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TMI Blog1972 (2) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... , issued by the Income-tax Officer, City Circle and Refunds, Nagpur (being annexure " A " to the petition). The impugned notice is sought to be attacked as being without jurisdiction and in excess of authority of the officer concerned, and the circumstances in which the challenge is made may be stated. The petitioner, that is, the Vidarbha Housing Board, Nagpur, is a body corporate having been established under the Madhya Pradesh Housing Board Act, 1950 (Act No. XLIII of 1950). It appears that initially under the said Act a common housing board both for Vidarbha region and Mahakoshal region was constituted by the name of Madhya Pradesh Housing Board. Later on, under another Act called the Madhya Pradesh Statutory Bodies (Regional Constitution) Act, 1956, the Madhya Pradesh Housing Board, which had been established for whole of Madhya Pradesh, was dissolved and in its place two regional boards were established, one being the petitioner before us and the other for Mahakoshal region. The petitioner, that is, the Vidarbha Housing Board, has thus been established for 8 districts of Vidarbha region of the State of Maharashtra. The Madhya Pradesh Housing Board Act, 1950, was an enactm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner submitted detailed information as required by respondent No. 1 from time to time. Thereafter, on 6th March, 1968, respondent No. 1 issued a notice to the petitioner-board under section 148 read with section 147 of the Act directing the petitioner to submit a return of income in the prescribed form for the assessment year 1959-60, on the ground that the income of the petitioner-board, which was chargeable to tax for the said assessment year, had escaped assessment within the meaning of section 147 of the Act. It is this notice that was received by the petitioner-board that is being challenged by the petitioner-board before us by the present writ petition. Mr. Thakar appearing for the petitioner-board has challenged the impugned notice on 3 or 4 grounds. In the first place, he contended that the income and the property of the petitioner-board were really the income and property of the State Government, the board being merely an agent through the instrumentality of which it was the State Government which was discharging its functions pursuant to the Directive Principles of State Policy contained in Part IV of the Constitution and, as such, the income which was sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 4(3)(i) of the 1922 Act involved consideration of legal as well as factual aspects and, as such, it required investigation into facts and without such investigation which could be done in the assessment proceedings that were intended to be initiated, the claim for exemption could not be considered and, therefore, this court should not interfere with the normal assessment proceedings that were being undertaken by the Income-tax Officer pursuant to the notice issued. As regards the suggestion that no reasons had been recorded before issuing the notice, it has been pointed out that actually reasons were recorded by the Income-tax Officer and even the sanction of the Commissioner was obtained inasmuch as the proceedings that were being initiated related to a period beyond the four years' period ; it has been contended, however, that in law all that was required to be done was that before issuing the notice under section 148 read with section 147 of the Income-tax Act, 1961, the Income-tax Officer was obliged to record reasons and there was no obligation to furnish the said reasons to the petitioner-board. As regards the last contention, it was pointed out by the counsel for the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government its distinct entity was maintained and that it was not acting either as an agent of the State Government or as any instrumentality acting on behalf, of the State Government while discharging the functions enjoined upon it by the Act. These rival contentions will have to be considered in the light of the relevant provisions that are to be found in the Act. Section 3 of the Madhya Pradesh Housing Board Act, 1950, enacts that with effect from such date as the State Government may, by notification, appoint in that behalf, there shall be established a board by the name of the Madhya Pradesh Housing Board (which has eventually been dissolved and two boards in its place, one for Vidarbha region and the other for Mahakoshal region, came to be established). Section 3(2) clearly provides that the board shall be a body corporate having perpetual succession and common seal with power to acquire property, both movable and immovable, and shall by the said name sue and be sued, while section 3(3) provides that the board shall be deemed to be a local authority for the purposes of the Land Acquisition Act, 1894. In other words, section 3 of the Act clearly shows that the petitioner-bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of a housing scheme ; similarly, power has been given to the board, subject to the rules framed by the State Government, to dispose of its land. Then comes Chapter IV which deals with miscellaneous matters. Under section 27 power has been conferred upon the board to borrow sums required for its purposes with the previous sanction of the State Government and subject to the provisions of this Act. Section 28 provides for maintenance of proper accounts and audit thereof by a person authorised by the State Government in that behalf. Section 32-A provides that all moneys due to the board may be recoverable as arrears of land revenue. Section 33 empowers the State Government