High Court Of Delhi
CIT vs. Deep Chand
Sections 2(14)(iii), 45
S.B. Sinha, C.J. & A.K. Sikri, J.
IT Ref. No. 478 of 1983
28th May, 2002
Counsel Appeared
Sanjiv Khanna with R.D. Jolly & Ms. Rashmi Chopra, for the Petitioner : None, for the Respondent
JUDGMENT
S.B. SINHA, C.J. :
These references at the instance of the Revenue have been made under s. 256(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’), by the Income-tax Appellate Tribunal, Delhi Bench ‘A’, Delhi (hereinafter referred to as ‘the Tribunal’), for the opinion of this Court on the following question: “Whether, on the facts and in the circumstances of the case, capital gains arising on transfer of agricultural lands in village Nangal Dewat, Delhi, is chargeable to tax ?”
2. The basic fact of the matter is not in dispute. Facts of IT Ref. No. 478 of 1983
2.1 The petitioner possessed 154 Bighas of agricultural land in Village Nangal Dewat, which is located near Delhi-Najafgarh Road adjoining Palam Airport, The said land was acquired by the Government for extension of the Palam Airport vide Notification dt. 3rd Dec., 1971, purported to be issued under s. 4 of the Land Acquisition Act. A sum of Rs. 8,55,450 by way of compensation was awarded to the petitioner by the Land Acquisition Officer vide his order dt. 20th July, 1973, whereafter possession of the said land was also taken over by the Government. However, the petitioner did not declare any income under the head ‘capital gains’ on the ground that the agricultural land owned by him was not a capital asset within the meaning of s. 2(14) of the Act and, thus, the transfer did not result in capital gains.
2.2. The Income-tax Officer (in short, ‘the ITO’), however, did not accept his submission and held that the said land was situated within the jurisdiction of Municipal Corporation of Delhi and by virtue of amendment made in the definition of ‘capital asset’ w.e.f. 1st April, 1970, the same became a capital asset, at the hands of the assessee. It was also noticed by the ITO that the petitioner had not accepted the award of the Land Acquisition Officer and filed appeals thereagainst before the Addl. District Session Judge claiming compensation @ Rs. 40,000 per Bigha. Therefore, he took the view that the fair market value of the said land transferred by the petitioner as on the date of transfer exceeded the full value of consideration declared by the petitioner in respect of the transfer by more than 15 per cent to the value declared and, on the said basis held that the provisions of s. 52(2) were applicable in the case of the petitioner. Thereafter, he sought for and obtained approval of the Inspecting Assistant Commissioner of Income-tax, Range-V(B), New Delhi (in short, ‘IAC’) for substituting the consideration of the transferred which was fixed by the ITO at Rs. 61,60,000. The ITO estimated the value of the land at Rs. 2,31,000 as on 1st Jan., 1954, whereas the assessee claimed that the value of the said land as on 1st Jan., 1954, was liable to be worked out by applying a rate of Rs. 3,500 per Bigha, but could not support his submission in respect thereof. The ITO rejected the assessee’s plea on the ground that the value of agricultural land in 1954 in the villages of Delhi was very low and held that the market value of the property as on 1st May, 1954, was Rs. 1,500 per bigha. It was also contended by the assessee before the ITO that he had expended Rs. 35,000 on the improvement of land, whereas the ITO curtailed the said claim on the ground that only a little evidence was led in support thereof and determined the capital gains arising to the petitioner at Rs. 36,05,117 as against ‘Nil’ as declared by him.
2.3. As the variation in the income was more than Rs. 1,00,000 the ITO forwarded a draft of the proposed order of assessment to the assessee. Thereagainst several objections were made.
2.4. The proposed order along with the objections received was forwarded to the IAC by the AO, who after giving an opportunity to the assessee, issued directions to the ITO. The ITO thereafter incorporated the said directions and determined the income of the appellant at Rs. 36,25,366.
2.5. Aggrieved by and dissatisfied with the aforesaid order, the assessee preferred an appeal before the AAC, which was allowed in part. The assessee again preferred an appeal before the Tribunal, which was allowed by the Tribunal.
2.6. On being moved for reference, the question as set out above, has been referred for opinion of this Court. We need not to go in great details of the facts of IT Ref. No. 479 of 1983, as the same are almost identical to IT Ref. No. 478 of 1983.
3. Sec. 2(14)(iii) of the Act reads thus : “(14) “capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include— ….. …… …… ….. ….. (iii) agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;” The aforesaid provision, in our opinion, is absolutely clear and unambiguous.
3.1. A bare perusal of the aforementioned provision would clearly go to show that ‘capital assets’ means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; and personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.
3.2. It may be true that the expression used therein is not very happy and could have been more explicit, but in terms thereof if the land is situated in an area, which is comprised within the jurisdiction of a municipality and has a population of not less than 10,000. The land must be situated in a municipality or a cantonment board. Had the intention of the law-makers been that the land situated in a village of not less than 10,000 will come within the purview of s. 2(14)(iii) of the Act, there was no reason as to why the same could not have been explicitly stated in the statute.
3.3. It is now a well settled principle of law that a literal meaning should be attributed to a statute. The golden rule of interpretation should ordinarily be adhered to.
