SING HAI RAKESH KUMAR versus UNION OF INDIA AND ORS.

Citation: [2000] SUPP. 5 S.C.R. 111 · Decided: 28-11-2000 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed
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Judgment (excerpt)

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SING HAI RAKESH KUMAR 
A 
v. 
UNION OF INDIA AND ORS. 
NOVEMBER 28, 2000 
[S.P. BHARUCHA, DORAISWAMY RAJU AND RUMA PAL, JJ.] 
B 
Income Tax Act, 1961: Sections 2(/A) and 2(14) (iii) (a) and (bj. 
Income Tax-Capital gains tax-AYs 1981-82 and 1983-84-
Agricultural lands situated within municipal limits-Sale of-Profits arising C 
from-Exigibility to capital gains tax-Held, income arising from transfer 
of agricultural lands falls outside the ambit of 'agricultural income' -Hence, 
such income liable lo capital gains tax-Income Tax Act, 1922-ss.2 (1) (A) 
and 2(4A) (iii). 
Constitution of India, 1950: 
Article 366, Schedule VII list II Entry 46-Agricultural income-
Definition of-Parliament's Power to define-Held: Parliament has power to 
define what agricultural income is-Hence, amendment of S.2 (14) of the 
Income Tax Act, 1961 is good in law. 
Words and Phrases: 
"Agricultural Income"-Meaning of-In the context of Art. 366(/) of 
the Constitution of India, 1950. 
D 
E 
Appellant-assessee, in the previous years relating to Assessment Years F 
1981-82 and 1983-84, sold agricultural lands, which were situated within a 
municipal area and made capital gains thereon. Income Tax Officer made the 
assessee liable to capital gains tax. But the Income Tax Appellate Tribunal 
held that the profit on the sale of agricultural lands was not capital gains 
under the Income Tax Act, 1961. High Court allowed the Revenue's appeal. G 
Hence this appeal. 
Dismissing the appeal, the Court 
HELD: I. Income arising from the transfer of agricultural land that 
111 
H 
112 
SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R. 
A falls within the terms of items (a) and (b) of sub-clause (iii) of clause (14) of 
Section 2 of the Income Tax Act, 1961 falls outside the ambit of revenue 
derived from land and, therefore, outside the ambit of 'agricultural income' 
as defined in Article 366(1) of the Constitution oflndia, 1950. Such income, 
therefore, is liable to capital gains tax chargeable under Section 45 of the 
B Income Tax Act [116-CJ 
Manubhai A. Sheth v. ND. Nirgudkar, 128 ITR 87 (Born.), referred to. 
2.1. Under the terms of the Constitution, Parliament is empowered to 
legislate to say what 'agricultural income' means. What Parliament says in 
this regard in the statute then current relating to income tax is the definition 
C of 'agricultural income' for the purpose of the Constitution. In regard to 
such agricultural income the States may legislate. In regard to all other 
incomes it is for the Parliament to legislate. [115-B] 
Bajaya v. Gopikabai, [1978) 2 SCC 542 and Karimtharuvi Tea Estates 
D Ltd v. State of Kera/a, [1963) 1 Supp. SCR 823, relied on. 
2.2. Parliament has the power to define what agricultural income is in 
the Income Tax Act; the amendments of sub-sections (2) and (14) of Section 
2 of the Income Tax Act are, therefore, good in law. The effect is that the 
assessee is liable to pay capital gains tax on the sale of his lands within the 
E municipal limits. [116-D) 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 15619-15620 
of 1996. 
From the Judgment and Order dated 8.4.96 of the Madhya Pradesh High 
F Court in W.P. No. 31196 and M.C.C. No. 735 of 1987. 
G 
B.Sen, Prakash Shrivastava and Ms. Pradipti Shrivastava for the 
Appellant. 
M.L. Verma, Pritish Kapoor, S.W.A. Qadri, Dhonajay Kr. Singh and 
Sushma Suri for the Respondents. 
The Judgment of the Court was delivered by 
BHARUCHA, J. Under challenge are the orders ofa Division Bench of 
the High Court of Madhya Pradesh dismissing a writ petition filed by the 
appellant•assessee and answering against him a reference made by the Income 
H Tax Appellate Tribunal of the following question : 
S.R. KUMAR v. U.O.L [BHARUCHA, .I.] 
113 
"Whether on the facts and in the circumstances of the case, the A 
Tribunal was right in holding that the profit arising from the sale of 
agricultural lands did not amount to capital gains within the meaning 
of Income Tax Act, 1961 ?" 
The reference related to the Assessment Years 1981-82 and 1983-84. 
B 
In the previous years relevant to the Assessment Years 1981-82 and 
1983-84 the assessee sold agricultural lands which were situated within the 
municipal limits of Bina. He made capital gains thereon and the Income Tax 
Officer made him liable to capital gains tax. The first appellate authority agreed 
with the Income Tax Officer and the assessee approached the Tribunal. The 
Tribunal held that the profit on the sale of agricultural lands wa
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