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Judgment
Dev Darshan Sud, J.—All these appeals have been preferred by the Agriculture Produce Market Committee(s) of Solan, Paonta Sahib, Una and Hamirpur, statutory bodies under the Himachal Pradesh Agriculture and Horticulture Produce Marketing (Development and Regulation) Act, 2005, for the assessment years as tabulated below :
Name of the assessee
Asst. yr.
Appeal No.
Date of order of the Tribunal
M/s Agriculture Produce Market Committee, Solan, District Solan.
2004-05 & 2005-06
ITA Nos. 791 & 792 of 2007
19.06.2008
M/s Agriculture Produce Market Committee, Paonta Sahib, District Sirmaur.
2007-08 & 2008-09
ITA Nos. 386 & 387 of 2010
14.05.2010
M/s Agriculture Produce Market Committee, Paonta Sahib, District Sirmaur,
2004-05, 2005-06 & 2006-07
ITA Nos. 364, 365 & 366 of 2010.
03.05.2010
M/s Agriculture Produce Market Committee, Paonta Sahib, District Sirmaur,
2007-08 & 2008-09
ITA Nos. 386 & 387 of 2007.
14.05.2010
M/s Agriculture Produce Market Committee, Una, District Una.
2003-04 to 2008-09
ITA Nos. 971 to 976 of 2010
31.08.2010
M/s Agriculture Produce Market Committee, Una, District Una
2003-04 to 2008-09
ITA Nos. 971 to 976 of 2010
31.08.2010
M/s Agriculture Produce Market Committee, Hamirpur, District Hamirpur.
2003-04 to 2008-09
ITA Nos. 948 to 953 of 2010.
28.07.2010
M/s Agriculture Produce Market Committee, Hamirpur, District Hamirpur.
2003-04 to 2008-09
ITA Nos. 948 to 953 of 2010
28.07.2010
M/s Agriculture Produce Market Committee, Hamirpur, District Hamirpur.
2003-04 to 2008-09
ITA Nos. 948 to 953 of 2010.
28.07.2010
The appeals involve a common question of law that is as to whether the assessee is entitled to the exemption under s. 10(20) of the IT Act, 1961 (hereinafter referred to as the ''Act'').
The facts need not be considered in detail as the common ground in all the orders is that the appellant-assessee claimed exemption under s. 10(20) of the Act claiming that it was a local authority within the meaning of the Act and income derived by it was exempt from tax as provided therein. This contention was negatived by the AO as confirmed and held in appeal by the Tribunal.
Sec. 10(20) of the Act reads :
"Sec. 10(20) The income of a local authority which is chargeable under the head ''Income from house property'', ''Capital gains'' or Income from other sources'' or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area.
Explanation.--For the purposes of this clause, the expression ''local authority'' means--
(i) Panchayat as referred to in cl. (d) of Art. 243 of the Constitution; or
(ii) Municipality as referred to in cl. (e) of Art. 342P of the Constitution; or
(iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or
(iv) Cantonment Board as defined in s. 3 of the Cantonments Act, 1924 (2 of 1924)."
Two questions have been raised for the consideration :
"(i) Whether in facts and circumstances of the case the Hon''ble Tribunal was justified in law in holding that the provisions of the s. 10(20) are not applicable to the appellant and that the appellant is not a local authority ?
(ii) Whether on facts and circumstances of the case, the Hon''ble Tribunal was justified in law in holding that the provisions of the s. 10(20) are not applicable to the appellant and subsequently interest under s. 234A and under s. 234B is liable to be imposed to the appellant ?"
The questions need not detain us further as they have been settled by the Supreme Court. In Agricultural Produce Market Committee, Azadpur Vs. Commissioner of Income Tax and Another, this question engaged the attention of the High Court of Delhi which, after consideration of the case law on the point and the effect of the explanation added to s. 10(20) of the Act, held :
"9. The appellant-committee is no doubt a statutory committee established under the provisions of a legislative enactment. It has been given a distinct nomenclature with definite statutory functions and powers. There is, therefore, no question of treating the appellant-committee as a municipal committee for it is neither known as a municipal committee under the enactment under which it is created nor recognized by fiction of law as such by the IT Act or by any other enactment for that matter. That being so, the Court cannot by a process of interpretation include an entity like the appellant into the provisions of the Explanation by drawing a comparison between the nature and functions which a municipal committee is expected to discharge with those discharged by the appellant. Any such process would imply that the Court interprets the provision by reference to what in its opinion was intended by Parliament and not what Is specifically stated in the provision. It would also amount to reading something into the provision which is not obvious but which the Court may on an interpretation attribute or discover. That approach in matters of interpretation has been eschewed by Courts in fiscal statutes unlike beneficial legislations where the Court has adopted the principle of liberal interpretation.
