TMI Blog1961 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Road Transport Corporations Act (LXIV of 1950), by a notification issued by the State Government under that Act and has been functioning with effect from January 11, 1958. Prior to the formation of the Corporation, the Road Transport was a department of the Government of Hyderabad and subsequently after the integration that of the Government of Andhra Pradesh and during those years it was treated as being exempt from income-tax. In response to a notice under section 22 of the Indian Income-tax Act issued by the Income-tax Officer, B-1, B-Ward and served on January 29, 1959, a return was furnished under protest stating that the income of the Corporation does not attract liability to tax under the Indian Income-tax Act. Before the Income-tax Officer it was contended on behalf of the Corporation that its status does not fall under any of the five categories of assesses specified in section 3 of the Indian Income-tax Act, viz., individual, Hindu undivided family, firm, company or association of persons and since there is no other category of assesses mentioned in the Act the Corporation cannot be assessed. Secondly, it was contended that inasmuch as the net income of the Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 674: In our view, the petition filed by the appellant should not have been entertained. The Income-tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the income-tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. That was a case where the Income-tax Officer had discovered that the firm carried on transactions in different commodities in fictitious names and had failed to disclose substantial incomes earned by it. The appellant claimed that no penalty could be levied on the ground that, after the dissolution of the firm by the death of one of the partners, no order of penalty could be passed against the firm. Learned Advocate-General tried to distinguish this case by reference to other Supreme Court decisions and contends that where there is a total lack of jurisdiction in a tribunal to entertain a matter, the remedy by way of writ petition will not be denied. In any case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences. Dealing with a similar argument as that raised by the learned Solicitor-General, viz., that the company would have sufficient opportunity to raise the question before the appellate officer or the Appellate Tribunal or in the High Court under section 66(2) of the Indian Income- tax Act, their Lordships observed that the existence of such alternative remedy is not, however, always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action . It would be unnecessary to multiply authorities on this point which are innumerable and many. The case of the supreme Court just referred to appears to us to be a stronger one in favour of the proposition that were the applicant raises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise. We would first take up the third and fourth points before dealing with the first two general questions. It appears to us that the contention of the learned Advocate- General that section 3 of the Income-tax Act does not apply to the Corporation or that it is a local authority within the meaning of section 4(3)(iii) has little force. The Income-tax Officer had declared it an association of persons; but we cannot accept the view inasmuch as, even on the assumption that the corporations could be included in the term persons , the use of the plural would show that there must be more than one person, that is, either several corporations or a corporation and other persons. Merely because a corporation has the power to issue shares and debentures to the public in case it needs further funds for its working, and many comprise of shareholders, that cannot by itself make the corporation an association of persons. If that be so, the militates against the very principle of incorporation which makes it a body corporate and a juristic person. While this is so, the assumption that an individual should be a human being alone or that an a association of persons should consist of hum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons within the meaning of the section. In Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax [1931] 5 I.T.C. 484, the trustees were made a body corporate by Act 4 of 1913 for purposes of executing the trust, the powers and purposes specified in the Act and were to hold properties and manage the same. The income-tax authorities had assessed the trustees as an association of persons; but Beaumont C.J. held that the corporation was an individual and not an association of persons. The question of the legality of the assessment was taken to the Privy Council and although this point was not directly raised there, the judgment of the Bombay High Court was affirmed. Leach C.J., in another case from Madras in Commissioner of Income-tax v. Salem District Urban Bank Ltd. [1940] 8 I.T.R. 269, adopted the views of Beaumont C.J. and observed at page 278-79: If a corporate body created by a statute is an individual within the meaning of the section and I hold that it is--a co-operative society registered under the Co-operative Societies Act must fall within the same category. It is a corporate body and has perpetual succession. I consider that it is not reasonable to supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that since the Government has declared the funds of the Corporation to be a local fund in its Notification G.O. Ms. No. 522 dated May 16, 1958, the Corporation is a local authority. As pointed out by the