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TMI Blog2000 (12) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10(20) of the Income-tax Act read with section 3(31) of the General Clauses Act, 1897 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding the income of Agricultural Produce Marketing Committee, Azadpur, Delhi, is not taxable under the Income-tax Act, 1961 ?" For determination of the questions reference to the factual aspects, as detailed in the statements of cases are, without unnecessary details, as follows : The assessee-committee was formed under the Delhi Agricultural Market Produce Marketing (Regulation) Act, 1976 (in short "the Marketing Act"). It was entrusted with the duty of providing facilities for marketing of agricultural produce in Azadpur, Subzi Mandi, Delhi, and to do other acts in relation to the superintendence, direction and control of markets for regulating marketing of agricultural produce. The Assessing Officer was of the view that it was not a local authority as claimed but was an association of persons. Accordingly, the claim that its income was exempt from tax was turned down. The matter was carried in appeal before the Commissioner of Income-tax (Appeals) (in short "the CIT(A)"). The said author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to or entrusted by the Government with, the control and management of a municipal or local fund. (iii) It must have a separate legal existence as a corporate body. (iv) It must not be a mere governmental agency but must be a legally independent entity. (v) It must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. (vi) It must enjoy a certain degree of autonomy, with freedom to decide for itself questions of policy affecting the area administered by it. (vii) The autonomy may not be complete and the degree of the dependence may vary considerably but an appreciable measure of autonomy must be there. (viii) It 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 inhabitant of the locality, like health and education services, water and sewerage, town planning and development roads, markets, transportation, social welfare services, etc. (ix) Broadly, it may be entrusted with the performance of civic duties and functions which would otherwise be governmental duties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the apex court in CIT v. U. P. Forest Corporation [1998] 230 ITR 945. Again the principles in R. C. Jain's case [1981] 58 FJR 284 ; AIR 1981 SC 951 were reiterated and by way of illustration certain other parameters were indicated as under : "(v) 'Other authority' referred to in section 3(31) of the General Clauses Act must be similar or akin to municipal committee, district board or body of port commissioners. (vi) Such an authority must have control or management of a municipal or local fund. (vii) The members of the local authority should be wholly or partly, directly or indirectly, elected by the inhabitants of the area. (viii) Local authority must have functions and duties which are usually entrusted to the municipal bodies, such as providing, civic amenities to the inhabitants of the locality like health, education, town planning, markets, transportation, etc. (ix) It must have the power to raise funds by levy of taxes, rates, charges or fees. (x) The expression 'local fund' occurring in section 3(31) of the General Clauses Act would mean the fund of a local self-Government. The fund should consist of any funds flowing directly from any taxing power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi Agricultural Produce Marketing (Regulation) General Rules, 1978 (in short "the Rules"). Finalisation of budget requires previous sanction of the board for approval. Thus, according to learned counsel for the Revenue, it is established beyond a shadow of doubt that the market committee is not a local authority. The major tests which can be carved out from the decision in R. C. Jain's case [1981] 58 FJR 284; AIR 1981 SC 951 and subsequent decisions are essentially as follows : (i) The authorities must have separate legal existence as corporate bodies and autonomous status. (ii) Must function in a defined area and must ordinarily, wholly or partly, directly or indirectly elected by the inhabitants of the area. (iii) It performs governmental functions such as running a market, providing civic amenities, etc. (iv) They must have power to raise funds for the furtherance of their activities and the fulfillment of their projects by levying taxes/fees, this may be in addition to money provided by Government. Control and management of the fund must vest with the authority. A few provisions of the Act which throw some light on the controversy need to be noted. As the preamble t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The administrator may sanction the budget of the board with such alterations or modifications as he may think fit and the budget so altered or modified by the administrator shall be the budget of the board for the year." Sections 8 and 9 deal with constitution of the market committee and composition of market committee. Section 10 deals with incorporation of the market committee and reads as follows : "10. Incorporation of market committees.-Every market committee shall be a body corporate by such name as the administrator may, by notification, specify and shall have perpetual succession and a common seal and may, in its corporate name, sue and be sued and shall, subject to such restrictions as are imposed by or under this Act, be competent to contract and to acquire, hold and dispose of property, both movable and immovable, and to do all other things necessary for the purposes for which it is constituted." Clause (4) deals with powers and duties of the market committee and section 25 reads as follows : "25. Powers and duties of market committee.