JUDGMENT
D.K. Jain, J.
1. In these ten references, at the instance of
the Revenue, the Income-tax Appellate Tribunal, New
Delhi (for short the Tribunal) has referred under
section 256(1) of the Income-tax Act, 1961 (for short
the Act) the following question for our opinion:
“Whether on the facts and in the
circumstances of the case, capital
gains arising on transfer of
agricultural lands in village Nangal
Dewat, Delhi is chargeable to tax?
2. Since in all the references an identical
question has been referred, these are being disposed of
by this common order.
3. As the format of the question itself
suggests, the issue arising for consideration is
whether the agricultural land in village Nangal Dewat
constitutes a capital asset within the meaning of
section 2(14)(iii)(a) of the Act and exigible to
capital gain taxed on its transfer.
4. The question posed being purely legal, it is
unnecessary to state the facts of each of the cases,
except to note that all the references pertain to the
assessment year 1974-75.
5. We have heard Mr. R.C. Pandey and Mr. R.D. Jolly,
Senior Standing Counsel for the Revenue and
Mr. R.P. Bansal, learned senior counsel for the assessed.
6. In our view, the question referred for our
opinion is no longer res integra in view of the
decision of the Madras High Court in S. Hidhayathullah
Sahib v. Commissioner of Income-tax, (1986) 158 ITR 20,
approved by the Apex Court in G.M. Omer Khan v.
Commissioner of Income-tax (Addl.), (1992) 196 ITR 269;
the decision of this court in CIT v. Pyare Lal, 1998
231 ITR 785 and a recent unreported decision in the
case of CIT v. Deep Chand etc. (ITR
Nos.478-479/1983). Section 2(14) of the Act defines
“capital asset”, as property of any kind held by an
assessed. The expression “property of any kind” in the
context of the Section is so widely defined as to
include within its ambit property of any kind other
than that comprised in the exceptions carved out in the
definition itself. One of the exceptions is in respect
of agricultural land, not being situated in a
particular area, mentioned therein. In the aforenoted
decisions of this court, involving agricultural lands
in the same village, namely, Nangal Dewat, it has been
held that it is the population of the municipality, as
a whole and not of any part area of it, that has to be
taken into account for the purpose of section
2(14)(iii)(a) to determine whether property in a
particular area is exigible to capital gains. It was
said that the part of the sentence – “which has
population of not less than ten thousand” refers to
municipality or a cantonment board and not to any area
comprised in the erstwhile village or any fraction of
the area constituting the municipality or cantonment
board.
7. However, it is vehemently submitted by
Mr. Bansal, learned counsel for the assessed that the
aforenoted decisions of this court need
re-consideration because the court has not taken into
consideration a vital fact that during the relevant
period, there was no notification under section 507 of
the Delhi Municipal Corporation Act, 1957 (for short
DMC Act) declaring the rural area of the village as
forming part of the urban area. The submission is that
in the absence of such a notification, the village
continues to be the rural area, beyond the control of
the Municipal Corporation of Delhi and would,
therefore, not fall within the ambit of section
2(14)(iii)(a) of the Act.
8. We are not impressed with the argument of
learned counsel for the assessed. Sub-section (2) of
Section 1 of the DMC Act, which came into force on 28
November 1957, read with sub-Section (10) of Section 2 of the Act holds that the DMC Act extends to the entire
Union Territory of Delhi, comprising rural and urban
areas. Village Nangal Dewat being within the Union
Territory of Delhi, falls within the Municipal area for
the purposes of levy of capital gains tax under the
Act. However, for the purposes of the DMC Act, Section
507 of the said Act, sets out some special provisions
for rural areas.
