TaxTMI 
TaxTMI 
1991 (8) TMI 9
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....n favour of the assessee holding that the lands acquired were agricultural lands. On question No. 4, whether, on the facts and in the circumstances of the case, the mere claim of the assessee for additional compensation can be taken into account for purpose of determining the capital gains derived by the assessee, the answer has gone in favour of the assessee and against the Revenue. The following two questions survive and are answered against the assessee : "2. Whether, on the facts and in the circumstances of the case, the interpretation given by the Tribunal based upon the definition of 'capital asset' in section 2 (14)(iii)(a) of the Income-tax Act, 1961, is correct ? 3. Whether the profits or gains arising from the transfer of 'capi....
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....which in terms meant a "village" and the population of that village was far below ten thousand. It was further maintained that the mere fact that the said area fell within the Municipality of Hyderabad, even though having population of more than ten thousand, was of no consequence. The High Court, interpreting section 2(14)(iii)(a) of the Act, opined on question No. 2 that the property acquired was a "capital asset" as the words "which has got a population of more than ten thousand" in the section would qualify only "the municipality or cantonment" and not the expression "area" and, therefore, the capital gains arising out of the sale of the land in question could not be exempted under the said section. Section 2(14)(iii)(a) is set out belo....
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....arious statutes by means of municipalities, municipal corporations, cantonment boards, etc. After their initial set up, areas by means of those laws are added to and subtracted from and subsume as such for identity, not as a separate municipal unit but part of the already set up municipal unit. Such being the scheme of things, it is difficult to accept the plea of the appellant that even though his village was falling in the municipal area of Hyderabad, it retained it identity as a village and hence an "area" so as to stand apart for the purpose of section 2(14)(iii)(a) of the Act. In S. Hidhayathullah Sahib v. CIT [1986] 158 ITR 20, the Madras High Court, following the instant judgment under appeal, held as under (at page 22): "A close re....
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....s. Therefore, it is necessary to avoid such an interpretation of the section which leads to anomalies and which will make it invalid. We have to adopt such a construction which will make the section valid and certain." This, in our view, is the correct position and has aptly and pithily been put. Nothing more is needed to be said on the subject. The interpretation put by the High Court on the provisions appears to us to be unexceptionable and rational. We affirm that interpretation. The other contention about fixing the date of passing of title in the land in the event of acquisition is just to be noticed and rejected. In the presence of sub-section (2) of section 7, there is no scope to apply subsection (1) of section 7 to determine when....