Kania, J. - (1.) This is an appeal against the judgment of a Division Bench of the High Court of Madhya Pradesh on a reference made to the High Court under S. 66(l) of the Indian Income-tax Act, 1922 (referred to hereinafter as "the said Act"). The appeal has been preferred on a certificate of fitness granted by the High Court under S. 66A(2) of the said Act and read with Art. 133(l) of the Constitution of India.
(2.) The releavant facts are as follows:- The assessee is a Hindu Undivided Family represented by its Karta one R.K. Palshikar. The years of assessment with which we are concerned are the assessment years 1959-60 to 1961-62. The assessee is the owner of what is known at present as 'Palshikar Colony' at Indore. This colony covers an area of 36.62 acres. The said land originally belonged to an ancestor of the present Karta as agricultural land. The land was in the possession of the tenants and crops like wheat, gram and so on were grown on the said land by the tenants. The present Karta wished to develop the land into a housing colony and took steps to evict the tenants. For this purpose he filed a suit in the High Court and on Sept. 24, 1957 that suit was decreed. The assessee got plans drawn up for the laying out of the said land as a housing colony in the year 1952 after the assessee was permitted to develop the land into a housing colony. In 1958, the Executive Engineer of Indore approved the revised lay out plan. The assessee then divided the land into plots and developed the land for making it suitable as building sites. The assessee also constructed some roads, sewages and water pipe lines and spent a large amount for developing the land. This expenditure was incurred in the accounting period 1958-59 and the subsequent years. The assessee started leasing building sites to various parties from May, 1958. The first lease was granted by the assessee, demising plot No. 12, on May 24, 1958. That lease was for a priod of 99 years. It was agreed under the lease deed that on the expiration of the said period of lease, the lessor or his legal heirs will execute a new lease deed in favour of the lessee or his legal heirs on terms and conditions as would be settled later. The 'salami' or premium for the said lease was fixed at Rs. 10,312/-, out of which amount of Rs. 501/- was paid in advance and the balance amount of Rs. 9,811/- was agreed to be paid before the grant of lease. The agreement of lease was executed on Sept. 15, 1959. The annual lease rent of the plot was fixed at Rs. 75 which was to be paid by the lessee in advance. The lessor reserved his right to take back possession of the land leased if the rent was not paid for two consecutive years and to recover the rent. We are not concerned with the other terms of the lease. In the years 1959-60, 1960-61 and 1961-62 with which we are concerned, the assessee leased out respectively 3.29 acres, 4.41 acres and 5.68 acres divided into many plots out of the aforesaid land and he received by way of 'salami' or premium Rs. 1,45,190/-, Rs. 2,06,475/- and Rs. 2,54,341/- respectively in the said years. The terms and conditions of the other leases were in pari materia with the aforesaid lease dated May 24,1958 in that the leases were for a period of 99 years and provided for the payment of premium or 'salami'. The question arose whether the assessee was liable to pay capital gains tax on the amounts of 'salami' or premium received as aforesaid. The contention of the assessee before the Income-tax Officer concerned was that no capital gains tax could be levied in respect of the said leases as the land was agricultural land and secondly that S. 12B of the said Act which provided for the levy of tax on the sale, exchange, relinquishment or transfer of a capital asset did not come into play as only lease-hold rights had been conveyed by the assessee to the lessees under the said leases. Both these contentions were rejected by the Income-tax Officer as well as by the Appellate Assistant Commissioner. The assessee preferred an appeal to the Income-tax Appellate Tribunal and urged the same contentions, which the Tribunal also rejected. Arising from the said decision of the Tribunal, two questions were referred to the High Court for determination. These questions are as follows: (1) Whether on the facts and in the circumstances of the case, the land sold by the assessee constituted a capital asset within the meaning of S. 12B of the Indian Income- tax Act or was agricultural land as defined in S. 2(4A) of the Act (2) Whether the transaction of lease effected by the assessee amounted to a transfer within the meaning of S. 12B so as to attract liability for capital gains tax
(3.) The first contention urged by the assessee before the High Court was that no capital gains tax could be levied on the said transactions for the lease of the land as the land was agricultural land, and the second contention was that S. 12B of the said Act did not come into play as only the lease hold rights in the said lands had been conveyed. As far as the first contention is concerned, it was conceded before the High Court that as the land was diverted to non-agricultural purposes several years ago, that contention could not be pressed and it was not disputed that the lands in question constituted a capital asset within the meaning of S. 2(4A) of the said Act. In support of the second contention of the assessee, it was urged on behalf of the assessee that the word "transfer" under S. 12B of the said Act must be interpreted in a limited and restricted sense and the principle of ejusdem generis should be applied in construing the said word as used in S. 12B. This contention was rejected by the High Court which took the view that, as the lease was for a long period of 99 years, the agreement of lease would amount to a transfer of a capital asset within the meaning of S. 12B of the said Act read with S. 2(4A) thereof. The High Court answered both the questions referred in the affirmative and against the assessee. On an application made by the assessee, leave was granted by the High Court as aforesaid, to appeal to this Court but only in respect of second question.;