Agricultural Produce Market ... vs Cit And Anr.
2006 Latest Caselaw 1071 Del

JUDGMENT

1. In this appeal under Section 260A of the Income Tax Act, 1961, the appellant has raised the following substantial question of law for determination of this Court:

Whether the Tribunal was correct in law in holding that the appellant marketing committee is not a local authority within the meaning of Section 10(20) of the Income Tax Act, 1961 ?

2. The question arises in the following backdrop

3. The appellant committee is established under the Delhi Agricultural Produce Marketing (Regulation) Act, 1976 which is now replaced by The Delhi Agricultural Produce Marketing (Regulation) Act, 1998. The provisions of the said Act enjoin upon the appellant to provide facilities for marketing of agricultural produce in Azadpur, Sabzi Mandi, Delhi apart from performing other functions and duties such as superintendence, direction and control of markets for regulating marketing of agricultural produce. For the assessment year 2002-03, the appellant committee claimed exemption from payment of tax on the income earned by it on the ground that it was a local authority within the meaning of Section 10(20) of the said Act. The assessing officer repelled that claim and brought to tax the committees income for the said year. Aggrieved, the committee appealed to the CIT(A) who affirmed the view taken by tire assessing officer. The matter was then taken up in a further appeal to the Tribunal who held that the assessed was indeed a local authority and, therefore, exempt from payment of income-tax under the Income Tax Act, 1961. A reference made to the High Court at the instance of the revenue raised the question whether the Agricultural Produce Marketing Committee, Azadpur, Delhi was a local authority within the meaning of Section 10(20) of the Income Tax Act, 1961 read with Section 3(31) of the General Clauses Act, 1897. A Division Bench of this Court comprising Arijit Pasayat, C.J. and D.K. Jain, J., as their Lordships then were, answered the question in the affirmative and hold that the marketing committee was a local authority within the meaning of Section 10(20) of the IT Act, 1961 read with Section 3(31) of the General Clauses Act, 1897. The decision is reported in CIT v. Agricultural Marketing produce Committee , The conclusion drawn by this Court was based on a conspectus of the provisions contained in Delhi Agricultural Produce Marketing (Regulation) Act, 1976 and a comparison of the said provisions with those contained in similar other enactments in the States of Punjab, Gujarat and Maharashtra. The court observed:

On examination of various provisions referred to above the inevitable conclusion is that the assessed is a body corporate having separate autonomous status. Its operational area is defined, its office bearers are elected and are free to take their own decision. The committee runs a market, providing civic amenities in the market and performs judicial, legislative and executive as well as fiscal functions. It can raise funds, control and manage funds. Therefore, the ratio laid down in R.C. Jains case (1981) 58 FJR 284 . AIR 1981 SC 951 as chiselled and honed by other decisions referred to above squarely applies to the facts of the case. As the indicated criteria are fulfillled, we have no hesitation in holding that the assessed is a local authority. The mere absence of a provision on the lines of the Maharashtra and Gujarat Acts would not be the decisive criteria in view of the analysis made supra. That being the position, the Tribunals conclusions are irreversible. The question referred is answered in the affirmative in favor of the assessed and against the revenue.

4. For the assessment year 2003-04, the appellant marketing committee once again claimed exemption from payment of tax in terms of Section 10(20) of the Act in response to a notice issued to it under Sections 142(1) and 143(2) of the said Act. The assessing officer repelled the assesseds claim for exemption relying upon Circular No. 8 of 2002, dated 7-8-2002 ((2002) 178 CTR (St) 9] issued by the CBDT. It was also of the view that the amended provisions of Section 10(20) of the Income Tax Act, 1961 were not attracted to "Agricultural Produce Marketing Societies" or Agricultural Market Boards, etc., even when they may be local authorities under other Central or State legislations. Aggrieved by the said order, the appellant committee filed an appeal before the Commissioner (Appeals) who uphold the view taken by the assessing officer and declined the exemption claimed by the assessed A further appeal before the Tribunal having failed, the committee has filed tile present appeal in which the primary question that falls for consideration is whether the committee is a local authority within the meaning of Section 10(20) of the Income Tax Act, 1961.

5. Appearing for the appellant, Mrs. Ahlawat argued that the Tribunal in error in taking a view contrary to the one taken by this Court in the previous round of litigation. She urged that this Court having declared the appellant committee to be a local authority for purposes of Section 10(20) of the Act, the reasoning underlying the said conclusion could not be ignored while determining the very same question for the assessment year 2003-04. Alternatively, she argued that although provisions of Section 10(20) of the Income Tax Act, 1961 had been amended with effect from 1-4-2003, yet the said amendment did not affect the legal character of the appellant committee as a local authority. She urged that since the functions of the appellant committee were akin to that discharged by a municipal committee, the appellant could be treated to be a municipal committee for purposes of exemption from income-tax.

6. We have given our anxious consideration to the submissions made by Mrs. Ahlawat. The question that fell for consideration before the court in the previous round of litigation between the parties was whether the appellant committee was a local authority within the meaning of Section 10(20) of the Income Tax Act, 1961 as it existed before its amendment. Since the Act did not provide any definition for the expression "local authority", this Court had interpreted the same by reference to Section 3(31) of the General Clauses Act, 1897 and answered the question in favor of the committee. The legal position has since tile said pronouncement undergone a change inasmuch as the expression "local authority" has been given a restricted meaning in an exhaustive definition for purposes of Section 10(20) of the Income Tax Act, 1961. Any determination of the question by reference to Section 3(31) of the General Clauses Act, 1897 would, therefore, no longer hold the key to the correct understanding or interpretation of the expression as it now has to be understood or interpreted in the light of the amended provision. Reliance upon the provisions of the General Clauses Act, 1897 would, in fact, be permissible only in cases where the enactment in which the expression occurs does not itself provide for a definition or meaning to be given to the same. It is possible that an expression which is defined under the General Clauses Act, 1897 is, at the same time, also given a meaning or definition under a special enactment which meaning may be different from the one given in the former Act. The decision of this Court in the previous round of litigation does not, therefore, provide a complete answer to the question that arises for the year under consideration in the present appeal. The first limb of Mrs. Ahlawats argument, therefore, fails and is rejected.

7. That brings us to the alternative submission urged by Mrs. Ahlawat that the appellant committee is a municipal committee within the meaning of Section 10(20) of the Act as amended with effect from 1-4-2003, by Finance Act, 2002, which added the following Explanation to the said provision with effect from 1-4-2003:

Explanation : For the purposes of this clause, the expression local authority means

(i) Panchayat as referred to in clause (d) of Art. 243 of the Constitution; or

(ii) Municipality as referred to in clause (e) of Art. 243P 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 Section 3 of the Cantonments Act, 1924."