TMI Blog2008 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... .............. of 2008 (arising out of S.L.P. (C) No.6757 of 2007) filed by AMC, Narela, Delhi. 4. Appellant-Committee is established under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998 ("1998 Act", for short). The provisions of the said 1998 Act enjoin upon the appellant to provide the facilities for marketing of agricultural produce in Narela, Delhi. This is apart from performing other functions and duties such as superintendence, direction and control of markets for regulating the marketing of agricultural produce. 5. For the assessment year 2003-04, the appellant- Committee claimed exemption from payment of tax under income earned by it on the ground that it was a "local authority" within the meaning of Section 10(20) of the said 1961 Act. It relied upon the definition of "local authority" in Section 2(l) of the said 1998 Act. The A.O. rejected the appellant's claim for exemption relying upon Circular No.8/2002 dated 27.8.02 issued by CBDT. The view taken was that the amended provisions of Section 10(20) of the 1961 Act were not attracted to "Agricultural Produce Marketing Societies" or "Agricultural Market Boards" even when they may be local authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2 of 1924);" 12. Mr. M.L. Verma, learned senior counsel appearing on behalf of the appellants, submitted that AMC(s) has been held to be a "local authority" under Section 10(20) of the 1961 Act falling outside the taxing net. In this connection, learned counsel placed reliance on the judgment of the Delhi High Court in the case of Commissioner of Income-tax v. Agricultural Marketing Produce Committee - [2001] 250 ITR 369 and the reasoning given by this Court in the case of Union of India and others v. R.C. Jain and others - 1981 (2) SCC 308. According to learned counsel, even after the amendment to Section 10(20) of the 1961 Act, by inserting the Explanation thereto, the AMC(s) continues to be covered by Item (iii) in the said Explanation as it is a "local authority" performing the municipal functions and is legally entitled to the control of local fund, namely, Market Fund under the said 1998 Act. In this connection, learned counsel urged that vide Finance Act, 2002, Parliament has bodily lifted the definition of the "local authority" under Section 3 (31) of the General Clauses Act, 1897 ("1897 Act", for short) and has incorporated the said definition vide Explanation inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at "Agricultural Produce Marketing Boards" and "Agricultural Marketing Societies" are not entitled to exemption after insertion of the said Explanation in Section 10 (20) of the 1961 Act. According to learned counsel AMC(s) is neither "Agricultural Produce Marketing Board" nor "Agricultural Marketing Society". Therefore, according to learned counsel even the Explanatory Note indicates that AMC (s) is covered by the Explanation and, therefore, AMC(s) is entitled to the continuance of the benefit of exemption even after Finance Act, 2002. Further, in the Explanation to Section 10(20) there are three items - Item (i) refers to "Panchayat", Item (ii) refers to "Municipalities" whereas Item (iii) refers to "Municipal Committees" and "Development Boards". According to learned counsel, there is no independent definition of "Municipal Committee". According to learned counsel, the Department is also not able to answer whether any Municipal Committee still exists so as to constitute a separate category or whether they would be covered under Item (ii) in the said Explanation which refers to "Municipality". Therefore, according to learned counsel, AMC (s) is a "local authority" of like nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants herein on the judgment of this Court in the case of R.C. Jain (supra) was misplaced. 18. Learned counsel further submitted that the explanation/definition clause inserted by Finance Act, 2002 is exhaustive as it uses the expression "means" as contradistinct from the expression "includes". Learned counsel submitted that borrowing definition from other statutes is not a safe guide, particularly, when the explanation is a definition section, specifically designed for grant of the exemption under Section 10(20) of the 1961 Act. 19. Learned counsel next contended that in the hierarchy, mentioned in 1998 Act, the Delhi Agricultural Marketing Board, as defined under Section 5, is in complete control of the finances of AMC(s) and, therefore, according to learned counsel, the clarification, issued by CBDT, expressly states that Agricultural Marketing Societies and Agricultural Marketing Boards shall stand excluded from the said Explanation. According to learned counsel, since the said Board is the highest authority under the 1998 Act, the CBDT Circular clarifies that the exemption shall not be admissible to such Agricultural Marketing Boards and when such an exemption is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icipal Corporation of Delhi, that Corporation; (ii) the New Delhi Municipal Council, that Council; and (iii) the Delhi Cantonment Board, that Board; Explanation- It is hereby clarified that, for the purpose of this Act, the Delhi Development Authority constituted under the Delhi Development Act, 1957 and the Board and a marketing committee