TMI Blog1995 (8) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... vision Bench of the same court. Article 285 comprises two clauses. Though clause (2) is not attracted in these matters, we may yet set out the entire article: 285. Exemption of property of the Union from State taxation.-- (1) The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. (2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State. According to clause (1), the properties of the Union of India shall be exempt from all taxes imposed by a State or by any other authority within a State except insofar as Parliament may by law provide otherwise. A municipality or a municipal corporation is certainly an authority within a State. Therefore, the municipality is not competent to levy any taxes upon the properties of the Union of India by virtue of this article. But what the Municipal Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted under the provisions of the Air Corporations Act, 1953. Air India has constructed certain buildings upon such land The Delhi Municipal Corporation levied property taxes upon the said buildings and made a demand upon Air India, questioning which it filed Writ Petition (C) No.3889 of 1975 in the Delhi High Court. The contention in this writ petition is practically the same as in the writ petition by the Authority. Air India's additional submission was that since the land upon which it has constructed its buildings is vested in the Authority, no taxes could have been levied upon Air India. Against the dismissal of the writ petition, Air India has preferred Civil Appeal No. 6699 of 1995 (arising from Special Leave Petition (C) No.7882 of 1993). The Union of India has preferred an independent appeal (arising from Special Leave Petition (C) No.5926 of 1991) against the judgment of the Delhi High Court in Writ Petition (C) No.578 of 1987. Section 123 of the Bengal Municipal Act, 1932 empowers the Commissioners to levy a rate on the annual value of the holdings. Section 128 lays down the method of determining the annual value. Tax can be levied both on land and buildings. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (2) of Section 2 of the Aircraft Act, 1934 in the following words: Aerodrome means any definite or limited ground or water area intended to be used, either wholly or in part, for the land or departure of aircraft, and includes all builidings, sheds, vessels, piers and other structures thereon or appertaining thereto. defined in clause (c) to mean, International Airports Authority of India constituted under section 3 . Section 3 provides for the constitution and incorporation of the authority. It says that with effect from the commencement of the Act, the Central Government shall constitute an authority to be called the International Airports Authority of India. Sub-section (2) says, the authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property both movable and immovable, and to contract and shall by the said name sue and be sued . The Authority comprises of certain number of members, all of whom are appointed by the Central Government. Chapter-III is entitled Property and Contracts . Section 12 in this chapter provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee in its regular service, whichever is earlier; Provided that during the period of deputation of any such employee with the Authority, the Authority shall pay to the Central Government, in respect of every such employee, such contribution towards his leave salary, pension and gratuity as the Central Government may, by order, determine: Provided further that any such employee, who has, in respect of the proposal of the Authority to absorb him in its regular service, intimated within such time as may be specified in this behalf by the Authority his intention of not becoming a regular employee of the Authority, shall not be absorbed by the Authority in its regular service. Sub-section (3) says that if any dispute or doubt arises as to which of the properties, rights or liabilities of the Central Government have been transferred to the Authority or as to which of the employees serving under the Central Government in consultation with the Authority and the decision of the Central Government thereon shall be final. Section 13 declares that any land required by the authority for discharging its functions shall be deemed to be needed for a public purpose and can be acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government. Sections 21 to 24 contain certain regulatory provisions concerning the finances of the authority. Chapter-VI entitled Miscellaneous comprises Sections 25 to 41. Section 25 creates an obligation upon the authority to prepare and submit to the Central Government, at the end of each financial year, an annual report in the prescribed form giving an account of its activities during that financial year and shall also set out therein an account of the activities which it proposes to undertake during the next financial year. Such report has to be laid before both Houses of Parliament as soon as it is submitted. Section 31 provides specifically that for the purposes of the Income-tax Act, 1961 (43 of 1961) or any other enactment for the time being in force relating to income-tax or any other tax on income, profits or gains, the Authority shall be deemed to be a company within the meaning of the Income- tax Act, 1961 (43 of 1961) and shall be liable to tax accordingly on its income, profits and gains. Sections 33 and 34 confer upon the Central Government certain powers vis-a-vis the authority to which we must refer in alittle more detail in view of the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of which default the financial position of the Authority or the administration of any airport has deteriorated; or (c) that circumstances exist which render it necessary in the public interest so to do, the Central Government may, by notification in the Official Gazette, supersede the