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TMI Blog1972 (2) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Housing Board. Later on, under another Act called the Madhya Pradesh Statutory Bodies (Regional Constitution) Act, 1956, the Madhya Pradesh Housing Board, which had been established for whole of Madhya Pradesh, was dissolved and in its place two regional boards were established, one being the petitioner before us and the other for Mahakoshal region. The petitioner, that is, the Vidarbha Housing Board, has thus been established for 8 districts of Vidarbha region of the State of Maharashtra. The Madhya Pradesh Housing Board Act, 1950, was an enactment intended to provide measures to be taken to deal with and satisfy the need of housing, accommodation and under section 3 of that Act initially the Madhya Pradesh Housing Board was incorporated, which, as stated earlier, was dissolved and in its place two boards, one for Vidarbha region and the other for Mahakoshal region, came to be established. Principally, the petitioner-board was established for the purpose of undertaking works in any area of Vidarbha region for the framing and execution of housing schemes. In the matter of discharging its function of providing housing accommodation for the people of Vidarbha region in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the present writ petition. Mr. Thakar appearing for the petitioner-board has challenged the impugned notice on 3 or 4 grounds. In the first place, he contended that the income and the property of the petitioner-board were really the income and property of the State Government, the board being merely an agent through the instrumentality of which it was the State Government which was discharging its functions pursuant to the Directive Principles of State Policy contained in Part IV of the Constitution and, as such, the income which was sought to be brought under taxation was immune from Union taxation under article 289(1) of the Constitution. Secondly, he contended that the income received by the board by way of rental from house properties and by way of interest from Government securities and from fixed deposits kept in banks was income derived from property held under trust or other legal obligation wholly for charitable purposes and, as such, the same was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, or under section 11 of the present Income-tax Act, 1961. (The relevant provision applicable for the assessment year concerned was the provision of section 4(3)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the sanction of the Commissioner was obtained inasmuch as the proceedings that were being initiated related to a period beyond the four years' period ; it has been contended, however, that in law all that was required to be done was that before issuing the notice under section 148 read with section 147 of the Income-tax Act, 1961, the Income-tax Officer was obliged to record reasons and there was no obligation to furnish the said reasons to the petitioner-board. As regards the last contention, it was pointed out by the counsel for the respondent No. 1 that this essentially pertained to a scrutiny of the return that would be filed by the petitioner-board pursuant to the notice issued to it and the question whether any taxable income was left in the hands of the petitioner-board could be properly decided by the Income-tax Officer and was not a question over which this court could express one view or the other in the absence of materials being placed before it. In our view, the real substantial question which arises for determination in the case pertains to the immunity claimed by the petitioner-board under article 289(1) of the Constitution, whereas the other contentions could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and two boards in its place, one for Vidarbha region and the other for Mahakoshal region, came to be established). Section 3(2) clearly provides that the board shall be a body corporate having perpetual succession and common seal with power to acquire property, both movable and immovable, and shall by the said name sue and be sued, while section 3(3) provides that the board shall be deemed to be a local authority for the purposes of the Land Acquisition Act, 1894. In other words, section 3 of the Act clearly shows that the petitioner-board has been constituted a body corporate having perpetual succession and common seal and as such it would be a distinct legal entity apart from the State Government. Section 4 provides for the constitution of the board and indicates who shall be members of the board, who, inter alia, include representatives of state legislature and representatives of other local bodies. Sections 5, 6, 8, 9 and 10 deal with the terms of office and conditions of service of the members, how the vacancies could be filled and the manner in which the business of the board should be conducted by it. Sections 12 and 13 are rather important. Section 12 provides that the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpowers the State Government to frame rules to carry out the purposes of the Act, while section 34 empowers the board, with the previous sanction of the State Government, to make regulations touching the matters specified therein. Under section 39 protection has been given against any suit or prosecution or other legal proceedings being filed in respect of anything done in good faith and purported execution of the provisions of the Act. Section 40 is very material. It provides for dissolution of the board by the State Government by a notification and it has been provided that no such dissolution could be made by the State Government unless a resolution in that behalf has been moved and passed by both the Houses of the State