Municipal agricultural land and statutory vesting rules define capital asset status and title transfer date.

Agricultural land situated within the jurisdiction of a municipality with the requisite population is treated as falling outside the rural land exclusion in section 2(14)(iii)(a) of the Income-tax Act, because the population test attaches to the municipal area and not to a village unit within municipal limits; the land is therefore a capital asset. On requisitioned property, the operative date of vesting and transfer of title is the date of publication of the notification under section 7(2) of the Requisitioning and Acquisition of Immovable Property Act, 1952, since that is the statutory event that makes vesting absolute in the Central Government and ends requisition. The text states that capital gains tax treatment was upheld on that basis.

---

---

Issues: (i) Whether agricultural land situated within the jurisdiction of a municipality with the requisite population fell outside the exclusion in section 2(14)(iii)(a) of the Income-tax Act, 1961. (ii) Whether, on acquisition of requisitioned property, the date of vesting and transfer of title was governed by section 7(2) of the Requisitioning and Acquisition of Immovable Property Act, 1952.

Issue (i): Whether agricultural land situated within the jurisdiction of a municipality with the requisite population fell outside the exclusion in section 2(14)(iii)(a) of the Income-tax Act, 1961.

Analysis: The provision was construed as drawing a distinction between agricultural land in rural areas and agricultural land comprised within the jurisdiction of a municipality or similar local authority. The population requirement was treated as qualifying the municipal area, and not as preserving the identity of a village situated within municipal limits. A construction that would permit segmented village-based population claims within a municipality was rejected as anomalous and inconsistent with the object of the provision.

Conclusion: The land was a capital asset within section 2(14)(iii)(a), and the issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether, on acquisition of requisitioned property, the date of vesting and transfer of title was governed by section 7(2) of the Requisitioning and Acquisition of Immovable Property Act, 1952.

Analysis: The statutory scheme made the publication of the notification under section 7(2) the operative date on which the property vested absolutely in the Central Government and requisition ceased. The earlier approval or order under section 7(1) did not determine the date of vesting for legal purposes.

Conclusion: Title vested on publication of the notification under section 7(2), and the issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The appeal failed on both surviving questions, and the assessment of capital gains was upheld.

Ratio Decidendi: For purposes of section 2(14)(iii)(a), agricultural land within municipal limits falls within the taxable capital-asset category, and where a statute specifies notification publication as the vesting date, that statutory date governs transfer of title.

---