The second reason which dissuades us from accepting the interpretation suggested by Mrs. Ahlawat is also not far to seek. The appellant is a marketing committee as distinct from municipal committee. The expression ''municipal committee'' has not been defined under the Act. One can, therefore, draw on the dictionary meaning given to the expression ''municipal''. Webster''s Dictionary defines ''municipal'' as under :
"All relating to or carried on by local self Government (especially of a town, city, etc.).''
In Black''s Law Dictionary, the term ''municipal'' has been defined as under :
"In narrower, more commonsense, it means pertaining to a local Governmental unit, commonly, a city or town or other Governmental unit. In its broader sense, it means pertaining to the public or Governmental affairs of a State or nation or of a people. Relating to a State or nation, particularly when considered as an entity independent of other States or nations.'''' (pp. 555-556)
In order to put at rest the entire controversy, the Supreme Court in Agricultural Produce Market Committee, Narela, Delhi Vs. Commissioner of Income Tax and Another, , affirming the above decision and after consideration of the provisions of the Delhi Agricultural Produce Marketing (Regulation) Act, 1998, provisions of which are in pari materia with the Himachal Pradesh Act, holds :
"28. As stated above, it has been argued on behalf of the appellants that AMC(s) is not a Municipal Committee. The words ''Municipal Committee'' find place in item (iii) of the said Explanation. According to the appellants, although AMC(s) is not a Municipal Committee still is a ''local authority'' of a like nature and character to that of Municipal Committee performing municipal functions legally entitled to control the local fund, namely, the market fund. For that proposition reliance is placed on para 2 of the judgment in the case of Union of India (UOI) and Others Vs. Shri R.C. Jain and Others, , as quoted hereinabove. However, it may be noted that this Court in the case of R.C. Jain (supra), was required to consider the question as to whether ''Delhi Development Authority'' is a ''local authority'' as its employees stood outside the purview of the Payment of Bonus Act, 1965. Under s. 32(iv) of the Payment of Bonus Act, 1965, it is stated that nothing in the said 1965 Act shall apply to the employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or State Government or a local authority. It is in this context that the Court was required to consider in the case of R.C. Jain (supra), as to whether the DDA is a ''local authority''. There was no definition of ''local authority'' in the said 1965 Act. Therefore, this Court had to go back to s. 3(31) of the 1897 Act. As quoted hereinabove, s. 3(31) of the 1897 Act defines ''local authority'' to meana Municipal Committee, District Board, body of Port Commrs. or other authority. In the case of R.C. Jain (supra), this Court was aware that the DDA is neither a District Board nor a body of Port Commrs. Therefore, the only question the Court had to address to was : whether DDA would fall within the meaning of the words ''other authority'' in s. 3(31) of the 1897 Act. Therefore, we have to read para 2 of the judgment in the case of R.C. Jain (supra), in the context of s. 3(31) of the 1897 Act as the words ''local authority'' were not defined in the Payment of Bonus Act, 1965. The Court, therefore, in the case of R.C. Jain (supra), had to fall back upon s. 3(31) of the 1897 Act and in doing so this Court in the case of R.C. Jain (supra) applied the functional and incorporation tests.
