Agricultural land taxability turned on municipal jurisdiction and population criteria, not a Delhi urbanisation notification.

Agricultural land in village Nangal Dewat, Delhi, was analysed under section 2(14)(iii)(a) of the Income-tax Act by reference to municipal jurisdiction and the prescribed population criterion. The absence of a notification under section 507 of the Delhi Municipal Corporation Act, 1957, was held irrelevant for income-tax classification, because that notification did not determine whether the land fell within the municipal area for capital asset purposes. Prior decisions concerning the same village were followed, and the contention that rural character alone excluded the land from capital gains tax was rejected. Capital gains on transfer were therefore chargeable to tax.

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Issues: Whether agricultural land situated in village Nangal Dewat, Delhi, was excluded from the definition of capital asset under section 2(14)(iii)(a) of the Income-tax Act, 1961, so as to escape capital gains tax on transfer.

Analysis: The relevant statutory test under section 2(14)(iii)(a) requires that the agricultural land be situated in an area falling within municipal jurisdiction and that the area have the requisite population. The existence or absence of a notification under section 507 of the Delhi Municipal Corporation Act, 1957, declaring rural area as urban was held to be irrelevant for determining whether land within the Union Territory of Delhi fell within the municipal area for income-tax purposes. The prior decisions on identical lands in the same village were followed, and the contention that rural character alone excluded the land from capital gains treatment was rejected.

Conclusion: The land was held to fall within section 2(14)(iii)(a) of the Income-tax Act, 1961, and capital gains arising on its transfer were chargeable to tax, in favour of the Revenue and against the assessee.

Ratio Decidendi: For the purposes of section 2(14)(iii)(a) of the Income-tax Act, 1961, the decisive factors are municipal jurisdiction and the prescribed population criterion; a separate urbanisation notification under the Delhi Municipal Corporation Act, 1957, is not determinative of taxability.

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