, as the question of law already decided in favour of the revenue. On the other hand, Ms. Suri vehemently argued that the opinion of the Tribunal was not accepted by the Hon ble Supreme Court, therefore, such opinion cannot be taken into consideration for returning a finding, whether the land acquired is an agricultural land or not. It is argued that the opinion of the Tribunal is based upon an order passed by this court in Income Tax Appeal No.276 of 2004 titled Commissioner of Income Tax, Chandigarh Vs. Smt. Anjana Sehgal decided on 01.03.2011, wherein an erroneous finding was returned that prior to constitution of Municipality of Panchkula on 25.01.2001, there was a Notified Area Committee. Therefore, neither the judgment of this Court in Anjana Sehgal s case (supra) nor the opinion of the Tribunal are relevant to determine; whether the land is agricultural or not on the date of notification under Section 4 of the Land Acquisition Act, 1894. We have heard learned counsel for the parties at length on the question; as to whether land acquired is agricultural land or a capital asset w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Haryana another . The land-owners have examined as many as 13 witnesses and proved documents Exs.P1 to P76. PW-3 Ram Niwas, Draftsman, has proved the plan Ex.P18; certified copies of Aks Shazras Ex.P19 to Ex.P22 and the site plan of Panchkula (Part) Ex.P23 depicting the acquired land and its surroundings showing important locations and NH-73 on which the acquired land is situated apart from location plan of Panchkula as Ex.24. As per his statement, the plans were prepared by taking Majri Chowk i.e. District Headquarter Chowk, Panchkula situated on the interception of NH-73 and NH-22 as the zero point. The plan reflects approximate distances of the important locations from the said zero point. The acquired land was said to be about 1 Km from the said zero point. After considering the entire evidence, the learned Reference Court recorded the following finding: 24. The land owners in support of their case produced thirteen witnesses and also relied upon various documents. From the oral and documentary evidence led on the file and keeping in mind the guidelines and relevant laws applicable to the facts and circumstances of the present case, all the ingredients and guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the same khasra no./rectangle no. are acquired vide the present acquisition. The acquired land is contiguous and similar in nature and quality to the land of already developed sector 25. It is also proved that Hotel North Park is opposite the acquired land followed by Police Line, ITBP residential colony, Madanpur Cooperative House Building Society i.e. an approved posh residential colony with the name of the Tribune Mittar Vihar is almost opposite the acquired land. Fun City, Amusement park, BRS Dental College and Heart Institute are also near the acquired land and beyond from Majri Chowk. The Tribune Mittar Vihar, ITBP colony and electricity sub-station have already been developed in Bana Madanpur. The development upto 5 Km beyond the acquired land had already taken place and plots had already been allotted in Sectors 25 and 26, Urban Estate, Panchkula (i.e. Jhuriwala and Bana Madanpur) depicting the market value in the vicinity of the acquired land. The plots in Sector 25 were offered for allotment in Dec. 1992 and allotted in January 1994 and plots in Sector 26, were offered for allotment in December, 1993 and allotted in February 1995 which is proved by Ex.P23, Ex.P24, Ex.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much prior to the issuance of the present notification u/s 4 of the Act on 04.05.1995; the outer boundary of Sector 28, Panchkula is 7 km from the Majri Chowk, Panchkula whereas the land in dispute falls in between the developed Sectors 24 to Sector 28 Panchkula on one side and Sector 21 and Sector 3, Panchkula on the other side 5. That the learned Additional District Judge has rightly held that it is also established on the file that the land in question abuts the National Highway 73 which connects Sectors 1 to 21, Panchkula with Sectors 24 to 28, Panchkula which are beyond the acquired land from Panchkula; the acquired land is situated in Panchkula city and in an extensively developed area amidst developed sectors on NH-73; Sector 28 was already developed and it extended around 5 km beyond the acquired land; that the acquired land is only around 1 km from Government College, Saket Hospital, District Headquarters/ Mini Secretariat, General Hospital Panchkula is only 3 km away; schools, colleges, hospital, University, Banks, Market, Bus Stand, Railway Station and Air Port are also nearer from the acquired land than from Sector 24 to 28, Urban Estate, Panchkula; even Chandigarh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; xx xx Sub Clause (b) of Section 2(14) of the Act contemplates that Central Government may specify the distance of not more than 8 Km from the local limits of Municipality to be excluded from agricultural land. It is in terms of the said provision; the Central Government has published a notification dated 06.01.1994 contemplating that the area up to a distance of 5 Km from the municipal limits of Panchkula in all directions shall not be an agricultural land. Learned counsel for the assessee has vehemently argued that the Municipal Council Panchkula was constituted for the first time vide notification dated 25.01.2001 and there was no Municipality or Notified Area Committee constituted for Panchkula prior to the said date. The argument is that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee have projected that the land has a potential for being developed as a residential and commercial area located in close proximity of developed Panchkula