legislature. What should happen with regard to the assets and properties of the board after a dissolution has been provided for under sub-section (2) of section 40 and since, in our view, it is a very material provision, we would rather set it out verbatim. Section 40(2) runs as follows ; " 40. (2) With effect from the date specified in the notification under sub-section (1)- (a) all properties, funds and dues which are vested in or realizable by the board sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of section 5 of the Revenue Recovery Act, 1890. Relying on these aspects or features, Mr. Thakar contended that the features emphasised by him were indicative of the fact that the board, though a statutory corporate body, will have to be regarded as an agent of the State Government through whose instrumentality the State Government was discharging its function of providing housing accommodation for the persons living in Vidarbha region. He invited our attention to articles 38 and 47 appearing in Part IV of the Constitution ; under the former article the State has been directed to secure a social order for the promotion of welfare of the people, while under the latter article the State has been directed to raise the level of nutrition and the standard of living and to improve public health of its citizens. He pointed out that providing housing schemes for the persons residing in Vidarbha region would be one of the social activities which the State has been called upon to secure under the Directive Principles of State Policy and in order to discharge that function the petitioner-board was constituted under the Act through which agency the State was discharging. its functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the board for making its recoveries, it cannot mean that the said recoveries become recoveries of the State or that the recoveries made by adopting that particular mode become recoveries made by the board for and on behalf of the State Government. Similarly, the provision under which the board has been deemed to be a local authority for the purposes of the Land Acquisition Act could not be suggestive of an inference which would favour or support the petitioner's contention. In fact, the provision-contained in section 3(3) is a deeming provision which implies that but for the said provision the board would not be a local authority, and what is more, it has been declared a local authority for the purposes of certain enactment, namely, the Land Acquisition Act, which only facilitates acquisition of properties for the board.The features that the board as a corporate body has no power to raise share capital or that its activities are not of trading or commercial nature or that the element of profit-making is absent may have some relevance on the point whether its income will attract exemption under section 4(3)(i) of the 1922 Act, but from these features no inference could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard upon its dissolution being made by the State Government. Under sub-clause (a) of sub-section (2) of section 40 it is provided that with effect from the date specified in the notification under sub-section (1), all properties, funds and dues which are vested in or realizable by the board shall vest in and be realizable by the State Government. If the board was acting as a department of the State Government or was merely an agent undertaking the activities for and on behalf of the State Government, it was utterly unnecessary to make the provision of the type indicated above. The very fact that provision has been made in section 40(2)(a) that upon the dissolution of the board all properties, funds and dues recoverable by the board shall vest in the Government clearly shows that the board is a distinct entity and is not an agent or a department of the State Government. Similarly, section 40(2)(b) is a further indication in the same direction. It provides that all liabilities enforceable against the board shall be enforceable against the State Government but only to the extent of the properties, funds and dues vested in and realised by the State Government. In other words, upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, but the corporation indulged in the concerned trade or business activity on its own and it was held that the immunity claimed by that corporation under article 289(1) of the Constitution was not available to it. In that case there were provisions of that Act which showed that the bulk of the capital necessary for the establishment of the corporation had been contributed by the State Government, a small portion by the Central Government and a few shares were held by some individuals; the provisions of the Act also indicated that the activity of the corporation was controlled by the State and in particular there was a provision to be found in section 30 of the Act for making over surplus receipts to the State Government after disbursements indicated in sections 28 and 29 had been made and, notwithstanding these features, which emerged from the provisions of the Road Transport Corporations Act, 1950, the Supreme Court took the view that the other features emerging from the examination of other provisions of the Act showed that the Andhra Pradesh State Road Transport Corporation was a distinct statutory corporation and the property and income thereof were not the property and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Housing Board Act, 1950, especially provisions of sections 3, 4, 12 and 14, clinchingly indicate that the petitioner-board cannot be regarded as a department or an agent of the State Government and will have to be regarded as a separate legal entity distinct from the State Government, and, therefore, the income and property of the