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TMI Blog1976 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the assessment year 1962-63, relevant in this reference, the Income-tax Officer again assessed the assessee in the same status. This time, the assessee challenged the assessment as also the status as determined by the Income-tax Officer and went up on appeal. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. In further appeal to the Tribunal, it was claimed by the assessee that it was a local authority within the meaning of section 2(31)(vi) of the Income-tax Act, 1961, and as such its income was exempt from income-tax under section 10(20) of the Act. The Tribunal found that the assessee was an authority and legally entitled to the control or management of its own fund created under section 27 of the Road Transport Corporations Act, 1950. The Tribunal, however, held that the fund controlled by the assessee was not a " local fund " within the meaning of section 3(31) of the General Clauses Act in spite of the notification issued under rule 11 of the West Bengal State Road Transport Corporations Rules, 1960. The Tribunal observed that under the notification of the Government of West Bengal dated the 10th June, 1960, the area of the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the Constitution reads as follows : " 367. (1) Unless the context otherwise requires, the General Clauses Act, 1897, shall, subject to any adaptations and modifications that may be made therein under article 372, apply for the interpretation of this Constitution as it applies for the interpretation of an Act of the Legislature of the Dominion of India." Section 3(31) of the General Clauses Act (Central) is as follows : " 3. (31) 'local authority' shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund." Mr. S. Mitra, learned counsel for the assessee, has drawn our attention to various provisions of the Road Transport Corporations Act, 1950, The Road Transport Corporations (West Bengal Amendment) Act, 1959, and the West Bengal State Road Transport Corporations Rules, 1960. In particular, he has relied on sections 23, 27 and 32 of the Road Transport Corporations Act, 1950. Section 23 provides for allotment of capital to road transport corporations by the Central and the State Government. The corporation is also e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first was the case of Andhra Pradesh State Road Transport Corporation v. Income-tax Officer [1963] 47 ITR 101 (AP). Mr. Mitra contended that in this case the learned Advocate-General of Andhra Pradesh appearing on behalf of the Andhra Pradesh State Road Transport Corporation conceded the point. The observations of the High Court, made on the basis of such concession read as follows : " In our view, the provisions of section 4(3)(iii) of the Income-tax Act itself by the use of the words 'within its own jurisdictional area' excludes a corporation such as this which has operational jurisdiction in the whole of the State, from being a local authority. The expression 'local authority' has not been defined in the Income-tax Act, but clause (31) of section 3 of the General Clauses Act, inter alia, defines it as an authority with the control of or management of a municipality or local fund. It is submitted that since the Government has declared the funds of the corporation to be a local fund in its Notification G.O. Ms. No. 522 dated May 16, 1958, the corporation is a local authority. As pointed out by the Income-tax Officer, the declaration of the Government is specifically for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Transport Corporation was held to be a local authority. The Supreme Court did not accept that the State Transport Corporation was a local authority and observed as follows : " The expression 'local authority' is not defined in the Land Acquisition Act but is defined in section 3(31) of General Clauses Act, 1897, as follows : 'Local authority' shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund. The definition given in the General Clauses Act, 1897, govern all Central Acts and Regulations made after the commencement of the Act... The definition given in section 3(31) will, therefore, hold good for construing the expression " local authority " occurring in the Land Acquisition Act... It will be clear from the definition that unless it is shown that the State Transport Corporation is an 'authority' and is legally entitled to or entrusted by the Government with control or management of a local fund it cannot be regarded as a local authority. No material has been placed before us from which it could be deduced that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general compass of the facts before him, unless he makes it clear that he intended his remarks to have a wider ambit ...... These general principles are particularly important when questions of construction of statutes are in issue. It is quite clear that judicial statements as to the construction and intention of an Act must never be allowed to supplant or supersede its proper construction and courts must beware of falling into the error of treating the law to be that laid down by the judge in construing the Act rather than found in the words of the Act itself. No doubt a decision on particular words binds inferior courts on the construction of those words on similar facts but beyond that the observations of judges on the construction of statutes may be of