COMMISSIONER OF INCOME TAX Vs. MURALI LODGE

JUDGEMENT

(1.) THE Revenue is before us. THE questions referred for our opinion are :

(2.) IT is the common case of the parties that the second question, in the light of the recent ruling of the Supreme Court in Garden Silk Weaving Factory v. CIT [1991] 189 ITR 512 requires to be answered in favour of the assessee. We, accordingly, answer the question in the affirmative and in favour of the assessee.

(3.) FROM the plain and unambiguous language employed in the section, it is clear that, if the agricultural land is situated outside the jurisdiction of a municipality then no tax on any profits or gains arising from the transfer of such land will be chargeable under the head "capital gains". The question, therefore, is : Whether the agricultural land of the assessee sold in public auction can be said to be situate in an area which is comprised within the jurisdiction of a municipality. The case of the Revenue is that it is, because the Guruvayur township is a municipality within the meaning of that word in the section. On the other hand, counsel for the assessee submits that the Guruvayur township, though a local authority, cannot be said to be a municipality and, therefore, the agricultural land in dispute cannot be said to be situated in an area which is comprised within the jurisdiction of a municipality. The word 'municipality' used in the section, considered in the light of the various expressions used in the brackets, namely, "whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name" must be held to take in its fold a township also, counsel for the Revenue submits. Of the various words included in the brackets, learned counsel for the Revenue laid emphasis on the words "by any other name". These words, counsel argues, take colour from the preceding words and, if that be the position, the Guruvayur township also can be called a municipality. May be that the Guruvayur township can be called a local authority. But all local authorities cannot be called municipalities. Only those local authorities which have all the trappings of a municipality can be treated as a municipality within the meaning of the section. Therefore, to find a solution to the problematic dispute, we have to give a meaning to the word "municipality" which stands undefined in the Act. Generally understood, 'municipality' means a legally incorporated or duly authorised association of inhabitants of a limited area for local governmental or other public purposes. (Black's Law Dictionary). The above definition more or less is reflected in the provisions contained in Chapter III of the Kerala Municipalities Act, 1960, The council constituted under Section 7 with the assistance of the standing committee of the council, chairman, commissioner, etc., will administer the provisions of the Act. The council consists of such number of members as are prescribed. They are called councillors. They are elected by the residents of the area coming within the jurisdiction of the municipality. The chairman and vice-chairman of the municipality are elected by the members of the council. The commissioner is appointed by the Government in consultation with the council. It is the duty of the commissioner to carry into effect the resolutions of the council unless it be that the said resolution is suspended or cancelled by the Government. The municipality contemplated under Section 2(14)(iii)(a) must be one which satisfies the above requirements. All the local authorities included in the brackets must satisfy the above requirements to be known as a 'municipality'. The position, however, would have been different had the section contained a definition which takes in its fold the local authorities included in the brackets, namely, "municipal corporation, notified area committee, town area committee, town committee or such other similar local authority". In that event, the Guruvayur Township can be said to be a municipality. The plain language employed in the section, however, makes it clear that the intention of the Legislature is not to treat every local authority as a municipality ; but, on the other hand, only those local authorities which have all the trappings of a municipality as stated above, can be said to be municipalities within the meaning of the section.