Commissioner of Income Tax vs Jitendra Ramniklal

M.P. Thakkar, J.—The question referred to us in this reference is one which does not pose any problem. Upon the mere facts being stated,

the view taken by the Income Tax Appellate Tribunal must be confirmed and the reference answered accordingly. The question is as to whether

the agricultural land situate within the area specified by the Central Government by an appropriate notification not being more than 8 kilometers

from the local limits of any municipality falls within the definition of ""capital asset"" as embodied in section 2(14) of the Income Tax Act, 1961, as it

stood at the material time in the assessment year 1972-73. Clause(b) of Section 2(14)(iii) provides the agricultural land within any area within such

distance would fall within the definition of ""capital asset"", provided the Central Government, having regard to the extent of and scope for

urbanination of that area, and other relevant considerations, specifies the area by a notification in the Official Gazette. Thus, the municipality or

cantonment is required to be specified in the notification before it can be said that the agricultural land situate beyond its limits but within 8

kilometers thereof is ""capital asset"". In the present case, the lands in question were sold by a registered document executed on March 30, 1971.

The document was registered on July 30, 1971. The transaction was, therefore, completed later on July 30, 1971. Till that date, no such

notification as is envisaged by section 2(14)(iii)(b) was issued, which was issued after a lapse of about one and half years on February 6, 1973.

Since the notification itself was not in existence, it cannot be said that the land so situate would fall within the definition of ""capital asset"". The

following questions referred to us are, therefore, answered in the manner indicated hereunder :

Questions Answer

Whether, on the facts and in the In the affirmative

circumstances of the case, the Income Tax and against the

Appellate Tribunal was right in law in Revenue.

holding that the land was not a capital

asset or that the land could not be

treated as non-agricultural land only

because it was within eight kilometers of

the Ahmedabad municipal limits as the

land was sold on July 30, 1971, i.e.,

before the notification dated February 6,

1973, covering the land in question ?

Whether, on the facts and in the In the negative

circumstances of the case, the surplus and against the

realized out of the sale of the land Revenue.

could be charged to capital gains in view

of the provisions of sub-section(14) of

section 2 of the Income Tax Act, 1961,

read with Notification No. 8.0.77(B)

dated February 6, 1973 ?

Reference answered accordingly with no order as to costs.