Law:

Section:

Section 2(14)(iii) of the Income-tax Act, 1961 - Capital assets - Agricultural land - Whether it was competent for P arliament to enact section 2(14)(iii) so as to provide for tax on capital gains arising from sale of agricultural lands - Held, yes - Whether, therefore, section 2(14)(iii) is not violative of article 14 of Constitution - Held, yes FACTS The land in question was being used for agricultural purposes and was situated within the jurisdiction of the municipal corporation ofAhmedabad. On 21-8-1965, a notification was issued under section 10(21) of the Bombay Town Planning Act sanctioning the development plan and in the development plan the land of the petitioner along with several other lands was reserved for the housing board functioning in the State of Gujarat. The lands of the petitioner was acquired for this purpose under land Acquisition Act and compensation was paid to the petitioners. The compensation amount was sought to be taxed by the income-tax authorities in view of section 2(14)(iii). The petitioner filed the petition contending that it was not within the legislative competence of Parliament to enact section 2(14)(iii ) and that, at any rate, the impugned section 2(14)(iii) as amended was violative of article 14 of the Constitution. HELD Under Article 366, which is the definition article laying down definitions of the different expressions set out in that article, those expressions have the meanings respectively assigned to them by article 366. Clause (1) of article 366 defines "agricultural income" as follows: "'Agricultural income' means agricultural income as defined for the purposes of the enactments relating to Indian income-tax". And, therefore, when one comes to entry 46 of the State List which empowers the State legislature to levy taxes on agricultural income and to entry 82 in the Union List which empowers the Union Legislature to levy taxes on income other than agricultural income, the words "agricultural income" have to be read in the light of the definition for the purposes of enactment relating too Indian income-tax. The definition in article 366 would govern also the entries in the Lists in the Seventh Schedule. Secondly,…

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