(1) For the purposes of this Act, the area comprised within the limits of the municipal area of Jammu and Srinagar shall be limits of Municipal Corporation of Jammu and Srinagar respectively.
(2) The Government may, from time to time, by a notification in the [Government Gazette], declare any municipality to be a Corporation ; provided that no municipality shall be so declared to be a Corporation unless the population thereof exceeds four lacs.
(3) The Government may, from time to time, after consultation with the Corporation, by notification in the [Government Gazette], alter the limits of the municipal area of the Corporation declared under sub-section (1) and (2) so as to include therein or exclude therefrom such areas as may be specified in the notification.
(4) When the limits of the municipal area are altered, so as to include therein any area, except as the Government may otherwise by notification direct, all rules, regulations, notifications, bye-laws, orders, directions and powers issued or conferred and all taxes imposed under this Act and in force in the municipal area, shall apply to such area.
(5) When a local area is excluded from the Corporation under sub-section (3),––
(a) this Act and all notifications, rules, bye-laws, orders, directions and powers issued, made or conferred under this Act, shall cease to apply thereto ; and
(b) the Government shall after consulting the Corporation, frame a scheme determining what portion of the balance of the Corporation fund and other property vesting in the Municipal Corporation shall vest in the Government and in what manner the liabilities of the Corporation shall be apportioned between the Corporation and the Government, and on the scheme being notified the property and liabilities shall vest and be apportioned accordingly.