Agricultural land exclusion under capital gains law depends on both municipal location and population threshold being satisfied.

Agricultural land is excluded from the definition of capital asset only where the statutory conditions are read conjunctively: the land must be outside municipal or cantonment jurisdiction and the population criterion must also be satisfied. The text states that the village entered municipal corporation limits on 03.07.2009, but the decisive factual finding was that its population was 5,912, below the statutory threshold. On that basis, the land continued to qualify as agricultural land and was not treated as a capital asset under the Income-tax Act, 1961.

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Issues: Whether agricultural land sold by the assessee was excluded from the definition of capital asset under Section 2(14)(iii)(a) of the Income-tax Act, 1961, having regard to the date on which the land fell within municipal limits and the population criterion.

Analysis: The provision excludes agricultural land only if both conditions are absent: the land must be situated outside the jurisdiction of a municipality or cantonment board, and the area must have a population of less than 10,000. The conditions are cumulative and must be read conjunctively. On the facts, the village became part of the municipal corporation from 03.07.2009, but the decisive factual finding remained that the population of the village was 5,912, which is below the statutory threshold. That factual finding was not shown to be perverse.

Conclusion: The land continued to qualify as agricultural land and did not form part of a capital asset under Section 2(14)(iii)(a) of the Income-tax Act, 1961.

Final Conclusion: The assessee succeeded on the core tax issue, and the revenue's appeal failed.

Ratio Decidendi: For exclusion of agricultural land from capital asset, the statutory requirements regarding municipal jurisdiction and minimum population must both be satisfied; if either requirement is absent, the land remains agricultural land.

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