SINGHAI RAKESH KUMAR Vs. UNION OF INDIA

JUDGEMENT

(1.) Under challenge are the orders of a Division Bench of the High Court of Madhya Pradesh dismissing a writ petition filed by the appellant-assessee and answering against him a reference made by the Income-tax Appellate Tribunal of the following question :

(2.) In the previous years relevant to the assessment years 1981-82 and 1983-84 the assessee sold agricultural lands which were situated within the municipal limits of Bina. He made capital gains thereon and the Income-tax Officer made him liable to capital gains tax. The first appellate authority agreed with the Income-tax Officer and the assessee approached the Tribunal. The Tribunal held that the profit on the sale of agricultural lands was not capital gains within the meaning of the provisions of the Income-tax Act, 1961. From the order of the Tribunal the question aforestated was referred to the High Court. Pending the reference, the assessee filed in the High Court the writ petition the order upon which is impugned. The writ petition asked the High Court to declare as unconstitutional the Explanation to sub-section (1A) and Clause (iii) of sub-section (14) of Section 2 of the Income-tax Act, 1961 and to declare that capital gains arising from the sale of agricultural lands within a municipal area were not liable to capital gains tax under the Income-tax Act, 1961. The High Court dismissed the writ petition and answered the reference against the assessee.

(3.) Article 366 defines, in Clause (1), 'agricultural income' to mean "agricultural income as defined for the purposes of the enactments relating to Indian Income-tax". Entry 46 of List II of the Seventh Schedule of the Constitution speaks of "taxes on agricultural income"; in other words, it is for the States to legislate on the subject of taxes on agricultural income. Entry 82 of List I of the Seventh Schedule reads "Taxes on income other than agricultural income"; in other words, it is for the Union to legislate on the subject of taxes on income other than agricultural income.