One more aspect needs to be mentioned. In the case of R.C. Jain (supra), the test of ''like nature'' was adopted as the words ''other authority'' came after the words ''Municipal Committee, District Board, Body of Port Commrs.''. Therefore, the words ''other authority'' in s. 3(31) took colour from the earlier words, namely, ''Municipal Committee, District Board or Body of Port Commrs.''. This is how the functional test is evolved in the case of R.C. Jain (supra). However, as stated, earlier Parliament in its legislative wisdom has omitted the words ''other authority'' from the said Explanation to s. 10(20) of the 1961 Act. The said Explanation to s. 10(20) provides a definition to the words ''local authority''. It is an exhaustive definition. It is not an inclusive definition. The words ''other authority'' do not find place in the said Explanation. Even, according to the appellant(s), AMC(s) is neither a Municipal Committee nor a District Board nor a Municipal Committee nor a Panchayat. Therefore, in our view, the functional test and the test of incorporation as laid down in the case of R.C. Jain (supra), is no more applicable to the Explanation to s. 10(20) of the 1961 Act. Therefore, in our view the judgment of this Court in the case of R.C. Jain (supra), followed by judgments of various High Courts on the status and character of AMC(s) are no more applicable to the provisions of s. 10(20) after insertion of the Explanation/definition clause to that sub-section, vide the Finance Act, 2002.
The question still remains as to why Parliament has used the words ''Municipal Committee'' and ''District Board'' in item (iii) of the said Explanation. In our view, Parliament has defined ''local authority'' to mean--a Panchayat as referred to in cl. (d) of Art. 243 of the Constitution of India, Municipality as referred to in cl. (e) of Art. 243P of the Constitution of India. However, there is no reference to Art. 243 after the words Municipal Committee'' and ''District Board''. In our view, the Municipal Committee and District Board in the said Explanation are used out of abundant caution. In 1897 when the General Clauses Act was enacted there existed in India Municipal Committees and District Boards. They continued even thereafter. In some remote place it is possible that there exists a Municipal Committee or a District Board. Therefore, in our view, apart from a Panchayat and Municipality, Parliament in its wisdom decided to give exemption to Municipal Committee and District Board. Earlier there were District Board Acts in various States. Most of the States had repealed those Acts. However, it is quite possible that in some remote place a District Board may still exist.
Therefore, Parliament decided to give exemption to such Municipal Committees and District Boards. Therefore, in our view, advisedly Parliament has retained the exemption for Municipal Committee and District Board apart from Panchayat and Municipality. Our view finds support from the provisions contained in Part IX of the Constitution of India. Article 243N provides for continuance of existing laws and Panchayats. It states, inter alia, that notwithstanding anything in Part-IX, any law relating to Panchayats in a State immediately before commencement of the Constitution (Seventy-third Amendment) Act, 1992, which is inconsistent with the provisions of Part IX, shall continue to be in force until repealed by a competent legislature. Similarly, under Part IX-A there is Art. 243ZF which refers to ''Municipalities''. This article, inter alia, states that notwithstanding anything in Part IX-A, any provision of any law relating to municipalities in force in a State Immediately before the commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with the provisions of Part IX-A, shall continue to be in force until amended to repealed by a competent legislature. In our view. Art. 243N and Art. 243ZF indicates that there could be enactments which still retain the entities like Municipal Committees and District Boards and if they exist, Parliament intends to give exemption to their income under s. 10(20) of the 1961 Act.
Before concluding we quote hereinbelow an important principle of law enunciated by this Court in the case of R.C. Jain (supra), which reads as under :
''............. it is not a sound rule of interpretation to seek the meaning of words used in an Act, in the definition clause of other statutes.''
Since we are of the view that AMC(s) is neither a Municipal Committee nor a District Board under the said Explanation to s. 10(20) of the 1961 Act, we refrain from going into the question : whether the AMC(s) is legally entitled to the control of the local fund, namely, Market Fund, under the said 1998 Act. There is one more reason why we do not wish to express any opinion on the said question. Vide the Finance Act, 2008, income of AMC(s) is exempt. Sub-s. (26AAB) of s. 10 comes into force w.e.f. 1st April, 2009. Therefore, we do not wish to express any opinion on the question as to whether AMC(s) is legally entitled to the control of the local fund.
We hold that AMC(s) is, therefore, not entitled to exemption under s. 10(20) of the 1961 Act after the insertion of the said Explanation, vide the Finance Act 2002, w.e.f. 1st April, 2003. (pp. 21-23)
We, therefore answer both the questions against the assessee and in favour of the Revenue.