Assessee had sold agricultural land and claimed exemption. AO held that land was situated at distance of 5 kms from limits of Municipal Corporation. AO held that it was not excluded from definition of term capital asset hence liable to capital gains tax. CIT (A) allowed the appeal of the assessee. Tribunal held that sale of agricultural land is a   capital asset on ground that land in question was situated at distance of 5 kms from limits of Municipal Corporation and, therefore, it was not excluded from definition of term capital asset. On appeal High also affirmed the order of the Tribunal by observing that a perusal of s. 2(14)(iii) would show that exclusion of agricultural land from term ‘capital asset’ would again be excluded if land falls either under (a) or (b) thereof-Sub-clause (a) would cover any agricultural land which was comprised within jurisdiction of municipality or cantonment board etc. and which had a population of not less than ten thousand. If agricultural land under reference was one which was comprised within jurisdiction of a municipality or cantonment etc. board having population of not less than ten thousand, it would not fall outside definition of capital asset. Clause (b) would cover any area within such distance not more than 8 kms from local limits of municipality or cantonment board etc. referred to in item (a) as a Central Government may specify under a notification. An agricultural land may fall either in clause (a) or clause (b) or neither but not both. If it happens to be a land comprised within jurisdiction of municipality or cantonment board etc., having population not less than ten thousand, it would fall under clause (a).  When a particular land was not comprised within jurisdiction of municipality or cantonment board etc., as referred to in sub-clause (a), question of applicability or inapplicability of sub-clause (b) would arise. Reference to words “any municipality or cantonment board referred to in item (a)” in sub-clause (b) must be to “any municipality or cantonment board which had a population of not less than ten thousand” which is phrase used in sub-clause (a). Accordingly the appeal of the assessee is  dismissed. (AY. 2009 -10)