Authority for such period, not exceeding six months, as may be specified in the notification; Provided that before issuing a notification under this sub-section for the reasons mentioned in clause (b), the Central Government shall give a reasonable opportunity to the Authority to show cause why it should not be superseded and shall consider the explanation and objections, if any, of the Authority. Sub-section (2) sets out the consequences and effects of a notification published under sub-section (1) of Section 34. With effect from the date of such publication superseding the Authority, all the members shall vacate their offices with effect from their supersession and all the powers, functions and duties of the Authority shall be exercised and discharge by such person or persons as the Central Government may direct. Clause (c) of sub-section (2) says that with effect from the date of publicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on its constitution in the year 1972. No taxes can, therefore, be levied upon such land by the Delhi Municipal Corporation. If the land cannot be taxed, the buildings thereon cannot also be taxed. So far as 'Hotel Airport Ashok' is concerned, the land upon which it is located was given on license to I.T.D.C. by the Authority. It is equally the property of the Union of India which vested in the Authority by virtue of Section 12. Moreover, the Bengal Municipal Act, 1932 provides for levy of an integrated and composite tax upon a holding - which expression is defined to mean land held under one title or agreement and surrounded by one set of boundaries by clause (21) of Section 3. The land and the building thereon cannot be dissociated from one another and hence, no tax can be levied upon the building alone if no tax can be levied upon the land. It is further submitted that the Government of India has repeatedly decided, as contemplated by Section 12(3) of the Act, that the properties concerned herein are the properties of the Union of India and thus exempt from tax. This decision was communicated to the Municipal Corporation of Delhi as well. The said decision, being a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as the case may be - both the State and Central Governments embarked upon an extensive and systematic course of activity where under several business ventures were commenced and in many cases taken over. Within a few years, however, it was realized that a business is to be carried on as a business and not in the manner of governmental activity. Accordingly, the Central and State Governments started creating corporations for carrying on these activities. In the case of major public utilities, statutory corporations were created under different enactments. For example, Road Transport Corporations under Road Transport Corporations Act, Electricity Boards under the Electricity Supply Act, 1948, Air India and Indian Airlines under the Airlines Corporation Act, Life Insurance Corporation under the Life Insurance Corporation Act and so on. In respect of several undertakings, companies were registered under the Companies Act. With a view to unable these statutory corporations and companies to carry on the activity which was hitharto carried on by the governments, the relevant properties assets and liabilities were transferred to such new corporations They were supposed to operate on bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 16 which says that it shall be the function of the Authority to manage the airports efficiently . On the basis of the said provisions learned counsel contends that the vesting of properties in the Authority is only for the purpose of managing those properties and that the ownership of those properties was not vested in the Authority. We are, however, of the opinion that the nature and character of vesting should not be determined with reference to the preamble and sub-section (1) of Section 16 alone but on a totality, i.e., on a conspectus of the provisions of the Act. Section 3(2) says that the authority shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property both movable and immpvable, and entitled to enter into contracts. It can sue and is liable to be sued in its own name. Section 12, which is the vesting provision does not contain any words of limitation. It vests all properties and other assets vested in the Central Government for the purposes of the airport and administered by the Director General of Civil Aviation immediately before the constitution of the authority in the Authority. All debts, obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt for ensuring better management of airports but the said purpose underlying the creation of the Authority cannot be read as a restriction or as a ground for curtailing the meaning of vesting. So far as Section 33 is concerned, it is a temporary measure - a regulatory manner - which has to be taken whenever it is found necessary in public interest. If the Central Government is of the opinion that in public interest, it is necessary or expedient so to do, it can direct the Authority to entrust the management of any airport to the person or persons appointed by it who shall manage the same for the limited period specified in the section subject to and under the orders of the Central Government. At the end of such period, the management of the airport reverts back to the Authority. Similarly, Section 34 provides for supersession of the authority in certain situations, viz., in a grave emergency where the authority is unable to discharge its functions or duties or where the authority has persistently made default in complying with any direction issued by the Central Government as a result of which the financial position of the authority or the administration of the authority ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the expressions owned and controlled , which means respectively the properties owned by it (i.e., acquired/constructed by it