9. Section 507 of the DMC Act reads as follows:
“507. Special provisions as to rural
areas:–
Notwithstanding anything contained in
the foregoing provisions of this
Act,–
(a) the Corporation with the previous
approval of the Government, may, by
notification in the Official Gazette,
declare that any portion of the rural
areas shall cease to be included
therein and upon the issue of such
notification that portion shall be
included in and form part of the
urban areas;
(b) the Corporation with the previous
approval of the Government may, by
notification in the Official
Gazette,–
(i) exempt the rural areas or any
portion thereof from such of the
provisions of this Act as it deems
fit,
(ii) levy taxes, rates, fees and
other charges in the rural areas or
any portion thereof at rates lower
than those at which such taxes,
rates, fees and other charges are
levied in or portion from any
such tax, rate, fee or other charge:
(c) the Corporation n shall pay a Gaon
Sabha–
(i) an amount equal to the proceeds
of the tax on profession, trades,
callings and employments, as and when
that tax is levied in the Gaon Sabha
area, and
(ii) an amount equal to such portion
of the proceeds of the property taxes
on lands and buildings in that area
as may from time to time be
determined by the Corporation,
after deducting the cost of
collection from such proceeds.”
10. The Section merely provides that with the
previous approval of the Government, the Corporation
may, by notification in the Official Gazette: (a)
declare that any portion of the rural areas shall cease
to be included therein and upon the issue of such
notification, that portion of the rural area shall be
included in land form part of the urban area; (b)
exempt the rural areas or any portion thereof from
of the provisions of the DMC Act like levying taxes and
other tax or fee etc., as it deems fit; (c) as and when
any tax or fee etc., is levied in the Gaon Sabha area,
a specified amount out of it shall be paid to Gaon
Sabha. A bare reading of the section makes it clear
that this provision confers special powers on the
Corporation to deal with the rural areas falling within
its jurisdiction for the purpose of various provisions
of the Act including the levy of taxes etc. As a
matter of fact, section 507 presupposes that the rural
areas, within the Union Territory of Delhi, in respect
of which a notification can be issued, fall within the
municipal limits. Even otherwise it is not the case of
the assessed that village Nangal Dewat does not fall
within the municipal limits. It is only claimed that
it has not been urbanised.
11. In this behalf it would be advantageous to
refer to a decision of this court in Naresh Kumar v.
Union of India and Ors. , . In that case
the property was situated in the revenue estate of
village Bijwasan, Tehsil Mehrauli, New Delhi which is a
rural area. The petitioner, disputing the right of the
DMC to recover tax on its property, had submitted that
the building constructed the property was being used
for agricultural purposes and was not liable to be
taxed also because it was situated in a rural area.
Repelling the said contention, it was held that rural
areas of Delhi were also part of ‘Delhi’ as
contemplated by section 2(52) of the DMC Act.
12. In that view of the matter, we feel that
section 507 of the DMC Act has no bearing insofar as
the applicability of section 2(14)(iii)(a) of the Act
is concerned. The relevant portion of the Section
reads as under:
“(iii) agricultural land in India, not
being land situate–
(a) in any area which is comprised
within the jurisdiction of a
municipality (whether known as a
municipality, municipal
corporation, notified area
committee, town area committee,
town committee, or by any other
name) or a cantonment board and
which has a population of not less
than ten thousand according to the
last preceding censes of which the
relevant figures have been
published before the first day of
the previous year; or
…………………
…………………”.
Sub-clause (a) postulates only two
conditions, namely (i) that the agricultural land
should be in an area within the municipality and (ii)
the area should have population of more than 10,000.
The controversy which had arisen earlier and now stands
resolved was whether it was only the population of the
area concerned which was to be taken into account for
the purposes of the said clause or the population of
the municipality, within whose jurisdiction the area
falls. Both the said conditions are attracted in
respect of the subject land.
13. We, therefore, do not find any substance in
the contention of learned counsel for the assessed that
the earlier decisions of this court require
reconsideration.
14. In the light of the above-noted
authoritative pronouncements, the question is answered
in the affirmative i.e. in favor of the Revenue and
against the assessed.
However, in the facts and circumstances of
the case, there shall be no order as to costs.