THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY and THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM
I.T.T.A. No. 86 of 2001
% 01.07.2014
Between:
# The Commissioner of Income Tax.
Versus $ Smt.Surjeet Kaur (died) and others.
...
APPELLANT ...RESPONDENTS < Gist:
> Head Note:
! COUNSEL FOR THE APPELLANT :- Sri J.V.Prasad ^COUNSEL FOR RESPONDENTS :-Sri Y.Ratnakar ? Cases Referred:
THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No. 86 of 2001
JUDGMENT: (per the Hon’ble Sri Justice L.Narasimha Reddy)
In this appeal, presented under Section 260A of the Income Tax Act (for short ‘the Act’), the only question that arises for consideration is as to whether the land sold by the respondent in the year 1991 attracts the capital gains tax, under the Act.
The respondent owned Acs.16.00 of land in Mallapur Revenue Village of Uppal Mandal, Ranga Reddy District. She sold that land through five sale deeds, between 12.06.1991 and 09.02.1992 in favour of various individuals. In the returns filed for the assessment year 1992-93, the transactions were reflected. The Assessing Authority took the view that the respondent is under obligation to pay capital gains under Section 45 of the Act. The basis for this was that the land was treated as capital asset and the sale proceeds thereof were treated as capital gains.
The respondent filed an appeal before the Commissioner of Income Tax (Appeals). She pleaded that the land held by her was agricultural in nature and that it cannot be treated as capital asset under Section 2(14)(iii)(a) of the Act. The appeal was dismissed. Thereupon, she filed I.T.A.No.354/Hyd/96 before the Income Tax Appellate Tribunal, Hyderabad Bench ‘A’ (for short ‘the Tribunal’). The appeal was allowed on 22.02.2001 and the contention of the respondent was accepted. Hence, this appeal by the Department.
Sri J.V.Prasad, learned Standing Counsel for the appellant, submits that the land in question was undisputedly within the limits of Kapra Municipality and thereby, it deserve to be treated as capital asset. He places reliance upon Section 2 (14) (iii)(a) of the Act. He further submits that even if one takes into account, the factor of population, mentioned in the said provision, the land would become a capital asset and that the view taken by the Tribunal cannot be sustained in law.
Sri Y.Ratnakar, learned counsel for the respondent, on the other hand, submits that the census figures referable to Section 2(14)(iii)(a) of the Act are only of the year 1983 and though the population of Mallapur in that census was more than 10,000, Kapra Municipality, of which Mallapur is a part, was not formed at all and that the obligation to pay the capital gains tax arise only when both the factors exist in respect of a land. He submits that the Tribunal has taken correct view of the matter and that the present appeal deserves to be dismissed.
Section 45 of the Act makes capital gains, taxable. Various accruals that can be treated as capital gains, are furnished therein. The word ‘capital asset’ is defined under Section 2 (14) of the Act. The agricultural lands per se stand excluded from the capital gains, since they are not included in it. However, in the context of defining the term ‘capital asset’, such of the agricultural lands that are within the jurisdiction of a Municipality subject to certain conditions are skipped the character of the agricultural land, in the context of capital gains.
In the instant case, the Tribunal perused the record pertaining to the land and was satisfied that it was being put to agricultural use, at the relevant point of time. The only controversy is as to whether the land is covered by Section 2(14) (iii)(a) of the Act, which reads as under:
“Section 2(14)(iii)(a): 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;”
From a perusal of the provision extracted above, it becomes clear that it is only when two factors exist side by side, that a land which is otherwise agricultural in nature would cease to be so. The first is that the land must be located within the limits of the Municipality or other local area. The second is that the population of the Municipality or other local area must be not less than 10,000, according to the last preceding census, of which the relevant figures have been published, before the first day of the previous year.
There are certain peculiar circumstances in the instant case. The transaction took place in the year 1991-92. The Municipality came into existence in the year 1987. However, the last preceding census figures were published in the year 1983. It is, no doubt, true that even in 1983, the population of Mallapur Village, in which the lands are situated, was more than 10,000. However, by that time, it was not part of the Municipality. The mere fact that as on the date of sale, the Village became part of the Municipality and the population exists 10,000 does not make much difference. It is too well- settled that the provisions of the taxation statute must be construed strictly and the benefit of ambiguity, if any, must accrue to the assessee.
The Tribunal proceeded on the same lines and took the view that the land sold by the respondent cannot be treated as capital asset. We are in agreement with the view expressed by the Tribunal.
The appeal is accordingly dismissed. There shall be no order as to costs.
The Miscellaneous petitions filed in this appeal shall also stand disposed of.
L.NARASIMHA REDDY,J CHALLA KODANDA RAM,J Dt:01.07.2014 Note: L.R. copy to be marked. kdl