Decided on December 07,1982



P.V.B. Rao, Vice President - (1.) THE assessee is a HUF and it owned lands measuring 31 bighas 10 1/3 biswas in the village known as Nangal Dewat in the Union territory of Delhi. THE Land Acquisition Collector, Delhi, paid compensation to the extent of Rs. 2,24,677. THE assessee claimed higher compensation in a reference under Section 18 of the Land Acquisition Act. It is not known as to the further progress of the litigation in relation to the amount of compensation. However, the ITO while dealing with the assessment of the assessee took into account the amount claimed by the assessee as higher compensation for the purpose of finding out the taxability of the surplus on account of compensation received by the assessee, under the head 'Capital gains'. In the absence of any details as to the cost of the acquisition of the land, the value of the land was estimated at Rs. 1,500 per bigha as on 1-1-1954. THE assessee's objections have not been accepted in regard to the assessability of the compensation amount and that is how the assessee has been assessed in respect of capital gains. THE assessee's appeal before the Commissioner (Appeals) succeeded in full since the assessee's contention that the land continued to be agricultural land and therefore does not fall within the purview of capital asset as contemplated under Section 2(14)(iii) of the Income-tax Act, 1961 ('the Act'), was accepted by him.
(2.) The revenue has come up in appeal against the order of the Commissioner (Appeals) and the assessee has filed a cross-objection raising various other contentions which the Commissioner (Appeals) did not deal with in the view he took about the assessability of the entire amount itself. The learned counsel for the revenue, Shri T.A. Ramachandran, submitted that the decision of the Commissioner (Appeals) is erroneous having regard to the language of Section 2(14)(iii)(a) which is very clear in that, once an area comes within the jurisdiction of a Municipal Corporation (in this case Nangal Dewat falls within the jurisdiction of the Delhi Municipal Corporation), one need not go into any other matter and the entire land even though agricultural in character is hit by the mischief of the provisions relating to the assessability of capital gains. In other words, what Mr. Ramachandran contended was that the definition of 'capital asset' takes within its fold all lands whatever be the character, once the lands are within the limits of the municipality-Delhi Municipal Corporation as in this case. While elaborating this argument he has tried to explain the meaning of the words 'area' 'comprised' 'included in' and so on and so forth which words occur in Section 2(14). He has particularly referred to the notes on clauses on the Finance Bill, 1970 [1970] 75 ITR (St.) 69 as also the Select Committee Report of the Taxation Laws Amendment Bill, 1969 (Gazette of India Extraordinary, Part II, Section 2, dated 3-8-1970 at 766) to show the intention of the Legislature in regard to Section 2(14). He has also relied on the decision of the Tribunal in Deep Chand's case [IT Appeal Nos. 962 to 972 of 1974-75, dated 17-9-1972]. He has also relied on the decision of the Tribunal in Deoki Nandan & Sons' case [IT Appeal No. 3850 of 1976-77 and 1583 of 1978-79, dated 18-2-1980]. He further brought to our notice the decision of the Andhra Pradesh High Court in the case of Addl. CIT v. G.M. Omarkhan [1979] 116 ITR 950, which according to Mr. Ramachandran deals with more or less similar case as the present one before us. He also tried to distinguish other decisions of the Tribunal which the assessee relied on and to which we will have the occasion to deal with at the appropriate place. He has also contended that the definition of 'capital asset' does not either specifically or by implication make a distinction based upon the quality of land situated in a municipality as urban or rural. He further referred to the rules regarding the interpretation of statute specifically the concept that different sections of a statute are to be read as a whole and that it is permissible to refer to the Notes on Clauses. Finally, he has dealt with the provisions of the Municipal Corporation Act as also the Delhi Panchayat Raj Act and tried to argue that the village even though governed by the Gram Panchayat Raj Act for same purpose comes within the limits of Delhi Municipal Corporation. He has also relied on the decision of the Gujarat High Court in Ambalal Magan Lal v. Union of India [1975] 98 ITR 237 which deals with the validity of Section 2(14)(iii) and argued that the contrary decision taken by the Bombay High Court in Manubhai A. Sheth v. N.D. Nirgudkar, Second ITO [1981] 128 ITR 87 should not be followed.
(3.) IN reply, Shri C.S. Agarwal, who appeared in a number of other cases which have been heard together, contended that the village Nangal Dewat is a part of the rural area and, therefore, should be considered as not part of the municipality which can be only urban in its character. IN other words, he contended that the rural areas are outside the purview of Section 2(14)(iii)(a). He has also referred to the map which describes the different areas of the Union territory of Delhi. He particularly relied on the speech of the Finance Minister at [1970] 75 ITR (St.) 22 as also the Memorandum explaining the provisions occurring at page 90 of the same volume. He also contended that the word 'area' occurring in Section 2(14)(iii)(a) relates only to the village of the rural area and not the entire municipality. IN this connection he referred to the decision of the Madras Bench of the Tribunal in K. Parameshwaran v. ITO [1982] 2 ITD 371. He further emphasised that the Gram Panchayat Raj Act alone applies so far as the concept of the local self-government is concerned and the Delhi Municipal Corporation Act has no relevance in this connection.;

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