TMI Blog1998 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... r better preservation, supervision, development of forest and better exploitation of forest produce within the State of Uttar Pradesh. It took over the work which was formerly done by the forest contractors and its income was from the exploitation of forest produce and sales thereof. These appeals relate to the assessment years 1977-78, 1980-81 and 1984-85. During the course of assessment proceedings, the respondent had claimed its status to be that of "local authority" and, therefore, its income was liable to be exempted from levy of tax by virtue of section 10(20) of the Act. The Assessing Officer rejected the claim and, in respect of the assessment years 1977-78 and 1980-81, he taxed it in the status of "artificial juridical person" and in respect of the year 1984-85, as a "company". The respondent then filed appeals in respect of the years 1977-78 and 1980-81 and the Commissioner of Income-tax (Appeals), following an earlier decision of the Allahabad High Court in Writ Petition No. 1568 of 1977 for the assessment year 1976-77, came to the conclusion that the respondent was a local authority and as such its income was exempted from tax. This order was challenged in appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund of the Corporation is regarded as a local fund. It was contended that the respondent satisfied the criterion of local authority as laid down by this court in R. C. Jain's case, AIR 1981 SC 951, and, therefore, the decision of the High Court calls for no interference. On the question, whether the Corporation exists and functions under a legal obligation for charitable purposes as defined by section 2(15) of the Act and, therefore, its income is exempt under section 11(1)(a) of the Act reliance was placed on the decision of this court in CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1. We will first consider the question as to whether the respondent is entitled to exemption under section 10(20) of the Act. The said clause reads as under : "the income of a local authority which is chargeable under the head 'Income from house property', 'Capital gains' or 'Income from other sources' or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Merely because the U. P. Forest Corporation Act regards the respondent as a local authority, that would not, in law, make the respondent a local authority for the purposes of section 10(20) of the Act. Whether the respondent is a local authority or not has to be examined without regard to the fact that section 3(3) of the U. P. Forest Corporation Act regards it as a local authority. The test for determining whether a body is a local authority had been laid down by this court in R. C. Jain's case, AIR 1981 SC 951; [1981] 2 SCR 854. In the context of applicability of the Bonus Act, 1965, the question which arose there was whether the Delhi Development Authority was a local authority. In construing the meaning of the expression "local authority" as defined in section 3(31) of the General Clauses Act, it was observed by this court at pages 857-858 of [1981] 2 SCR as follows (page 952 of AIR 1981 SC; page 286 of 58 FJR) : "Let us, therefore, concentrate and confine our attention and enquiry to the definition of 'local authority' in section 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of section 3(31) suggests that an authority in order to be a loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. Jain's case, AIR 1981 SC 951 was then followed in Calcutta State Transport Corporation's case [1996] 219 ITR 515 (SC) where the assessee had contended that it was a local authority. While holding that the definition of Corporation was not similar to the definition of the Delhi Development Act, it was observed as follows : "We do not think that the said decision is of any help to the assessee herein. The assessee is a road transport corporation constituted to render road transport services in the State. Sections 18 and 19 of the Road Transport Corporations Act which set out the general duty and powers of the corporation establish clearly that the corporation is meant mainly and only for the purpose of providing an efficient, adequate, economical and properly co-ordinated system of road transport services in the State or part of it, as the case may be. It has no element of popular representation in its constitution. Its powers and functions bear no relation to the powers and functions of a municipal committee, district board or body of port commissioners. It is more in the nature of a trading organisation. Merely because it has a fund or for that matter merely because it is cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ejusdem generis is not applicable because there is no distinct genus or category running through the bodies named earlier. The local authorities which are specifically mentioned in section 3(31) of the General Clauses Act clearly can be regarded as local bodies which are intended to carry on self-government. It is for this reason that this definition states that such an authority must have control or management of a municipal or local fund. Municipal committee, district board, body of port commissioners are entities which carry on Government affairs in local areas and they would give colour to the words "other authorities" occurring in section 3(31). To put it differently, "other authority" referred to in section 3(31) must be similar or akin to municipal committee, district board or body of port commissioners. In R. C. Jain's case, AIR 1981 SC 951, at least five attributes or characteristics of an authority falling under section 3(31) of the General Clauses Act have been mentioned. At least three of the five attributes mentioned in the passage quoted above from R. C. Jain's case, AIR 1981 SC 951, are absent here. Firstly, the members of the respondent-Corporation are not wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is a local authority, our concern is only to find out whether the public authority is authorised by statute to make a compulsory exaction of money and not with the further question whether the money so exacted is to be utilised for specific or general purposes. In the second place the Delhi Development Authority is constituted for the sole purpose of the planned development of Delhi and no other purpose and there is a merger, as it were, of specific and general purposes. The statutory situation is such that the distinction between tax and fee has withered away. In the third place we see no reason to hold that the charge contemplated by section 37 is a fee and not a tax". (emphasis added) In the case of the respondent-corporation, the Act does not enable it to levy any tax, cess or fee. It is the income from the sale of the forest produce which goes to augment its funds. It has no power under the Act of compulsory exaction such as taxes, fees, rates or charges. Like any commercial organisation it makes profit from sale of forest produce and it has been given the power to raise loans. Whereas municipal or local funds are required to be spent for providing civic amenities, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77-78 and 1980-81 and that of the assessing authority for the assessment year 1984-85. In our opinion, the proper course to adopt, while allowing these appeals, would be to require the assessing authority to examine the question as to whether the respondent is entitled to the benefit under section 11(1) of the Act. Before concluding, we would like to observe that the High Court ought not to have entertained the writ petitions when adequate alternative remedy was available to the respondent. Under the peculiar facts and circumstances of the present case and inasmuch as the litigation between the parties has been going on for a number of years, we do not think it will be appropriate to dismiss these appeals on this ground at this late stage. We, however, emphasise that petitioners should not normally short-circuit the procedure provided by the taxing statute and seek the redress by filing a petition under article 226 of the Constitution of India. For the aforesaid reasons, these appeals are allowed and the decision of the High Court is set aside. While holding that the respondent is not a local authority whose income is exempted from tax under section 10(20) of the Act, we, however ..... X X X X Extracts X X X X X X X X Extracts X X X X
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