TMI Blog2011 (6) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disposed of by a single judgment as the question of law involved in all the appeals is same and reads as follows: 1.Whether on the facts and in the circumstances of the case the Hon ble Tribunal was right in law in holding that the H.P. Marketing Board is a local authority within the meaning of Section 10(20) of the Income-tax Act, whereas the Marketing Board does not fulfil the ingredients of a Local Authority as defined in Section 3(31) of the General Clauses Act, and also does not satisfy the tests laid down by the Hon ble Supreme Court in Union of India vs. R.C. Jain (1981) 2 SCR 854 and followed in other cases? 2. To appreciate this question it will be appropriate to refer to Section 10(20) of the Income Tax Act as it stood at the relevant time which reads as follows: 10.In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included (1) to (19) xxxxxxxxxxxxx (20) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the inhabitants of the area. Next, they must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Next. they must be entrusted by Statute with such Governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfillment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) (supra), 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 (supra) are absent here. Firstly, the members of the respondent Corporation are not wholly or partly, directly or indirectly, elected by the inhabitants of the area. According to Section 4 of the U. P. Forest Corporation Act, the Corporation is consisted of a Chairman and eight members. The Chairman as well as the members are nominated by the State Government. Five members, so appointed, must be officers serving under the State Government and three non-officials members appointed by the State Government must be belonging to the category, who in the Government's opinion, possess experience in matter relating to preservation and development of forests. It is too tenuous to contend as was sought to be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een constituted under Section 23. Section 24 deals with the Market Committee Fund and Section 24(2)(a) reads as follows: (2)(a)Every market committee shall, out of its fund, pay to the Board, 20 per cent of the moneys received by it on account of the Board office expenses and such other expenses incurred by it in the interest of the marketing committee generally and also pay to the Government the cost of any special or additional staff employed by the Government in consultation with the committee for giving effect to the provisions of this Act in the notified market area. 10. Thus, 20% of the funds generated by the Marketing Committee have to be given to the Board. The Board can utilize these funds for a number of purposes including better marketing of agricultural produce etc. 11. Sh.Vaidya, learned counsel appearing on behalf of the assessee submits that this is a local fund and therefore the Board is a local authority within themeaning of the Act. This argument cannot be accepted. In U.P. Forest Corporation s case (Supra) the Apex Court laid down a number of tests. The first test is whether the assessee is directly or indirectly elected by the inhabitants of the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. 17. In Radhasoami Satsang vs. Commissioner of Income-Tax, (1992) 193 ITR 321, the Apex Court clearly held as follows: We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 18. In this case the Apex Court held that the res judicata does not apply to income-tax proceedings but further held that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other then the parties should not be permitted to change their position in a subsequent years. In case the Apex Court order is read as a whole these observations do not in any way debar income tax authorities from coming to a new legal conclusion. The question whether the Marketing Board is a local authority ..... 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