-(1) Subject to the provisions of this Act, it shall be the duty of a market committee- (i) to implement the provisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erate in the market without a licence. There is compulsion to obtain a licence and similarly a power to suspend a licence. Section 39 deals with market fund, its custody and investment. Sub-sections (1) and (2) read as follows : "(1) All fees and other money received by a market committee under this Act (except the amount of such fee credited to the election fund under section (12)) all sums realised by way of penalty (otherwise than by way of a fine in a criminal case), all loans raised by the administrator to the committee shall form part of a fund to be called the market fund. (2) The amount to the credit of a market fund shall be kept or invested in such manner as may be prescribed." Section 40 deals with the purpose for which the market fund may be expended. It may be noted that in Krishi Utpanna Bazar Samiti v. ITO [1986] 158 ITR 742, the Bombay High Court examined the question whether the market committee constituted under the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963, to which reference has been made, was a local authority. After examining various clauses of the Act, it was held that the committee was a local authority. Reliance was placed on cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Declaration of intention by notification for regulating purchase and sale of agricultural produce by the director (section 5). (ii) Establishment of markets by the director (section 6) (ii) Declaration of market areas by the director (section 6). (iii) Constitution of market committees by the administrator (section 8) (iii) Director to declare market, market yards and market proper (section 7). (iv) Nomination of persons by the administrator in certain circumstances (section 14) (iv) Director to establish a market committee for every market area (section 9). (v) Removal of members for misconduct by the administrator on the recommendation of the market committee (section 15) (v) Acceptance of resignation of members of the market committee (section 12). (vi) The market committee to levy and collect such fee not being in excess of or less than an amount determined by the administrator by notification (vi) Removal of any member of the market committee by the director on the recommendation of the market committee (section 13). (vii) Provision for expending the market fund for purposes other than those spec ified in section 40 with the previous approval of the administra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 36(a)) payment of contribution to the board by a market committee out of the market fund (section 39(3)(a)) (v) Inspection enquiry by the board and submission of statements to the board (section 43) (vi) Duty of officers, servants and members of market committee to furnish information to the board (section 44). (vii) Board to call for proceedings of the market committee and to pass orders thereon (section 46) (viii) Compounding of offences with the previous approval of the chairman of the board (section 70) 3. The measure of popular representation in a market committee (i) Composition of market committee : (i) Every market committee shall consists of the following : (a) Six members to be elected by the agriculturists residing in the market area and holding agricultural land in the Union Territory of Delhi with the provision for nomination of 50 per cent. of such members by the administrator in certain cases. (a) Eight agriculturists to be elected by members of managing committees of co-operative societies dispensing agricultural credit in the market area . (b) Two members to be elected by the traders and commission agents holding licences to operate as such in the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of agricultural produce in specified area (section 3(1)) (i) Notification of intention by the State Government to regulate the marketing of agricultural produce in such area as may be specified in the notification (section 3). (ii) Establishment of markets by the director (section 6) (ii) Declaration by the State Government by notification of regulation of marketing of specified agricultural produce and market area (section 4). (iii) Constitution of market committees by the administrator (section 8) (iii) Establishment of markets by the director (section 5). (iv) Nomination of persons by the administrator in certain circumstances (section 14) (iv) Regulation of marketing of agricultural produce (section 6). Licence to be granted by the director when a market committee has not yet started functioning (section 6). (v) Removal of members for misconduct by the administrator on the recommendation of the market committee (section 15) (v) First meeting of a market committee to be held on a date fixed by the director (section 15). (vi) The market committee to levy and collect such fee not being in excess of or less than an amount determined by the administrator by notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule (section 62). 