TMI Blog2000 (12) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 authority c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, namely, that it is legally entitled 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held not to be a local authority as : (a) it had no popular representation ; (b) it did not have a local fund ; and, (c) it did not function independently. Thereafter came the 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee to have a secretary whose appointment is made by the board. His services are lent by the board to the committee on such terms and conditions as the board may provide. All the cheques issued by the committee requires the signatures of the secretary. All these are under the Delhi 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the exercise of the functions of the board as he may think fit. (10) The board shall exercise superintendence and control over the Market Committees. (14)(a) Subject to the rules made under this Act, an estimate of the annual income and expenditure of the board for the ensuing year shall be prepared and passed by the board and submitted every year, not later than the prescribed date to the administrator for his sanction. (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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablishing the market, it can obtain loan from the administrator on such terms and conditions as he may determine. The market committee with the previous approval of the Board can obtain loans from other market committees subject to such conditions as may be made. Section 35 deals with execution of contracts. Clause 5 deals with officers and servants of the committees. Section 34 provides for the market committee s power to grant licences under the said provision. No person shall operate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htra. The relevant provisions of the Act vis-a-vis those contained in Maharashtra, Gujarat and Punjab Act can be summarised as follows : The Delhi Agricultural Produce Marketing (Regulation) Act, 1976 The Gujarat Agricultural Produce Markets Act, 1963 (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 specified area (section 3(1)) (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). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xiii) Power of administrator to amend the schedule (section 66) (xiii) Director to call for pro ceedings etc. (section 47). (xiv) Power of administrator to transfer assets etc. in certain cases (section 67) (xiv) State Government to dissolve and constitute a market committee (section 54). (xv) Approval by the administrator for write off of irrecoverable fees, etc., in certain cases (section 68) (xv) State Government to make rules (section 59). (xvi) Director to register or refuse registration of bye laws made by a market committee (section 60). (xvii) Director to call upon the market committee to make bye laws, or amend or rescind existing bye laws (section 61). (xviii) State Government to amend the Schedule (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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an election does not result in the return of required number of qualified persons to take office. (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 (iii) The chairman of a market committee to be nominated by the administrator from among the members of the committee (iv) The market committee to elect one of its elected members to be its vice-chairman (section 9) (c) The chairman of the co-operative society engaged in the business of processing or 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 or marketing of agricultural produce in the market area (c) Two representatives of the co-operative marketing societies situated in the market committee by election. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 (vi) Provision for appointment by director of administrator after normal or extended term of office of members expires (section 15A). (vii) Provision for expending the market fund for purposes other than those specified in section 40 with the previous approval of the administrator (sub-section (n) of section 40) (vii) Nomination of members by the State Government in certain circumstances (section 16). (viii) Supervision of market committee by the administrator (section 48) (viii) Removal of member by the State Government for misconduct (section 17). (ix) The power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xxi) State Government to amend the schedule (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 prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the local limits of whose jurisdiction the principal market in relation to that market committee is constituted (iv) One shall be chairman of the panchayat samiti within whose jurisdiction the marketing area is situated. (e) One member to be elected by the licensed weigh-men and measurers. (v) One shall be the president or sarpanch of the local authority within whose jurisdiction the principal market is situated. (f) One member of the Metro politan Council of Delhi to be elected by that council from amongst its members to represent the interests of consumers (vi) The Deputy Registrar of Co-operative Societies--with no right to vote. (g) Two members to be nominated by the administrator of whom one shall represent the interests of consumers (vii) The Assistant 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 admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 members of a market committee by the State Government (section 15). (vii) Provision for expending the market fund for purposes other than those specified in section 40 with the previous approval of the administrator (sub-section (n) of section 40) (vii) Filling of vacancies by the State Government (section 17). (viii) Supervision of market committee by the administrator (section 48) (viii) Fees to be levied by the market committee subject to such rules as may be made by the State Government (section 23). (ix) The power of constitution of one or more Tribunals for recovery of dues to the market committee with the administrator (section 60(4)) (ix) Surplus of market committee fund to be invested in such manner as may be prescribed (section 27). (x) Power of administrator to del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 28(xii)) (vi) Duty of officers, servants and members of market committee to furnish information to the board (section 44). (vi) Power to call for information, inspect and enforce attendance to suspend action etc. of committee with the chairman or the secretary of the board (section 33A) (vii) Board to call for proceedings of the market committee and to pass orders thereon (section 46) (vii) Power to order production of accounts and power of entry inspection and seizure with the board (section 33A) (viii) Compounding of offences with the previous approval of the chairman of the board (section 70) (viii) In case the committee fails to make bye-laws within specified period, bye laws to be made by the board (section 44(2)). (ix) Amendment, alteration, rescission of an existing bye law or adoption of a new bye law at the instance of the board and in the event of committee s failure to do the needful, the Board to register the amendment alteration etc. (section 44(3)) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 State Government (section 12B). (g) Two members to be nominated by the administrator of whom one shall represent the interests of consumers (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 (iii) The chairman of a market committee to be nominated by the administrator from among the members of the committee (iv) The market committee to elect one of its elected members to be its vic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 planning and architect to be nominated by the Central Government representative of the Health Services of the Delhi Administration to be appointed by the Central Government (section 5) ; (v) The authority shall have its own fund to which shall be credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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