city. The Municipality as defined in clause (e) of Article 243P of the Constitution means an institution of self-government constituted under Article 243Q. Article 243Q provides for the constitution of the municipalities provided it may not be constituted in such urban area or part thereof as the Governor may having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit to be a Municipality. Haryana Urban Development Authority is a local authority in terms of Section 3 of the Haryana Urban Development Authority Act, 1977. Such authority has been established to promote and secure the development of all or, any of the areas comprised in an urban area and for that purpose the Authority shall have the power to acquire by way of purchase, transfer, exchange or gift, held, manage, plan, develop and mortgage or otherwise dispose of land and other property to carry on by itself or through any agency. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Clauses Act, 1897. Section 3 (31) reads as under: 3 (31) local authority shall mean a municipal committee, district board, body of port Commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; The Supreme Court held that such an authority to be local authority must have separate legal existence as corporate body. It must not be a mere governmental agency, but must be legally independent entities. The Court held that DDA is empowered to levy betterment charges on the owners of the properties and the arrears of betterment charges can be recovered as arrears of land revenue. There is an element of popular representation in the constitution of DDA and the functions of the DDA are more akin and similar to the functions of the Municipality including the power of zonalisation prescribed the use to which each zone is to be put, demolition of constructions made contrary to zoning regulations. Though in the aforesaid case, the DDA was found to a local authority though there was no specific provision declaring the DDA to be as local authority in the Statute. But in the case of Harya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adesh High Court in Officer-in-Charge (Courts of Wards) Vs. CWT (1969) 72 ITR 552 giving wide connotation as was possible to give to the words agricultural land . The Court did not approve the said wide interpretation and observed inter alia to the following effect: We think that it is not correct to give as wide a meaning as possible to terms used in a statute simply because the statute does not define an expression. The correct rule is that we have to endeavour to find out the exact sense in which the words have been used in a particular context. We are entitled to look at the statute as a whole and give an interpretation in consonance with the purposes of the statute and what logically follows from the terms used. We are to avoid absurd results. If we were to give the widest possible connotation to the words agricultural land , as the Full Bench of the Andhra Pradesh High Court seemed inclined to give to the term agricultural land , we would reach the conclusion that practically, all land, even that covered by buildings, is agricultural land inasmuch as its potential or possible use could be agricultural. The object of the Wealth-Tax Act is to tax surplus wealth. It is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt, is that income arising from the transfer of agricultural land that falls within the terms of Items (a) and (b) of sub-clause (iii) of clause (14) of Section 2 falls outside the ambit of revenue derived from land and therefore, outside the ambit of agricultural income . Such income, therefore, is liable to capital gains tax chargeable under Section 45 of the 1961 Act. Reliance of the learned counsel for the appellant on the Division Bench judgment of Kerala High Court in Murali Lodge s case (supra), wherein the land was situated within Guruvayur township constituted under the Guruvayur Township Act. With respect, we have reservation about the findings recorded. The Court has held that Guruvayur township can be a local authority, but all local authorities cannot be called Municipalities. It observed as under: .May be that the Guruvayur township can be called a local authority, but all local authorities cannot be called municipalities. Only those local authorities which have all the trappings of a municipality can be treated as a municipality within the meaning of the section. Therefore, to find a solution to the problematic dispute, we have to give a meaning to the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but, on the other hand, only those local authorities which have all the trappings of a municipality as stated above, can be said to be municipalities within the meaning of the section. With respect, we are unable to agree with the view expressed by the Kerala High Court in the aforesaid judgment. The expression by any other name appearing in Item (a) of clause (iii) of Section 2 (14) has to be read ejusdem generis with the earlier expressions i.e. municipal corporation, notified area committee, town area committee, town committee. The Court has also not considered the scope and ambit of Section 3 (31) of the General Clauses Act defining local authority. The judgment of Bombay High Court in H.V. Mungale s case (supra) again deals with the provisions of Wealth Tax Act so as to determine; whether the asset is an agricultural asset or not. The expression Municipality will include a local authority was not the question raised or decided. In view of the above discussion, we hold that the land, subject matter of acquisition, is a capital asset falling within the scope of clause (iii) of Section 2 (14) of the Act. Consequently, the question of law is answered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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