established under this Act, shall be deemed to be local authority; CHAPTER III CONSTITUTION AND POWERS OF DELHI AGRICULTURAL MARKETING BOARD 17. Powers and functions of the Board - (1) The Board shall exercise superintendence and control over the marketing committees. (2) The Government or the Chairman or the Vice-Chairman of the Board or any other official of the Board authorized in this behalf by the Board may call for from any marketing committee or any trader, godown-keeper or any other functionary operating within the market area any information or return relating to agricultural produce and shall have the power to inspect the records and accounts of such marketing committee, trader, godown-keeper or other functionary and shall also have power to seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance and improvement works undertaken by the Marketing Committee; (e) to execute all works chargeable to the Market Development Fund; (f) to encourage marketing of the agricultural produce on cooperative basis; (g) to maintain accounts in such forms as may be prescribed and get the same audited in such manner as may be prescribed; (h) to publish annually at the close of the financial year, its progress report, balance sheet and statement of assets and liabilities and send copies thereof to all the members of the Board and a copy to the Government; (i) to make necessary arrangements for dissemination of information on matters relating to regulated marketing of notified agricultural produce; (j) to provide facilities for the training of officers and members of the staff of the Board as also the Marketing Committees; (k) to prepare and adopt its budget for the ensuring year; (l) to sanction the budget of the Marketing Committees; (m) to grant subventions of loans to the Marketing Committees for the purposes of this Act on such terms and conditions as the Board may determine; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations and bye-laws made there under for the market area; (ii) to provide such facilities for marketing of notified agricultural produce therein as the Board may, from time to time, direct; (iii) to perform other functions as may be required in relation to the superintendence, direction and control of markets, or for regulating and control of markets, or for regulating the market area and for purposes connected with the matters aforesaid, and, for this purpose, may exercise such powers and perform such duties and discharge such functions as may be provided by or under this Act. (2) Without prejudice to the generality of the foregoing provisions, a Marketing Committee may - (a) regulate the entry of the persons and of vehicular traffic into the market; (b) supervise the conduct of those who enter the market for transacting business; (c) grant, renew, refuse suspend or cancel licences; (d) provide for settling disputes arising out of any kind of transaction connected with the marketing o notified agricultural produce and all matters ancillary thereto; (e) prosecute persons for violating the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (n) arrange to obtain fitness certificate of health from a veterinary doctor in respect of animals, cattle or birds brought for sale or sold in the market/sub-market; (o) disseminate information about the benefits of regulation, the system of transaction, facilities provided in the market yard, etc. through such means as posters, pamphlets, hoarding, cinema slides, film shows, group meetings, etc., or through nay other means considered by it more effective or necessary; (p) ensure payment in respect of a transaction which takes place in a market to be made on the same day to the seller, and in default thereof to seize the agricultural produce in question alongwith other property of the commission agent or purchaser if no commission agent is involved in the transaction; (q) make arrangement for weighmen palledars for weighing and transporting of goods in respect of transactions held in the market yard/sub-yard; (r) recover the charges in respect of weighmen and palledars and distribute the same to weighmen and palledars if not paid by the purchaser or seller, as the case may be. 62. Power to levy and collect market fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be operated in the manner as may be prescribed in the rules. Explanation--For the purpose of this sub-section `competent authority' shall mean the Board, or Vice-Chairman or any other officer of the Board to whom the powers of the Board to incur expenditure have been delegated, as the case may be. (3) The amount standing to the credit of the Market Development Fund shall be kept or invested in such manner as may be prescribed. 