Case: NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY Vs. CHIEF COMMISSIONER OF INCOME TAX


Decision reasoning: 0[ds]7. The constitutional provisions as contained in Part IXA delineate that the Constitution itself provided for constitution of Municipalities, duration of Municipalities, powers of Authorities and responsibilities of the Municipalities. The Municipalities are created as vibrant democratic units ofThe duration of Municipality was provided for five years contemplating regular election for electing representatives to represent the Municipality. The special features of the Municipality as was contemplated by the constitutional provisions contained in Part IXA cannot be said to be present in Authority as delineated by statutory scheme of Act, 1976. It is true that various municipal functions are also being performed by the Authority as per Act, 1976 but the mere facts that certain municipal functions were also performed by the authority it cannot acquire the essential features of the Municipality which are contemplated by Part IXA of the Constitution. The main thrust of the argument of the learned Counsel for the Appellant that the High Court having not adverted to the notification dated 24.12.2001 issued under proviso to Article 243Q(1) the judgments relied on by the High Court for dismissing the writ petition is not sustainable. We thus have to focus on proviso to Article 243Q(1). For the purpose and object of the industrial township referred to therein whether industrial township mentioned therein can be equated with Municipality as defined Under Article 243P(e). Article 243P(e) provides that the "Municipality means an institution ofconstituted Under Article 243Q. Whether the Appellant is a institution ofconstituted Under Article 243Q is the main question to be answered?(1) of Article 243Q provides that there shall be constituted in everyNagar Panchayat, a Municipal Council and a Municipal Corporation, in accordance with the provisions of this Part. The proviso to(1) provides that: "Provided that a municipality under this Clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided for an industrial establishment in that area and such other factors as may he may deem fit, by public notification, specify to be an industrial township.".Thus, proviso does not contemplate constitution of an industrial establishment as a Municipality rather clarifies an exception where Municipality under Clause (1) of Article 243Q may not be constituted in an urban area. The proviso is an exception to the constitution of Municipality as contemplated by(1) of Article 243Q. No other interpretation of the proviso conforms to the constitution scheme.Applying Rules of interpretation as laid down by this Court, it is clear that proviso is an exception to the constitutional provisions which provide that there shall be constituted in every State a Nagar Panchayat, a Municipal Council and a Municipal Corporation. Exception is covered by proviso that where an industrial township is providing municipal services the Governor having regard to the size of the area and the municipal services either being provided or proposed to be provided by an industrial establishment specify it to be an industrial township. The words industrial township have been used in contradiction of a Nagar Panchayat, a Municipal Council and a Municipal Corporation. The object of issuance of notification is to relieve the mandatory requirement of constitution of a Municipality in a State in the circumstances as mentioned in proviso but exemption from constituting Municipality does not lead to mean that the industrial establishment which is providing municipal services to an industrial township is same as Municipality as defined in Article 243P(e). We have already noticed that Article 243P(e) defines Municipality as an institution ofconstituted Under Article 243Q, the word constituted used Under Article 243P(e) read with Article 243Q clearly refers to the constitution in every State a Nagar Panchayat, a Municipal Council or a Municipal Corporation. Further, the words in proviso "a Municipality under this Clause may not be constituted" clearly means that the words "may not be constituted" used in proviso are clearly in contradistinction with the word constituted as used in Article 243P(e) and Article 243Q. Thus, notification under proviso to Article 243Q(1) is not akin to constitution of Municipality. We, thus, are clear in our mind that industrial township as specified under notification dated 24.12.2001 is not akin to Municipality as contemplated Under Article 243Q.At this juncture, we may also notice the two judgments as relied on by the High Court and three more judgments where Article 243Q came for consideration. The first judgment which needs to be noticed is Adityapur Industrial Area Development Authority (supra). The Adityapur Industrial Development Authority was constituted under the Bihar Industrial Area Development Authority Act, 1974.In the present case although exemption Under Article 289 was not claimed or contended but the above judgment cannot be said to be not relevant to the present case since, the Court has also dwelled upon Section 10(20) as amended w.e.f. 