1984 (11) TMI 42 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Market Committee is a "local authority" u/s 10(20) of the Income-tax Act.
2. Validity of notices u/s 139(2) and 148 of the Income-tax Act.
3. Examination of the scheme of the APMC Act.
4. Applicability of the General Clauses Act definition of "local authority".
5. Consideration of alternate remedies under the Income-tax Act.

Summary:

1. Whether the Market Committee is a "local authority" u/s 10(20) of the Income-tax Act:
The central issue is whether the Market Committee, as defined u/s 2(j) of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 (APMC Act), qualifies as a "local authority" u/s 10(20) of the Income-tax Act. Section 10(20) exempts the income of a local authority from certain heads of income. The term "local authority" is not defined in the Income-tax Act, necessitating reference to the General Clauses Act, 1897 (GC Act), which defines it u/s 3(31).

2. Validity of notices u/s 139(2) and 148 of the Income-tax Act:
The notices u/s 139(2) and 148 and certain assessment orders are challenged. The court finds that the Market Committee satisfies the tests laid down in Union of India v. R. C. Jain, AIR 1981 SC 951, for being a "local authority" as it has a separate legal existence, functions in a defined area, enjoys autonomy, performs governmental functions, and has the power to raise funds.

3. Examination of the scheme of the APMC Act:
The court examines the APMC Act, noting its provisions for the establishment, powers, and duties of Market Committees, including the creation of a Market Fund, regulation of markets, and performance of civic duties. The Market Committee is a body corporate with perpetual succession, capable of suing and being sued, and has the authority to levy fees and raise loans.

4. Applicability of the General Clauses Act definition of "local authority":
The court concludes that the Market Committee meets the definition of "local authority" u/s 3(31) of the GC Act. It has a local fund as defined in various financial rules and performs functions similar to municipal bodies. The court references several cases, including Patel Premji Jiva v. State of Gujarat and Budha Veerinaidu v. State of Andhra Pradesh, which support the Market Committee's status as a local authority.

5. Consideration of alternate remedies under the Income-tax Act:
The court rejects the contention that the petitions should not be entertained due to the availability of alternate remedies under the Income-tax Act. It holds that the existence of an alternate remedy is no bar to entertaining a writ petition, especially when a pure question of law with broad implications is involved.

Conclusion:
The petitions are allowed, and the Market Committees are declared "local authorities" u/s 10(20) of the Income-tax Act. The respondents are free to issue notices or assess the income on this basis. There is no order as to costs, and any securities or guarantees furnished by the petitioners stand discharged.