after its constitution) and those under its control (i.e., the properties which are owned by the Union of India and placed under the management of the Authority under the provisions of the Act). It is submitted that the Parliament used both the expressions to denote both kinds of properties. We cannot agree. Probably, the learned counsel are reading too much into these two words. In any event, Section 34(2)(C) does not use the expression managed , as it ought to, if the intention attributed to Parliament by the learned counsel is correct. It uses a different expression controlled by . It seems to refer to those properties which may not be owned by the Authority but are under its control on the date of supersession. From the said two words in Section 34(2)(C), no inference can be drawn which militates against the entire scheme of the Act. A circumstance common to both Sections 33 and 34, which establishes the distinct identity of the Authority is the requirement that before taking action under either of the sections, notice has to be given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the control of the IAAI. ii. Payment of Municipal taxes to the Bombay Municipal Corporation by the IAAI. Sir, I am directed to say that the International Airport Authority of India, a public sector under taking under this Ministry, has informed the Ministry that Additional Collector, Bombay Sub-urban District and the Bombay Municipal Corporation respectively are making non-agricultural assessment and levying Municipal taxes on the lands under the control of IAAI at Bombay Airport. Sometimes ago, this Ministry received a letter from the Additional Collector, Bombay Sub-urban District stating that the IAAI is subject to non-agricultural assessment for the lands under its control at Bombay Airport (No. C/Desk/2/8A/826 dt.03.05.1980). 2. This matter was referred to the Union Ministry of Law, Justice Company Affairs for legal opinion. A copy of the legal opinion received is enclosed. It may be seen from the legal opinion received that the property vested with the IAAI continues to be the property of the Government of India and is exempt from state taxation. 3. In view of this, it is requested that suitable instructions be issued to the Additional District Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the properties of the Union, the income arising therefrom should also be the income of the Union and not the income of the authority. The dichotomy in the argument of the appellants is understandable. When Section 31 says that the income, profits and gains of the authority shall be liable to tax under the Income Tax Act, it means clearly that it shall be assessed according to the provisions of that Act which includes Section 32 providing for depreciation on the assets from which the income arises. As a matter of fact, the Authority has been claiming and obtaining the benefit of Section 32 of the Income Tax Act, which it could have claimed only if it were the owner of those assets. Having done that over a period of more than twenty years, the Authority cannot now turn round - when it is sought to be taxed under the relevant Municipal Corporation Act - and say that those properties do not belong to it. The shifting stands adopted by the Authority to suit its convenience are too self-evident to call for any emphasis. The decision of the Constitution Bench of this Court in Andhra Pradesh State Road Transport Corporation v. The Income Tax Officer (1964 (7) S.C.R.17) - a case arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upersession of the 1971 Act. We are told that the 1994 Act has come into force on and from April 1, 1995. Section 3 of the Act constitutes an authority called Airports Authority of India . Sub-section (1) of Section 13 says that on and from the appointed day, the under takings of the International Airports Authority (i.e., the authority constituted under Section 3 of the 1971 Act) shall be transferred to and vest in the Authority constituted under Section 3 of the 1994 Act. Sub-section (2) of Section 13 makes it clear that the undertaking of the International Airports Authority which is transferred to and which vests in the Authority under sub-section (1) shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, real or personal, corporeal or incorporeal, present or contingent, of whatever nature and where so ever situate, including lands, buildings, machinery, equipments, works, workshops, cash balances, capital reserves, reserve funds, investments, tenancies, leases and book debts and all other rights and interests arising out of such property as were immediately before the appointment day in the ownership, possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot, therefore, invoke the immunity created by Article 285(1) of the Constitution. The levy of property taxes by the relevant Municipal bodies is unexceptionable. In view of our conclusion in the preceding para, it is unnecessary to go into the other question raised, viz., whether the municipality can levy tax upon the building where it cannot levy tax upon the land upon which the building stands. The Calcutta high Court has expressed a view that not all the land in the possession of the I.T.D.C. (pursuant to the license granted to it by the Authority) is within the limits of the Dum Dum Municipality. Since this finding appears to be not based on any definite material, we leave this question open for decision by the appropriate authorities at the appropriate stage. In any such proceedings, the finding of the High Court aforesaid shall not operate as res judicata. For the above reasons, Civil Appeal Nos. 6698-6700 of 1995 (arising out of S.L.P.(C) Nos.1176 of 1991, 7882 of 1993 and 5926 of 1991) are dismissed and Civil Appeal No. 6696 of 1995 (arising out of S.L.P.(C) No.5337 of 1988) is allowed. No costs. CIVIL APPEAL NO.6701 OF 1995 (ARISING OUT OF S.L.P.(C) NO.791 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
