1999 (7) TMI 694 - SC - Indian Laws

Summary

Issues involved:
The judgment involves the exemption of a corporation from taxation under Article 285 of the Constitution and the assessment of property tax under the Punjab Municipal Act.

Exemption from Taxation under Article 285:
The Food Corporation of India contended that it is exempt from taxation under Article 285 of the Constitution due to its status as a statutory corporation incorporated by an Act of Parliament and its operational structure. The Corporation argued that it operates on subsidies provided by the Central Government, follows government directions, and has no profit motives, thus being an extended arm of the Central Government. However, the Supreme Court held that the Corporation, being distinct from the Central Government and having attributes of a company under the Food Corporation Act, cannot claim exemption from taxation under Article 285.

Assessment of Property Tax:
The Corporation challenged the assessment of property tax under the Punjab Municipal Act, arguing that the valuation was not based on the provisions of Section 3 of the Act, which determine house tax on the basis of the "annual value" of properties. The High Court found that the assessment was based on agreed fair rent as stated by the Municipal Committee, and since the Corporation did not challenge this, it was deemed fair. The Supreme Court upheld this decision, stating that the agreed rent can be considered fair unless proven otherwise.

Precedent and Interpretation:
The judgment referred to previous cases to establish that the Food Corporation of India, as a government company, cannot be equated with the Central Government for tax exemption purposes. It also analyzed the definition of 'company' under the Land Acquisition Act and concluded that the Corporation, with its autonomous nature and distinct identity, does not qualify as a government department. The Court emphasized that even if the Corporation is an agency of the Central Government, it does not make it a government department, as the Act grants it individuality separate from the Government.

Conclusion:
The Supreme Court ruled that the Food Corporation of India is not exempt from taxation under Article 285 of the Constitution, given its distinct corporate status and attributes. The appeal was dismissed, affirming the decision of the High Court, and costs were awarded against the Corporation.