JUDGMENT
S.B. Sinha, C.J.
1. These references at the instance of the Revenue have been
made under Section 256(1) of the Income Tax Act, 1961 (
hereinafter referred to as ‘the Act’) by the Income-tax
Appellate Tribunal, Delhi Bench ‘A’, Delhi (hereinafter
referred to as ‘the Tribunal’), for the opinion of this Court
on the following question :-
“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. The basic fact of the matter is not in dispute.
FACTS OF ITR NO. 478 OF 1983 :-
2.1 The petitioner possessed 154 bighas of agricultural land in
Village Nangal Dewat, which is located near Delhi-Najafgarh
Road adjoining Palam Airport. The said land was acquired
by the Government for extension of the Palam Airport vide
notification dated 03.12.1971 purported to be issued under
Section 4 of the Land Acquisition Act. A sum of
Rs. 8,55,450/- by way of compensation was awarded to the
petitioner by the Land Acquisition Officer vide his order
dated 20.07.1973 where after possession of the said land
was also taken over by the Government. However, the
petitioner did not declare any income under the head
‘Capital Gains’ on the ground that the agricultural land
owned by him was not a capital asset within the meaning of
Section 2(14) of the Act and, thus, the transfer did not
result in capital gains.
2.2 The Income Tax Officer (in short, ‘the ITO’), however, did
not accept his submission and held that the said land was
situated within the jurisdiction of Municipal Corporation of
Delhi and by virtue of amendment made in the definition of
‘Capital Asset’ w.e.f. 01.04.1970, the same became a capital
asset, at the hands of the assessed. It was also noticed by
the ITO that the petitioner had not accepted the award of
the Land Acquisition Officer and filed appeals there against
before the Additional District Session Judge claiming
compensation @ Rs. 40,000/- per bigha. Therefore, he took
the view that the fair market value of the said land
transferred by the petitioner as on the date of transfer
exceeded the full value of consideration declared by the
petitioner in respect of the transfer by more than 15% to the
value declared and, on the said basis held that the
provisions of Section 52(2) were applicable in the case of the
petitioner. Thereafter, he sought for and obtained approval
of the Inspecting Assistant Commissioner of Income-tax,
Range – V(B), New Delhi (in short, ‘IAC’) for substituting
the consideration of the transferred which was fixed by the
ITO at Rs. 61,60,000/-. The ITO estimated the value of the
land at Rs. 2,31,000/- as on 01.01.1954, whereas the
assessed claimed that the value of the said land as on
01.01.1954 was liable to be worked out by applying a rate of
Rs. 3,500/- per bigha, but could not support his submission
in respect thereof. The ITO rejected the assessed’s plea on
the ground that the value of agricultural land in 1954 in the
villages of Delhi was very low and held that the market value
of the property as on 01.05.1954 was Rs.1,500/- per bigha.
It was also contended by the assessed before the ITO that he
had expended Rs. 35,000/- on the improvement of land,
whereas the ITO curtailed the said claim on the ground that
only a little evidence was led in support thereof and
determined the capital gains arising to the petitioner at
Rs. 36,05,117/- as against ‘Nil’ as declared by him.
2.3 As the variation in the income was more than Rs. 1,00,000/-
the ITO forwarded a draft of the proposed order of
assessment to the assessed. There against several objections
were made.
2.4 The proposed order along with the objections received was
forwarded to the IAC by the Assessing Officer, who after
giving an opportunity to the assessed, issued directions to
the ITO. The ITO thereafter incorporated the said directions
and determined the income of the appellant at
Rs. 36,25,366/-.
2.5 Aggrieved by and dissatisfied with the aforesaid order, the
assessed preferred an appeal before the Appellate Assistant
Commissioner (in short, ‘the AAC’), which was allowed in
part.
The assessed again preferred an appeal before the Tribunal,
which was allowed by the Tribunal.
2.6 On being moved for reference, the question, as set out
above, has been referred for opinion of this Court.
We need not to go in great details of the facts of I.T.R. No.
479 of 1983, as the same are almost identical to I.T.R. No.
478 of 1983.
3. Section 2(14)(iii) of the Act reads thus :-
“(14) “capital asset” means property of any
kind held by an assessed, whether or not
connected with his business or profession, but
does not include –
… … … … … … …
(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 census of
which the relevant figures have 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,
urbanization of that area and other
relevant considerations, specify in this
behalf by notification in the official
Gazette;”
The aforesaid provision, in our opinion, is absolutely clear
and unambiguous.
3.1 A bare perusal of the aforementioned provision would
clearly go to show that ‘capital assets’ means property of
and kind held by an assessed, whether or not connected
with his business or profession, but does not include any
stock-in-trade, consumable stores or raw materials held for
the purpose of his business or profession; and personal
effects, that is to say, movable property (including wearing
apparel and furniture, but excluding jewellery) held for
personal use by the assessed or any member of his family
dependent on him.
6.3.2 It may be true that the expression used therein is not very
happy and could have been more explicit, but in terms
thereof if the land is situated in an area, which is comprised
within the jurisdiction of a municipality and has a
population of not less than 10,000. The land must be
situated in a municipality or a cantonment board. Had the
intention of the law-maker been that the land situated in a
village of not less than 10,000 will come within the purview
of Section 14(1)(iii) of the Act, there was no reason as to why
the same could not have been explicity stated in the
statute.
3.3. It is now a well settled principle of law that a literal meaning
should be attributed to a statute. The golden rule of
interpretation should ordinarily be adhered to.