89. Application of Market Fund— (1) Subject to the provisions of section 88, the Market Fund may be expended for the following purposes only, namely:-- (i) the acquisition of a site or sites for the market yard; (ii) the establishment, maintenance and improvement of the market yards; (iii) the construction and repair of buildings necessary for the purposes of the market and for convenience or safety of the persons using the market yard; (iv) the maintenance of standard weights and measures; (v) the meeting of establishment charges including payment and contribution of provident fund, pension, gratuity, leave encashment on retirement or yearly basis, actual reimbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the public interest subject to the prior sanction of the Board. (xxi) contribution to centralized pension fund of the Board as may be prescribed. (2) Without prejudice to the generality of sub-section (1), every marketing committee shall, out of the "market fund" pay— (a) to the Board, as contribution, such percentage of its income derived from the licence fee, market fee, fines received as specified below, to enable the Board to defray its expenses on office establishment and other expenses incurred by it in the interest of the marketing committee generally,- (i) if the annual income of a marketing committee does not exceed ten thousand rupees, ten percent. (ii) if the annual income of a marketing committee exceeds ten thousand rupees but does not exceed fifteen thousand rupees, on the first Rs.10,000 ten percent. On the next five thousand rupees or part thereof... fifteen percent (iii) if the annual income of a marketing committee exceeds fifteen thousand rupees, on the first Rs.10,000 Ten per cent on the next Rs.5,000 Fifteen percent on the remaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text, - (31). "local authority" shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund;" (emphasis supplied by us) 24. The short question which arises in this batch of civil appeals is : whether Agricultural Marketing Committee [AMC (s)] is a "local authority", so as to be entitled to the benefit under Section 10 of the 1961 Act after insertion of the Explanation in Section 10(20) vide Finance Act, 2002 w.e.f. 1.4.2003. 25. Before analyzing the above question, we quote hereinbelow a comparative chart containing the Explanation to Section 10(20) of the 1961 Act on one hand in juxtaposition to Section 3(31) of the 1897 Act: Explanation to Section 10(20) of the 1961 Act "Explanation.- For the purposes of this clause, the expression "local authority" means - (i) Panchayat as referred to in clause (d) of article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or (iii) Municipal Committee and District Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful scrutiny of the language of Section 3(31) suggests that an authority, in order to be a local authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the government with, the control and management of a municipal or local fund. What then are the distinctive attributes and characteristics, all or many of which a Municipal Committee, District Board or Body of Port Commissioners shares with any other local authority? First, the authorities must have separate legal existence as corporate bodies. They must not be mere governmental agencies but must be legally independent entities. Next, they must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. Next, they must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court had to go back to Section 3(31) of the 1897 Act. As quoted hereinabove, Section 3(31) of the 1897 Act defines "local authority" to mean - a Municipal Committee, District Board, body of Port Commissioners or other authority. In the case of R.C. Jain (supra) this Court was aware that DDA is neither a District Board nor a Body of Port Commissioners. Therefore, the only question the Court had to address to was : whether DDA would fall within the meaning of the words "other authority" in Section 3(31) of the 1897 Act. Therefore, we have to read para ₹ 2' of the judgment in the case of R.C. Jain (supra) in the context of Section 3(31) of the 1897 Act as the word "local authority" was not defined in the Payment of Bonus Act, 1965. The Court, therefore, in the case of R.C. Jain (supra) had to fall back upon Section 3(31) of the 1897 Act and in doing so this Court in the case of R.C. Jain (supra) applied the functional and incorporation tests. 29. One more aspect needs to be mentioned. In the case of R.C. Jain (supra) the test of "like nature" was adopted as the words "other authority" came after the words "Municipal Committee, District Board, Body of Port Commissioners". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pealed those Acts. However, it is quite possible that in some remote place District Board may still exists. Therefore, Parliament decided to give exemption to such Municipal Committees and District Boards. Therefore, in our view, advisedly Parliament has retained exemption for Municipal Committee and District Board apart from Panchayat and Municipality. Our view finds support from the provisions contained in Part IX of the Constitution of India. Article 243N provides for continuance of existing laws and Panchayats. It states, inter alia, that notwithstanding anything in Part IX, any law relating to Panchayats in a State immediately before commencement of the Constitution (Seventy-third Amendment) Act, 1992, which is inconsistent with the provisions of Part IX, shall continue to be in force until repealed by a competent Legislature. Similarly, under Part IXA there is Article 243ZF which refers to the "Municipalities". This Article, inter alia, states that notwithstanding anything in Part IXA, any provision of any law relating to Municipalities in force in a State immediately before the commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with ..... 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