the greatest help and guidance but are entitled to no more than respect and cannot absolve the court from its duty of exercising an independent judgment." Mr. S. Sen, learned counsel for the revenue, contended, on the other hand, that the decisions cited on behalf of the assessee were binding and ought to be followed in the instant case. In addition he cited certain other decisions : The first was Kartick Chandra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses Act, 1897, which has been imported to interpret the expression " local authority " in article 12 : cf. Sarangapani v. Madras Port Trust AIR 1961 Mad. 234, 239 ; Kishan Singh v. State of Punjab AIR 1961 Punj 1, 3 [FB]. Though there has been some controversy as to whether the expression " other authorities " must be interpreted ejusdem generis with the expression " local authority " (University of Madras v. Shantha Bai AIR 1954 Mad 67) or it would comprise other statutory bodies which do not discharge functions similar to that of a local self-government organ, e.g., a State Electricity Supply Board (Mohan Lal v. State AIR 1966 Raj 1, 5) or a Devaswom Board (Nambooripad v. Cochin Devaswom Board AIR 1956 Trav-Coch 19, 21), there is an agreement on the following points : (i) In order to constitute an 'other authority' within the meaning of article 12, the body must be a body created by statute and having the power to make regulations having the force of law (Paramatma v. Chief justice, AIR 1964 Raj 13, 15 ; Nambooripad v. Cochin Devaswom Board AIR 1956 Trav-Coch 19, 21 or exercising statutory powers as a 'public authority' (S. K. Mukherjee v. Chemicals and Allied Products AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not see any reason to narrow down this meaning in the context in which the words 'other authorities' are used in article 12 of the Constitution ....... These decisions of the court support our view that the expression ' other authorities ' in article 12 will include all constitutional or statutory authorities on whom powers are conferred by law. It is not at all material that some of the powers conferred may be for the purpose of carrying on commercial activities .......The State, as defined in article 12, is thus comprehended to include bodies created for the purpose of promoting the educational and economic interests of the people. The State, as constituted by our Constitution, is further specifically empowered under article 298 to carry on any trade or business. The circumstance that the Board under the Electricity Supply Act is required to carry on some activities of the nature of trade or commerce does not, therefore, give any indication that the Board must be excluded from the scope of the word 'State' as used in article 12. On the other hand, there are provisions in the Electricity Supply Act which clearly show that the powers conferred on the Board include power to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal authority ". As the General Clauses Act does not provide the definition of " authority ", we are left with the judicial decisions interpreting and construing this expression. In view of the law laid down by this court and the Supreme Court in the decisions considered earlier it does not appear to us that the assessee in the instant case satisfies the test and can be stated to be an " authority " within the meaning of the expression as laid down in the above decisions. The assessee cannot be said to exercise quasi-governmental or governmental powers or perform governmental or quasi-governmental functions. No direction can be issued by the assessee which may be enforced with punishment. As such, the assessee cannot be said to be an " authority ". The assessee also does not exercise any particular statutory power. There is no right vested in the assessee to command and be obeyed. The assessee also has no power to make regulations, rules or bye-laws having the force of law and the tests laid down in the case of West Bengal Small Industries Corporation AIR 1967 Cal 231 are not satisfied. Even if we assume that the assessee is an " authority " under section 3(31) of the General C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Commissioner of Income-tax v. Myore Spinning Manufacturing Co. Ltd. reported in [1970] 78 ITR 4 (SC). The facts before the Supreme Court were different from the facts before us in the instant case. Mr. Mitra also cited a decision of the Allahabad High Court in the case of Madho Mahesh Sugar Mills (P.) Ltd. v. Commissioner of Income-tax reported in [1973] 92 ITR 503 (All). It was held in this case that the liability for payment of gratuity ascertained one actuarial calculations was a liability in praesenti and was capable of ascertainment and could be a permissible business expenditure. The above decisions and two other cases cited by Mr. Mitra reported respectively in India United Mills Ltd. v. Commissioner of Income-tax [1975] 98 ITR 426 (Bom) and Commissioner of Income-tax v. High Land Produce Co. Ltd. [1976] 102 ITR 803 (Ker) do not advance the matter any further. It has been found as a fact that the funds were not constituted by any irrevocable trust but some money was set apart by investing the same in Government securities. The Tribunal concluded that only by reason of the fact the money was so invested it could not be said that the assessee lost all proprietary r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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