to frame rules to carry out the purposes of the Act, while section 34 empowers the board, with the previous sanction of the State Government, to make regulations touching the matters specified therein. Under section 39 protection has been given against any suit or prosecution or other legal proceedings being filed in respect of anything done in good faith and purported execution of the provisions of the Act. Section 40 is very material. It provides for dissolution of the board by the State Government by a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -whether of framing housing schemes and executing them or framing regulations or concerning financial matters---the board was under the supervision or direct control of the State Government. He also pointed out that the board has been deemed to be a local authority for the purposes of the Acquisition Act. He further relied on the specific provision contained in section 32-A of the Act under which all moneys recoverable by the board either under the Act or under any agreement made by it have been made recoverable as arrears of land revenue and that for purposes of the recovery of such moneys the board has been deemed to be a public officer within in the meaning of section 5 of the Revenue Recovery Act, 1890. Relying on these aspects or features, Mr. Thakar contended that the features emphasised by him were indicative of the fact that the board, though a statutory corporate body, will have to be regarded as an agent of the State Government through whose instrumentality the State Government was discharging its function of providing housing accommodation for the persons living in Vidarbha region. He invited our attention to articles 38 and 47 appearing in Part IV of the Constitution ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t section all moneys recoverable by the board under the Act or under any agreement are declared to be recoverable as arrears of land revenue and Mr. Thakar urged that this provision showed that the recoveries of the board will have to be regarded as recoveries of the State Government, otherwise these would not have been made recoverable as arrears of land revenue. In our view, it is not possible to accept this submission of Mr. Thakar, for, all that section 32A provides for is merely to indicate amode of recovery and simply because a particular mode of recovery which is generally available to the State Government for making its recoveries has been made available to the board for making its recoveries, it cannot mean that the said recoveries become recoveries of the State or that the recoveries made by adopting that particular mode become recoveries made by the board for and on behalf of the State Government. Similarly, the provision under which the board has been deemed to be a local authority for the purposes of the Land Acquisition Act could not be suggestive of an inference which would favour or support the petitioner's contention. In fact, the provision-contained in section 3(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment, for, it is inconceivable that a party would pay interest to itself. This provision, in our view, is a clear pointer to the fact that the Board is a distinct entity apart from the State Government and not a department or an agent of the State Government. On, the other hand, this provision clearly suggests that the board is a separate entity, possesses its own property, assets or funds and undertakes the various activities on its own account. The other provision which, in oar view, is of a clinching character is the one to be found in section 40(2) of the Act. That provision indicates as to what should happen to the property and assets of the board upon its dissolution being made by the State Government. Under sub-clause (a) of sub-section (2) of section 40 it is provided that with effect from the date specified in the notification under sub-section (1), all properties, funds and dues which are vested in or realizable by the board shall vest in and be realizable by the State Government. If the board was acting as a department of the State Government or was merely an agent undertaking the activities for and on behalf of the State Government, it was utterly unnecessary to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a similar question based on the provisions of article 289(1) of the Constitution was raised and immunity from Union taxation thereunder was claimed by the Andhra Pradesh State Road Transport Corporation, and on an examination of the relevant provisions of the Road Transport Corporation Act, 1950, under which the Andhra Pradesh State Road Transport Corporation was constituted, the court came to the conclusion that the trading or business activity that was being carried on by the Andhra Pradesh, State Road Transport Corporation was not carried on by that corporation either as a department of the State Government or as an agent on behalf of the State Government, but the corporation indulged in the concerned trade or business activity on its own and it was held that the immunity claimed by that corporation under article 289(1) of the Constitution was not available to it. In that case there were provisions of that Act which showed that the bulk of the capital necessary for the establishment of the corporation had been contributed by the State Government, a small portion by the Central Government and a few shares were held by some individuals; the provisions of the Act also indicated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id peculiar features which obtained under the Road Transport Corporations Act, 1950, the Supreme Court took the view that the A. P. State Road Transport Corporation was a distinct entity. Secondly, as stated earlier, the