1964 (3) TMI 15 - SC - Income Tax

Whether the income received by the appellant is the income of the State of Andhra Pradesh within the meaning of article 289(1)? Held that - The High Court was right in rejecting the argument that by virtue of the repugnancy between the material provisions of the Act and the charging section of the Income-tax Act, it should be held that the appellant was not liable to pay tax on its income. Appeals dismissed.

Issues Involved:
1. Whether the Andhra Pradesh State Road Transport Corporation (appellant) is exempt from Union taxation under Article 289(1) of the Constitution.
2. Whether the appellant falls under any of the five categories of assessees under section 3 of the Income-tax Act.
3. Whether the appellant is a local authority exempt from income-tax.
4. Whether there is repugnancy between the charging section of the Income-tax Act and sections 28, 29, and 30 of the Road Transport Corporations Act, 1950.

Issue-wise Detailed Analysis:

1. Exemption from Union Taxation under Article 289(1):
The appellant argued that its income is exempt from Union taxation under Article 289(1) of the Constitution, which states, "The property and income of a State shall be exempt from Union taxation." The High Court found that the appellant is not a State-owned Corporation and does not carry on business on behalf of the Government. The Supreme Court further analyzed Article 289, noting that while clause (1) provides a general exemption, clause (2) allows the Union to impose taxes on trade or business carried on by or on behalf of the Government of a State. Clause (3) permits Parliament to declare certain trades or businesses incidental to the ordinary functions of Government, exempting them from clause (2). The Court concluded that the appellant's income is not the income of the State, as the corporation has a separate legal entity, and its profits and losses are its own, not the State's.

2. Categories of Assessees under Section 3 of the Income-tax Act:
The appellant contended that it did not fall under any of the five categories of assessees (individual, Hindu undivided family, firm, company, or association of persons) under section 3 of the Income-tax Act. The Income-tax Officer rejected this argument, leading to the assessment orders. The Supreme Court did not specifically address this issue in detail, as the primary focus was on the constitutional exemption under Article 289.

3. Local Authority Exemption:
The appellant claimed it was a local authority and thus exempt from income-tax. The High Court rejected this argument, and the Supreme Court upheld this decision, noting that the appellant did not meet the criteria for a local authority.

4. Repugnancy between the Income-tax Act and the Road Transport Corporations Act:
The appellant argued that there was repugnancy between the charging section of the Income-tax Act and sections 28, 29, and 30 of the Road Transport Corporations Act, 1950. The High Court found no substance in this argument, and the Supreme Court agreed. The Court noted that the Road Transport Corporations Act's provisions do not indicate an intention to exempt the corporation from income-tax. The Court also referenced similar provisions in other Acts, such as the State Financial Corporations Act and the Damodar Valley Corporation Act, which explicitly stated the liability to pay income tax, emphasizing that the absence of such a provision in the Road Transport Corporations Act does not imply exemption.

Conclusion:
The Supreme Court dismissed the appeals, holding that the appellant's income is not exempt from Union taxation under Article 289(1) of the Constitution. The appellant does not fall under the categories of assessees exempt from income-tax, is not a local authority, and there is no repugnancy between the Income-tax Act and the Road Transport Corporations Act. The appeals were dismissed with costs.

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