3.4 In Gurudevdatta Vksss Maryadit & Ors. v. State of
Maharashtra & Ors., it has been held :-
“It is cardinal principle of interpretation of
statute that the words of a statute must be understood
in their natural, ordinary or popular sense and
construed according to their grammatical meaning,
unless such construction leads to some absurdity or
unless there is something in the context or in the
object of the statute to suggest to the contrary. The
golden rule is that the words of a statute must prima
facie be given their ordinary meaning. It is yet
another rule of construction that when the words of
the statute are clear, plain and unambiguous, then the
courts are bound to give effect to that meaning,
irrespective of the consequences. It is said that the
words themselves best declare the intention of the
law-giver. The courts have adhered to the principle
that efforts should be made to give meaning to each
and every word used by the legislature and it is not a
sound principle of construction to brush aside words
in a statute as being inapposite surpluses, if they can
have a proper application in circumstances
conceivable within the contemplation of the statute.”
The said principle was reiterated in Harshad S. Mehta &
Ors. v. State of Maharashtra , and Dental Council of India &
Anr. v. Hari Prakash & Ors. ,
3.5. Yet again in Dadi Jagannadham v. Jammulu Ramulu &
Ors. , AIR 2001 SCW 3051 the Court referred to P.K. Unni v. Nrimala Industries , in the following lines :-
“15. The court must indeed proceed on the
assumption that the legislature did not make a
mistake and that it intended to say what it said
: See Nalinakhya Bysack v. Shyam Sunder
Haldar , . Assuming there is a defect or
an omission in the words used by the
Legislature, the Court would not go to its aid to
correct or make up the deficiency. The Court
cannot add words to a statute or read words
into it which are not there, especially when the
literal reading producers an intelligible result.
No cause can be found to authorise any Court
to alter a word so as to produce a casus
omissus : Per Lord Halsbury, Mersey Docks
and Harbour Board v. Henderson Brothers
(1888) 13 AC 595, 602: 4 TLR 703) .
“We cannot aid the legislature’s defective
phrasing of an Act, we cannot add and mend,
and, by construction, make up deficiencies
which are left there”: Crawford v. Spooner
(1846) 6 Moore PC 1, 8, 9 : 4 Moo Ind App
179 .
16. Where the language of the statute leads
to manifest contradiction of the apparent
purpose of the enactment, the Court can, of
course, adopt a construction which will carry
out the obvious intention of the legislature. In
doing so ” a Judge must not alter the material
of which the Act is women, but he can and
should iron out the creases.” : Per Denning,
L.J., as he then was, Seaford Court Estates
Ltd. v. Asher (1949) 2 All E R 155, 164 . See
the observation of Sarkar, J. in M. Pentiah v.
Muddala Veeramallappa .”
3.6. The question referred to this court for its 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 wherein it was held :-
“The section lays down two criteria: (1)
that the agricultural land should be in an area
within the municipality; and (2) that the area
should have a population of more than 10,000.
The expression “which has a population of not
less than ten thousand according to the last
preceding census” is intended to qualify only
the “area” and not the “municipality”.
However, it is not possible to go only by the
language used in that provision without having
regard to the object and intendment of the
provision. If the Legislature meant to fix a
minimum limit of population for any area
within a municipality or cantonment Board, it
would have specified a particular area such as
village, ward, street, etc., and since the
Legislature has left the area in a municipality
undefined, it would not have prescribed a limit
of population for such an unspecified or
indefinite area within a municipality. It may be
that a municipality may comprise of many
villages, wares and streets and each assessed
may claim that the limit of population is
provided with reference to a village, ward or
street. In such an event, the section will have
no uniform application and will lead to many
anomalies. Therefore, it is necessary to avoid
such an interpretation of the section which
leads to anomalies and which will make it
invalid. We have to adopt such a construction
which will make the section valid and certain.”
Approving the aforesaid decision of the Madras High Court,
the Apex Court in G.M. Omer Khan v. Commissioner of
Income Tax (Addl.) , (1992) 196 ITR 269 held :-
“This, in our view, is the correct position
and has aptly and pithily been put. Nothing
more is needed to be said on the subject. The
interpretation put by the High Court on the
provisions appears to us to be unexceptionable
and rational. We affirm that interpretation.”
3.7. This aspect of the matter has also been considered by a
Division Bench of this Court in Commissioner of Income Tax
v. Pyare Lal , (1998) 231 ITR 785.
The question involved herein is also covered by an
unreported decision passed in ITR Nos. 184 & 185 of 1982,
wherein Lahoti J., as his lordship then was, by a judgment
and order dated 31.07.1997 held :-
“The first question is covered by the
decision of the Supreme Court in G.M. Omer
Khan v. CIT 196 ITR 269 approving the
decision of Madras High Court in S.
Hidayatullah Sachil v. CIT (1986) 158 ITR 20
wherein it has been held that population of the
Municipality is to be taken into account for the
purpose of Section 2(14)(iii)(a) and not the
population in any area within the jurisdiction
of Municipality.
The second question has to be answered
in the light of the amendments made in the
definition of ‘Agricultural income’ in Clause
1(A) of Section 2 and the definition of ‘Capital
asset’ in Clause 14 of Section 2 incorporated
respectively by the Finance Act, 1989 and the
Finance Act, 1970 with retrospective effect
from 1.4.1970.
Accordingly, both the questions are
answered in the negative i.e. in favor of the
Revenue and against the assessed.”
4. In this view of the matter, the question is answered in the negative, 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.