Judgment

Rajendra Babu, J.-This appeal is by special leave against an order passed by the High Court of Andhra Pradesh in a batch of cases. By that order, the High Court consi­dered the effect of a combined reading of Sections 2(1A) and 2(14) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and has held that (i) capital gains arising from sale of land used for agricultural purposes would be revenue derived from such land and, therefore, ‘agricultural income’ within the definition under Section 2(1A) of the Act with the result that Parliament would have no legislative competence to tax such agricul­tural income; and (ii) amended Section 2(14)(iii) should be read down to preserve its constitutionality. All land used for agricultural purposes whether situated in areas mentioned in Section 2(14)(iii)(a) and (b) should be held to be excluded from the definition of capital asset. Thus Section 2(14)(iii) should read as excluding from capital asset agricultural land in India, not being land situated in the areas mentioned therein. Upon such interpretation, Section 2(14)(iii) does not enable levy of tax on capital gains arising from transfer of land which is used for agri