2. Control by the board (i) Money to be borrowed by a market committee with the previous sanction of the board (section 29) (i) Powers and functions of board (section 34). Section 34(i), (ii), (iv), (v), (vi), (viii), (ix). (ii) Grant of allowance for regulation of marketing produce by the director who is ex-officio secretary of the board when a market committee has not been constituted or has not started functioning (section 33(a)) (ii) Inspection of construction works undertaken by market committees (section 34K). (iii) Suspension or cancellation of licence by the director (section 35(2)) (iii) Payment of contribution to the board by every market committee (section 34M). (iv) Appeal to the board (section 36(a)) payment of contribution to the board by a market committee out of the market fund (section 39(3)(a)) (iv) The board to make regulations with the previous app roval of the State Govern-ment (section 59A). (v) Inspection enquiry by the board and submission of statements to the board (section 43) (vi) Duty of officers, servants and members of market committee to furnish information to the board (section 44). (vii) Board to call for proceed ings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Cotton Extension Officer with no right to vote. (ii) When the market committee is constituted for the first time all the members thereof, including chairman and the vice-chairman to be nominated by the administrator (b) When a market committee is constituted for the first time all the members thereof and the chairman and vice-chairman shall be nominated by the State Government. (iii) The chairman of a market committee to be nominated by the administrator from among the members of the committee (c) On the failure to elect members within the stipulated period by the co-operative society, panchayat samiti local authority etc. the director shall appoint on behalf of such persons the required number of persons qualified to be elected (section 13). (iv) The market committee to elect one of its elected members to be its vice-chairman (section 9) The Delhi Agricultural Produce Marketing (Regulation) Act, 1976 The Punjab Agricultural Produce Marketing Act, 1961 (1) (2) (3) 1. The functions of administrator/ director/the State Government by way of control, etc. (i) Administrator by notification to declare his intention of regulating marketing of agricultural produce in sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67) (xv) Approval by the administrator for write off of irrecoverable fees, etc., in certain cases (section 68) 2. Control by the board (i) Money to be borrowed by a market committee with the previous sanction of the board (section 29) (i) Removal of any office-bearer by a majority of two-thirds of the total members of the committee subject to confirmation by the board (section 16(2)) (ii) Grant of allowance for regulation of marketing produce by the director who is ex-officio secretary of the board when a market committee has not been constituted or has not started functioning (section 33(a)) (ii) Powers of the committee if delegated to one member by the market committee, the resolution shall operate only after its approval by the Board (section 19, proviso) (iii) Suspension or cancellation of licence by the director (section 35(2)) (iii) Every committee shall have its secretary who is appointed by the board as servant and is lent to the committee. The committee to employ other officers and servants with the previous approval of the secretary of the board (section 27(20)) (v) Inspection enquiry by the board and submission of statements to the board (section 43) (v) If ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the co-operative society engaged in the business of processing on marketing of agricultural produce in the market area with the provision that in the absence of such co-operative society the administrator to nominate a member to represent the persons doing the business of processing of marketing of agricultural produce in the market area (b) Where the committee consists of 16 members : (i) nine members from the producers; (ii) four members from licensees under section 10. (d) One member to be elected by the members of other local authority within the local limits of whose jurisdiction the principal market in relation to that market committee is constituted (iii) Two members from licensees under section 13. (e) One member to be elected by the licensed weigh-men and measurer's. 2. During the period of super-session of the committee all powers, duties of the committee to be exercised and performed as such by the Gazetted officers as the Government may appoint. (f) One member of the Metropolitan Council of Delhi to be elected by that council from amongst its members to represent the interests of consumers 3. Constitution of committees by nomination for a period by the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every purchaser of agricultural produce sold in the market area. A conspectus of various provisions of the Delhi Development Act, which formed the foundation of R. C. Jain's case [1981] 58 FJR 284 ; AIR 1981 SC 951 will provide an answer to the question of parity between that case and the issue under examination in this case. A synopsis of the provisions is as follows : The Delhi Development Act (i) Rule means a rule made under this Act by the Central Government (section 2(1)); (ii) The Central Government shall appoint the DDA which shall consist inter alia of the following : A chairman who shall be the administrator of the Union Territory of Delhi. A vice-chairman ; A Finance and Accounts Member ; An engineer all to be appointed by the Central Government (section 3) ; Two representatives of Municipal Corporation of Delhi ; Three representatives of Metropolitan Council for the Delhi Government, etc. ; (iii) The Central Government may appoint two suitable persons, as secretary and chief accounts officer of the authority (section 4) ; (iv) Advisory council of the authority shall consist inter alia of the chairman of the authority and representatives having knowledge of town ..... X X X X Extracts X X X X X X X X Extracts X X X X
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