Law:

Section:

Section 2(14)(iii)(a), read with section 45, of Income-tax Act, 1961 - Capital asset - Agricultural land - Assessment year 1981-82 - Whether intention of Legislature is not to treat every local authority as a municipality but, on other hand, only those local authorities which have all trappings of municipality, can be said to be a municipality within meaning of section 2(14)(iii)(a) - Held, yes - Whether agricultural land situated within jurisdiction of Guruvayur township can be said to be land situated within jurisdiction of a municipality - Held, no - Whether such land could be treated as agricultural land - Held, yes FACTS During the assessment year 1981-82, the assessee sold agricultural land in Guruvayur township and contended that since this agricultural land could not be said to be situated within a municipal area, the transaction would not attract capital gains tax under section 45. The Tribunal accepted the assessee's contention. On reference: HELD All local authorities cannot be called municipalities. Only those local authorities which have all the trappings of a municipality can be treated as a municipality within the meaning of the section. Generally understood, municipality means a legally incorporated or duly authorised association of inhabitants of limited area for local governmental or other public purpose (Black's Law Dictionary). The above definition more or less is reflected in the provisions contained in Chapter III of the Kerala Municipalities Act. The council constituted under section 7 with the assistance of the standing committee of the council, Chairman, Commissioner, etc., will administer the provisions of the Act. The council consists of such number of members as are prescribed. They are called councillors. They are elected by the residents of the area within the jurisdiction of the municipality. The Chairman and Vice-Chairman of the municipality are elected by the members of the council The Commissioner is appointed by the Government in consultation with the council It is the duty of the Commissioner to carry into effect the resolutions of the council unless it be that the said resolution is suspended or cancelled by the Government.…

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