01.04.2003. We, thus, do not accept the submission of the Appellant that the above case was not relevant for the present case and was wrongly relied on by the High Court.The second judgment which is relied on by the High court is Agricultural Produce Market Committee, Narela (supra). The Agricultural Produce Market Committee was constituted under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998. The question arose as to whether Agricultural Market Committee is a "local authority" under the Explanation to Section 10(20) of the Income Tax Act, 1961. In the above context it was noticed that all Agricultural Market Committees at different places were enjoying exemption from income tax Under Section 10(20) prior to its amendment by the Finance Act, 2002 w.e.f. 01.04.2003. The definition of local authority Under Section 3(31) of General Clauses Act, 1897 is asauthority" shall mean a municipal committee, district board, body or port Commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or localIn the above case this Court noticed in extenso the provisions of Delhi Agricultural Produce Marketing (Regulation) Act, 1998 and provisions of Section 10(20) of the Income Tax Act, 1961. Definition of local authority as contained in Explanation to Section 10(20) and Section 3(31) of the General Clauses Act was also noticed and discussed. This Court held that the definition of local authority in General Clauses Act Under Section 3(31) is no longer applicable after the amendment of Section 10(20) by Finance Act, 2002.This Court held that Agricultural Marketing Committee is also not covered by the words "Municipal Committee, District Board, Body of Port Commissioners" as used in Explanation of Section 10(20).In this context, we also refer to the judgment of this Court in Saij Gram Panchayat v. State of Gujarat an others, 1999 (2) SCC 366 .   This Court had occasion to consider in the above case Gujarat Industrial Development Act, 1962, the provisions of Article 243Q and Gujarat Municipalities Act, 1963.This Court held that Gujarat Industrial Development Act operates in a totally different sphere from Parts IX and IXA of the Constitution and the Gujarat Panchayats Act, 1961.We, thus, conclude that authority constituted under Act, 1976 with regard to which notification under proviso to Article 243Q(1) dated 24.12.2001 has also been issued is not akin to the Municipality constituted Under Article 243Q(1).We have already noticed that by the Finance Act, 2002 an Explanation has been added to Section 10(20) of the I.T. Act, 1961 and Section 10(20A) has been omitted. Prior to Finance Act, 2002 there being no definition of local authority under the I.T. Act, the provisions of Section 3(31) of the General Clauses Act, 1897 were pressed into service while interpreting the extent and meaning of local authority. The Explanation having now contained the exhaustive definition of local authority, the definition of local authority as contained in Section 3(31) of General Clauses Act, 1892 is no more applicable. Section 3 of the General Clauses Act begins with the words "In this Act, and in all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject orThe definition given of the local authority Under Section 3(31) does not now govern the field in view of the express omission of the expression "all other authority". This Court has already in Agricultural Produce Market Committee, Narela (supra), held that definition Under Section 3(31) of the General Clauses Act is now no more applicable to interpret local authority Under Section 10(20) of the I.T. Act. Before we proceed further it shall be useful to notice certain well settled principles of statutory interpretation of fiscal statutes.The explanatory note clearly indicates that by Finance Act, 2002 the exemption Under Section 10(20) has been restricted to the Panchayats and Municipalities as referred to in Articles 243P(d) and 243P(e). Further by deletion of Clause (20A), the income of the Housing Boards of the States and of Development Authorities became taxable.On a writ petition filed by the Appellant before the Allahabad High Court where the notices issued in the year 1998 Under Section 142 of the Income Tax Act was challenged vide its judgment dated 14.02.2000 the High Court held that Appellants case comes squarely Under Section 10(20A) of the Income Tax Act, hence, the Appellant was liable to be exempted under the said Act, although, the High Court did not express any opinion on the question whether Appellant was exempted Under Section 10(20) in that judgment.After omission of Section 10(20A) only provision under which a Body or Authority can claim exemption is Section 10(20). Local authority having been exhaustively defined in the Explanation to Section 10(20) an entity has to fall Under Section 10(20) to claim exemption. It is also useful to notice that this Court laid down in State of Gujarat and Ors. v. ESSAR Oil Limited and Anr 2012 (3) SCC 522   , that a person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision.It is also relevant to notice that this Court in Gujarat Industrial Development Corporation v. Commissioner of Income Tax, 1997 (7) SCC 17   , after considering the provisions of Section 10(20A) of