3.4. In Gurudevdatta VKSSS Maryadit & Ors. vs. State of Maharashtra & Ors. (2001) 4 SCC 534, it has been held : “It is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning, irrespective of the consequences. It is said that the words themselves best declare the intention of the law-giver. The Courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses, if they can have a proper application in circumstances conceivable within the contemplation of the statute.” The said principle was reiterated in Harshad S. Mehta & Ors. vs. State of Maharashtra (2001) 8 SCC 257 and Dental Council of India & Anr. vs. Hari Prakash & Ors. (2001) 8 SCC 61.
3.5. Yet again in Dadi Jagannadham vs. Jammulu Ramulu & Ors. AIR 2001 SCW 3051, the Court referred to P.K. Unni vs. Nirmala Industries (1990) 2 SCC 378 : AIR 1990 SC 933 in the following lines : “15. The Court must indeed proceed on the assumption that the legislature did not make a mistake and that it intended to say what is said : See Nalinakhya Bysack vs. Shyam Sunder Haldar, 1953 SCR 533, 545 : AIR 1953 SC 148 (at p. 152). Assuming there is a defect or an omission in the words used by the legislature, the Court would not go to its aid to correct or make up the deficiency. The Court cannot add words to a statute or read words into it which are not there, especially when the literal reading produces an intelligible result. No cause can be found to authorise any Court to alter a word so as to produce a casus omissus : Per Lord Halsbury, Mersey Docks and Harbour Board vs. Henderson Brothers (1888) 13 AC 595, 602 : 4 TLR 703. “We cannot aid the legislature’s defective phrasing of an Act, we cannot add and mend, and, by construction, make up deficiencies which are left there”: Crawford vs. Spooner (1846) 6 Moore PC 1, 8, 9 : 4 Moo Ind App 179. 16. Where the language of the statute leads to manifest contradiction of the apparent purpose of the enactment, the Court can, of course, adopt a construction which will carry out the obvious intention of the legislature. In doing so “a Judge must not alter the material of which the Act is woven, but he can and should iron out the creases.” : Per Denning, L.J. as he then was, Seaford Court Estates Ltd. vs. Asher (1949) 2 All ER 155, 164. [See the observation of Sarkar, J. in M. Pentiah vs. Muddala Veeramallappa (1961) 2 SCR 295, 314 : AIR 1961 SC 1107 (at p. 1115)].”
3.6. The question referred to this Court for its opinion is no longer res integra in view of the decision of the Madras High Court in S. Hidhayathullah Sahib vs. CIT (1985) 45 CTR (Mad) 178 : (1986) 158 ITR 20 (Mad) : TC 20R.542, wherein it was held : “The section lays down two criteria : (1) that the agricultural land should be in an area within the municipality; and (2) that the area should have a population of more than 10,000. The expression “which has a population of not less than ten thousand according to the last preceding census” is intended to qualify only the “area” and not the “municipality”. However, it is not possible to go only by the language used in that provision without having regard to the object and intendment of the provision. If the legislature meant to fix a minimum limit of population for any area within a municipality or cantonment Board, it would have specified a particular area such as village, ward, street, etc., and since the legislature has left the area in a municipality undefined, it would not have prescribed a limit of population for such an unspecified or indefinite area within a municipality. It may be that a municipality may comprise of many villages, wards and streets and each assessee may claim that the limit of population is provided with reference to a village, ward or street. In such an event, the section will have no uniform application and will lead to many anomalies. 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.” Approving the aforesaid decision of the Madras High Court, the apex Court in G.M. Omer Khan vs. Addl. CIT (1992) 106 CTR (SC) 288 : (1992) 196 ITR 269 (SC) : TC 20R.536 held : “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.”
3.7. This aspect of the matter has also been considered by a Division Bench of this Court in CIT vs. Pyare Lal (1999) 151 CTR (Del) 310 : (1998) 231 ITR 785 (Del) : TC 20.2211. The question involved herein is also covered by an unreported decision passed in IT Ref. Nos. 184 & 185 of 1982, wherein Lahoti J., as his Lordship then was, by a judgment and order dt. 31st July, 1997, held : “The first question is covered by the decision of the Supreme Court in G.M. Omer Khan vs. CIT (1992) 106 CTR (SC) 288 : (1992) 196 ITR 269 (SC) : TC 20R.536 approving the decision of Madras High Court in S. Hidayatullah Sachil vs. CIT (1985) 45 CTR (Mad) 178 : (1986) 158 ITR 20 (Mad) : TC 20R.542 wherein it has been held that population of the municipality is to be taken into account for the purpose of s. 2(14)(iii)(a) and not the population in any area within the jurisdiction of municipality. The second question has to be answered in the light of the amendments made in the definition of ‘agricultural income’ in cl. 1(A) of s. 2 and the definition of ‘capital asset’ in cl. 14 of s. 2 incorporated respectively by the Finance Act, 1989, and the Finance Act, 1970, with retrospective effect from 1st April, 1970. Accordingly, both the questions are answered in the negative i.e., in favour of the Revenue and against the assessee.”
4. In this view of the matter, the question is answered in the negative, i.e., in favour of the Revenue and against the assessee. However, in the facts and circumstances of the case, there shall be no order as to costs.
[Citation : 257 ITR 756]
