COMMISSIONER OF INCOME TAX Vs. THOMAS P J

JUDGEMENT

(1.) IN this tax case petition under section 256(2) of the INcome-tax Act, 1961, the Revenue seeks a direction to the Tribunal to refer the following two questions of law, for the opinion of this court :

(2.) WITH reference to the first question, we find that the conclusion arrived at by the Tribunal regarding the character of the land is factual. In arriving at the conclusion that the lands sold by the assessee were only agricultural lands, the Tribunal had taken into account not only the classification of the land in the revenue records as "garden land" but also the circumstances that the land was under the actual cultivation of the sister of the assessee and it had the benefit of channel irrigation and there were also 42 coconut trees thereon. That apart, the Tribunal had also considered the receipt of agricultural income from the land in question. Based on the aforesaid circumstances, the Tribunal rightly came to the conclusion that the land in question sold by the assessee was agriculture land. Even as regards the second question, it is seen that under section 2(14) of the Income-tax Act, 1961, the exclusion of agricultural land as capital asset, would be applicable to land within the limits of a municipality and not a panchayat. The land sold by the assessee was situate in Koshancherry town and that was only a panchayat. Though learned counsel for the Revenue strenuously Contended that a panchayat would also be comprehended within section 2(14) of the Income-tax Act, 1961, we are unable to accept the contention. Section 2(14)(iii) refers to the exclusion as capital asset of agricultural lands situate in on area which is comprised within the jurisdiction of a municipality (whether known as municipality or municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment, which has a population of not less than 10,000 according to the last preceding census. In order that the benefit of exclusion of agricultural land as capital asset may not be available, the land should be situated within the jurisdiction of a municipality or a cantonment board as stated earlier and is also related to the population. Though the expression, "municipality, municipal corporation, notified area committed town area committee, town committee", etc., have been used they refer only to certain specific entities either known by that name or by any other name and that cannot be taken to apply to a panchayat which is and has also always been understood as distinct and different from municipality, etc. In the absence of clear or specific words in the section to take in a panchayat, we are unable to countenance the argument of learned counsel for the Revenue. We are satisfied that the Tribunal was quite justified in deleting the tax arising on capital gains on account of the sale of the agricultural lands by the assessee. The tax case petition is dismissed. There will be no order as to costs.