distinguishing features mentioned by Mr. Thakar may be relevant on the point of attracting the exemption under section 4(3)(i) and not on the issue which has been raised. The principal question involved both in that decision as well as in the case before us has been whether the income and the property of the board could be regarded as the income and property of the State Government and on that question the provisions of the Madhya Pradesh Housing Board Act, 1950, especially provisions of sections 3, 4, 12 and 14, clinchingly indicate that the petitioner-board cannot be regarded as a department or an agent of the State Government and will have to be regarded as a separate legal entity distinct from the State Government, and, therefore, the income and property of the board could not be regarded as the income and the property of the State Government. In other words, the relevant provisions concerning a particular entity established under a particular enactment would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in the case of Commissioner of Income-tax v. Andhra Chamber of Commerce . The material portion of the relevant head-note runs as follows : " Held ,.... (iii) That the expression " object of general public utility " was not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public was an object of general public utility. To serve as a charitable purpose, it was not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It was sufficient if the intention was to benefit a section of the public as distinguished from specified individuals. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a Public or impersonal nature : where there was no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid. " (Underlining is ours). Now, before the question could be answered in favour of the petitioner- board that the board could claim exemption under section 4(3)(i) of the 1922 Act, it is absolutely essential to find out upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer felt that the board was an entity whose income chargeable to tax has escaped assessment it could be said that the opinion which he formed was clearly warranted by the facts which obtained in the case. It may be stated that for two assessment years 1961-62 and 1962-63, the petitioner- board had by filing limited returns claimed refund from the income-tax department, but, admittedly, no regular returns under section 22 of the Act had been filed, but pursuant to the summons issued by the Income-tax Officer under section 131 of the 1961 Act the necessary information that was called for had been furnished by the petitioner-board. In other words, certain definite information was in the possession of the Income-tax Officer and on a prima facie view which he had taken that the board's income was chargeable to tax, it was clear that since no regular returns had been filed, income could be said to have escaped assessment. However, as stated earlier, these questions both on the legal aspect as well as on factual aspect will have to be gone into for which investigation will have to be undertaken by the Income-tax Officer before exemption claimed under section 4(3)(i) could be allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommunication relied upon by Mr. Thakar is not a communication addressed by the Central Board of Direct Taxes to any officer of the income-tax department, but it is a communication addressed by the Central Board of Direct Taxes to the Government ofMaharashtra whereby its opinion on the point is communicated to the State Government. On both these grounds, therefore, the apprehension entertained by Mr. Thakar is without any substance. Mr. Thakar next invited our attention to another letter, dated 18thMarch, 1968, addressed by the respondent No. 1 to the petitioner-board inconnection with the assessment year 1963-64. It appears that when the petitioner-board was called upon to submit its return for the assessment year 1963-64 pursuant to the notice under section 148 served, on it, thepetitioner-board by its letter, dated March 16, 1968, raised some preliminary objections, including the objection that if at all there was any surplus of receipts over the expenditure, the same was not assessable to tax, in view of section 11 of the 1961 Act and it appears that these preliminary objections were dealt with by respondent No. 1 in his communication, dated 18th March, 1968, and it has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No. 1 or his successor, who will be dealing with the case, to take a view that the point is concluded by reason of the communication dated 18th March, 1968. In the circumstances, we are not impressed by the argument of Mr. Thakar that the view expressed in paragraph 3 of the said communication is in any manner final or conclusive and that because of such view having been expressed this court should decide the question in its writ jurisdiction. We trust that when the regular return is filed by the petitioner-board in the assessment proceedings that will be undertaken by respondent No. 1 or his successor, due enquiry will be made by him, both on the factual as well as on the legal aspects on the basis of which the petitioner-board will be claiming exemption under section 4(3)(i) of the 1922 Act or section 11 of the 1961 Act. Counsel for respondent No. 1 has made a statement at the Bar before us that the respondent, Income-tax Officer, who will be dealing with the case of the petitioner-board after return is filed pursuant to the impugned notice, will deal with the question of exemption claimed under section 4(3)(i) or section 11 of the Act uninfluenced by the prima facie view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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