Income-tax Officer, the declaration of the Government is specifically for the purposes of free remittance facilities under the remittance facilities scheme of the Reserve Bank of India and not for all purposes. It is an advantage given to this Corporation, but that by itself does not in any view of the matter make it a local authority. The main question which has now to be considered is, on the basis that the Corporation is an individual, is it immune from taxation either on the ground that it is State-owned or State-controlled attracting the immunity under article 289 of the constitution, or as the provisions of the Road Transport Corporations Act are repugnant to the Income-tax Act, to the extent of that repugnance, the Income-tax Act should be deemed to have been impliedly repealed and therefore inapplicable to this Corporation. The argument of the learned Advocate-General in respect of the first point of the main question is that the State can carry on by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the doctrine tersely thus: The Sovereignty of a State extends to everything which exists by its own authority, or is introduced by its permission; but does it extend to those means which are employed by Congress to carry into execution powers conferred on that body by the people of the U.S.A.? We think it demonstrable that it does not. The principle which these American authorities establish may, however, be stated only to see to what extent our Constitution has recognised this principle. In 84 Corpus Juris Secundum, page 499-7(a), this is how it has been summed up: The property of public corporations and organisations functioning as governmental agencies and instrumentalities of the State is exempt under constitutional and statutory provisions exempting such property, or construed to have the effect, but property of a public corporation, in order to be exempt under such provisions, must be held by it in the exercise of its functions as a governmental agency, and not in its proprietary capacity, nor will the exempting provisions operate to exempt property held by government agency as trustee for private organisations of their affairs...........and a private corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Outrim [1907] A.C. 81 cited by the learned Solicitor-General, the respondent, an officer of the Australian Commonwealth, resident in Victoria, and receiving his official salary in that State, was assessed in respect thereof for income-tax imposed by an Act of the Victorian Legislature. The Supreme Court had upheld the respondent's objection to being assessed, but the Privy Council held that the Victorian Legislature had the competence to impose the tax. Meeting the assumption in the argument of Griffith C.J. of Australia in D'Emoen v. Peddar 1 C.L.R. 91, that the framers of the Australian constitution who were familiar with the two English speaking federations, viz., the Constitution of the United States and of the Canadian Dominion, intended that like provisions should receive like interpretation, and gave preference to the American principle. Their Lordships of the Privy Council observed at pages 90-91 as under: It is, indeed, an expansion of the canon of interpretation in question to consider the knowledge of those who framed the Constitution and their supposed preferences for this or that model which might have been in their minds. Their Lordships are not able to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall effect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,-- (i) the professional or technical qualifications necessary for practicing any profession or carrying on any occupation, trade or business, or (ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. 289. (1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be immune from taxation. While it does not prevent the State from carrying on any trade or business unless sanctioned by an Act of Parliament, all that it means is that if Parliament by law declares any such trade or business to be incidental to the ordinary functions of Government, it shall not be liable to be taxed by the Union. Sinha C.J. in Kesheoprasad v. State of Madhya Pradesh A.I.R. 1955 Nag. 177 explained the provisions of clauses (2) and (3) in these words: Clause (2) of article 289 of the Constitution contemplates that the State may engage in any trade or business. When it does so, the Union may impose or authorise the imposition of any tax touch extent as Parliament may by law provide. Clause (3) contemplates that any trade or business may be incidental to the ordinary functions of Government. When the State engages in any such trade or business, the income or profits thereof are immune from taxation. This clause does not mean that the state cannot engage in such trade or business unless sanctioned by an Act of Parliament. All that it means is that if Parliament by law declares any such trade or business to be incidental to the ordinary functions of Government, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State Government. Sub-sections (3) to (6) prescribe the manner in which the shares are to the divided and allotted and the number which shall be subscribed by the State and Central Governments and other parties, including persons whose undertakings have been acquired by the Corporation. Section 24 gives power to raise additional capital by the issue of new shares if the capital is not sufficient. Under section 25 the State Government guarantees the payment of the principal and the payment of the annual dividend at such minimum rate as may be fixed by the State Government by notification published in