board could not be regarded as the income and the property of the State Government. In other words, the relevant provisions concerning a particular entity established under a particular enactment would have to be considered for deciding the question and, in our view, as stated earlier, the provisions of the Madhya Pradesh Housing Board Act, 1950, clearly indicate that the board, its property an income cannot be regarded as property and income of the State Government. In this view of the matter, we feel that the principle enunciated in the Supreme Court's decision in the case of Andhra Pradesh State Road Transport Corporation , would be applicable to the instant case before us and on an analysis of the provisions of the concerned Act before us, we have come to the conclusion that the property and income of the board is not the property and income of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified individuals. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a Public or impersonal nature : where there was no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid. " (Underlining is ours). Now, before the question could be answered in favour of the petitioner- board that the board could claim exemption under section 4(3)(i) of the 1922 Act, it is absolutely essential to find out upon an investigation of facts as to whether the section of the community sought to be benefited by the various housing schemes that were undertaken by the board was sufficiently defined and identifiable by some common quality of a public or impersonal nature and unless this was found upon, it would not be possible for either the taxing authority or even this court to come to the conclusion whether the exemption could be granted to the board and this is exactly what has been contended by the counsel on behalf of respondent No. 1 before us. Mr. Manohar appearing for respondent No.1 urged that there were two aspects of the matter : first, whether exemption could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inite information was in the possession of the Income-tax Officer and on a prima facie view which he had taken that the board's income was chargeable to tax, it was clear that since no regular returns had been filed, income could be said to have escaped assessment. However, as stated earlier, these questions both on the legal aspect as well as on factual aspect will have to be gone into for which investigation will have to be undertaken by the Income-tax Officer before exemption claimed under section 4(3)(i) could be allowed to the petitioner-board and that is exactly what will be done by the Income-tax Officer in the proceedings which had been initiated under the impugned notice under section 148 of the Act. In the circumstances, we do not think that this is a fit case where we should resort to writ jurisdiction as sought by the petitioner-board. Mr. Thakar brought to our notice two aspects which he wanted to press into service. In the first place, he has invited our attention to a communication dated 13th May, 1965, addressed by the Under-Secretary, Central Board of Direct Taxes, to the Under-Secretary to the Government of Maharashtra, Urban Development and Public Health Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called upon to submit its return for the assessment year 1963-64 pursuant to the notice under section 148 served, on it, thepetitioner-board by its letter, dated March 16, 1968, raised some preliminary objections, including the objection that if at all there was any surplus of receipts over the expenditure, the same was not assessable to tax, in view of section 11 of the 1961 Act and it appears that these preliminary objections were dealt with by respondent No. 1 in his communication, dated 18th March, 1968, and it has been pointed out by Mr. Thakar that in paragraph 3 of the said communication, dated 18th March, 1968, respondent No. 1 has rejected the petitioner-board's preliminary objections raised undersection 11 of the 1961 Act. He has pointed out that respondent No. 1 has stated that in view of the multifarious activities for profit, the board has engaged itself for profit and the income of the board was not covered by section 11 of the Income-tax Act, 1961. Respondent No. 1 has further stated that the tests laid down by judgments of High Courts and the Supreme Court were not satisfied by the petitioner-board and, as such, the object of the petitioner-board not being dominantl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as on the legal aspects on the basis of which the petitioner-board will be claiming exemption under section 4(3)(i) of the 1922 Act or section 11 of the 1961 Act. Counsel for respondent No. 1 has made a statement at the Bar before us that the respondent, Income-tax Officer, who will be dealing with the case of the petitioner-board after return is filed pursuant to the impugned notice, will deal with the question of exemption claimed under section 4(3)(i) or section 11 of the Act uninfluenced by the prima facie view expressed in paragraph 3 of the communication dated 18th March, 1968. The remaining two points need not detain us any longer. There is no denial of the fact that the reasons, on the basis of which opinion was formed by the Income-tax Officer concerned, had been recorded and at the hearing of this petition before us even copies of these reasons had been furnished to the counsel for the petitioner-board, and, as such, the contention urged by Mr. Thakar in that behalf does not survive. As regards the contention that the petitioner-board is making losses and there is no surplus left after meeting the expenditure, it is clearly a question which will have to be dealt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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