I.T. Act held that Gujarat Industrial Development Corporation is entitled for exemption Under Section 10(20A). The Gujarat Industrial Development Corporation was held to be entitled for exemption Under Section 10(20A) at the time when the provision was in existence in the statute book and after its deletion from the statute book the exemption is no more available. Now, reverting back to Section 10(20) as amended by Finance Act, 2002, the same has also come for consideration before different HighDivision Bench of the Allahabad High court in Krishi Utpadan Mandi Samiti v. Union of India and Anr. (2004) 267 ITR 460 statedbare perusal of the Explanation of Section 10(20) shows that now only four entities are local authorities for the purpose of Section 10(20), namely, (i) Panchayat, (ii) Municipality; (iii) Municipal Committee and District Board; (iv) Cantonment Board Krishi Utpadan Mandi Samiti is not one of the entities mentioned in the Explanation to Sectionmay be noted that the Explanation to Section 10(20) uses the word means and not the word includes. Hence, it is not possible for this Court to extend the definition of local authority as contained in the Explanation to Section 10(20), vide P. Kasilingam v. P.S.G. College of Technology AIR 1995 SC 1395    (para 19). It is also not possible to refer to the definitions in other Acts, as the IT Act now specifically defines localis well settled that in tax matters the literal Rule of interpretation applies and it is not open to the Court to extend the language of a provision in the Act by relying on equity, inference,is the first principle of interpretation that a statute should be read in its ordinary, natural and grammatical sense as observed by the Supreme Court ofconstruing a statutory provision the first and foremost Rule of construction is the literary construction. All that the Court has to see at the very outset is what does the provision say. If the provision is unambiguous and if from the provision the legislative intent is clear, the Court need not call into aid the other Rules of construction of statutes. The other Rules of construction are called into aid only when the legislative intent is not clear" vide Hiralal Ratanlal v. STO AIR 1973 SCA Division Bench of the Delhi High Court also in Agricultural Produce Market Committee v. Commissioner of(2006)156 ITR 286 had occasion to consider Section 10(20) as amended w.e.f. 01.04.2003 where the High court in paragraph 8 has stated theThe most striking feature of the Explanation is that the same provides an exhaustive meaning to the expression "local authority". The word "means" used in the Explanation leaves no scope for addition of any other entity as a local authority to those enlisted in the Explanation. In other words, even if an entity constitutes a local authority for purposes of the General Clauses Act, 1897 or for purposes of any other enactment for that matter, it would not be so construed for purposes of Section 10(20) of the Act unless it answers the description of one of those entities enumerated in the Explanation. Mrs. Ahlawat did not make any attempt to bring her case under Clauses (i), (ii) and (iv) of the Explanation and in our opinion rightly so because the Appellant committee cannot by any process of reasoning be construed as a Panchayat as referred to in Clause (d) of Article 243 of the Constitution of India, a municipality in terms of Clause (e) of Article 243P of the Constitution of India or a Cantonment Board as defined Under Section 3 of the Cantonments Act, 1924. What she argued was that looking to the nature of the functions enjoined upon the Appellant committee, it must be deemed to be a municipal committee within the meaning of that expression in Clause (iii) of the Explanation. We regret our inability to accept that submission. We say so for two distinct reasons. Firstly because the expression "municipal committee" appears in a taxing statute and must, Therefore, be construed strictly. It is fairlyby a long line of decisions rendered by the Supreme Court that while interpreting a taxing statute, one has simply to look to what is clearly stated therein. There is, in fiscal statutes, no room for any intendment nor is there any equity about the levy sanctioned under the same. The following passage from Cape Brandy Syndicate v. IRC 1921 (1) KB 64 has been approved by the Apex Court in the decisions rendered by their Lordships. in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, One can only look fairly at the language used.We fully endorse the views taken by the High Court in the above two judgments.Now, reverting back to Explanation to Section 10(20), these are entities which mean the local authority. The submission of the Appellant is that the Appellant is covered by Clause (ii) of the Explanation i.e. "Municipality as referred to in Clause (e) of Article 243P of the Constitution". We, while discussing above provisions, have already held that the Appellant is not covered by the word/expression of "Municipality" in Clause (e) of Article 243P. Thus, the Appellant is not clearly included in(ii) of Explanation. It is not even the case of the Appellant that the Appellant is covered by Section 10(20) except Clause