the Official Gazette at the time of issuing the shares. The Corporation has the power to borrow under section 26 and under section 27 every Corporation shall have its own fund and all receipts and all payments shall be made thereto. It is further provided by that section that, except as otherwise directed by the State Government, all moneys belonging to that fund shall be deposited in the Reserve Bank of India or with the agents of the Reserve Bank of India or invested in such securities as may be approved by the State Government. Section 28 provides for payment of interest on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount as may, with the previous approval of the State Government and the Central Government, be specified in this behalf by the Corporation and the remainder, if any, shall be made over to the State Government for the purpose of road development. The aforesaid provisions do not, to our mind, contemplate the creation of a Corporation which is entirely State-owned. It is not necessary for the State or the Central Government to contribute any capital at all. The capital can comprise of shares issued to the public entirely or partly by the Central Government or the State Government. When the Government notifies the formation of a Corporation under the Road Transport Corporation Act, no question of contribution of capital arises at that stage. It is only when the Corporation is brought into existence that the Central and the State Government can decide how the capital or the manner in which capital is contributed that determines the character of the Corporation. If that be so, the status of the Corporation will be changing from time to time according to the manner of the capital contribution. That, we think, is not the criterion that will determine the status of the Corporation. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that has been already provided for in section 68A(b)(iv). The purpose of Chapter IV-A in only to enable the State to provide for an efficient, adequate, economical and properly co-ordinated road transport service to be operated by the State transport undertaking to the exclusion, complete or partial, of other persons. We are clearly of the view that the Corporation is not a State-owned Corporation nor is the Corporation carrying on business on behalf of the Government. In this view of the matter, it is unnecessary to consider the further question whether the business of the Road Transport Corporation is incidental to the ordinary functions of the Government. Since the Corporation is not a State-owned Corporation nor is the business of road transport carried on by or on behalf of the Government, the provision of the Income-tax Act would be applicable; but it is contended that since there is a conflict between the provision of the Income-tax Act and the Road Transport Corporations Act, the provisions of the Road Transport Corporations Act should alone prevail. We are unable to accept this contention as sound, firstly, because the doctrine of repugnancy is one which arises in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that its enactment should be a complete and exclusive law governing a particular matter. As we have already pointed out, there is no question of any repugnancy in the sense discussed above, inasmuch as both the laws, viz., the Income-tax Act and the Road Transport Corporations Act, are both Central laws. There is here no conflict between the enactment made by Parliament and the enactment made by the State Legislature. On the other question, viz., whether the provisions of the Income-tax Act, we are clearly of the view that no such conflict, in fact, arises because both the Acts deal with different matters. It is true that certain provisions of the Road Transport Corporations Act relating to depreciation, computation of net profits, etc., are not the same as those in the Income-tax Act; but that Act is concerned only with the ascertainment of the profits for the purposes of taxation. The Income- tax Act is an act to tax income, profits and gains and if the legislature intended it, the tax can be levied at such rate or rates as may be prescribed without any deductions. Parliament, however, has laid down certain provisions for deductions and allowances from profits to arrive at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated in computing net revenue accounts. Rule 29(e) provided that the Corporation should show in computing net revenue accounts the interest paid on capital and loans, income-tax, etc., and the appropriation of the net revenue, after meeting the charges, to such of the funds as are not provided for under Working Expenses . By an amendment to Grant 6, dated June 21, 1960, taking effect from April 1, 1960, under the heading Sanction to expenditure under the grants it is provided that the income-tax if leviable should be excluded. In so far as this grant is concerned, it is stated that because the payment was being made, the rule has been changed; but even so under rule 29, the deduction of income-tax in computing the net revenue account had already been provided. Apart from that, it is stated that, even when the Road Transport Corporation was a Government department, it was paying 23 taxes such as the property tax, municipal tax, barbardari tax, vehicle tax registration fees for inspections, passenger tax, sales-tax, excise duty, etc., all of which were levied under the appropriate Acts levying those taxes. In the view we have taken on both the questions, general as well as the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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