Important Point
The Food Corporation of India is not exempt from taxation under Article 285 of the Constitution.

Judgment

D.P Wadhwa, J.-Food Corporation of India (‘Corporation’ for short) is aggrieved by the judgment dated December 13, 1994 of the Division Bench of the Punjab and Haryana High Court dismissing its writ petition challenging the order of assessment of its properties under the Punjab Municipal Act by the second respondent, the Municipal Committee, Jalalabad, District Ferozpur in the State of Punjab.

2. It is contended before us that the Corporation is exempt from taxation under Article 285 of the Constitution and that valuation and assessment of the properties has been completed without taking into account the provisions of Section 3 of the Punjab Municipal Act under which house tax is to be arrived at on the basis of the “annual value” on which the properties can be let.

3. High Court has held that assessment of the property tax was based on agreed fair rent as stated by the Municipal Committee. There is no challenge to this averment by the Corporation. It is, therefore, difficult for us to hold that the agreed rent is not the fair rent and that there has been any violation of the provisions regarding fixation of annual value. This contention of the Corporation must fail.

4. The appellant Corporation is constituted by the Food Corporation Act, 1964 (for short the “Act”). Under Section 3 of this Act, the Corporation shall be body corporate with that name, having perpetual succession and a common seal with power, subject to the provisions of the Act, to acquire, hold and dispose of property and to contract and may, by that name, sue and be sued. If we refer to Section 42 of the Act, the Corporation is a company within the meaning of the Income-tax Act, 1961 and liable to tax on its income, profits and gains. However, under Section 43, provision of law relating to winding up of companies or corporations do not apply to the Corporation and it cannot be placed in liquidation save by order of the Central Government. It is, thus, apparent that the Corporation is a distinct entity from the Union of India.

5. It is submitted before us that the Corporation is nevertheless a statutory corporation incorporated by an Act of parliament and runs entirely on the subsidies provided by the Central Government and in fact it has taken over the role earlier performed by the Directorate of Food in the Government of India and further that the Corporation has no profit motives. Lastly, it is submitted that the Corporation is obliged to follow directions/instructions issued by the Central Government from time to time and its management is also provided by the Central Government. It was, thus, submitted that for all intent and purposes, the Corporation is nothing but an extended arm of the Central Government and it is thus exempt from taxation under Article 285 of the Constitution.

6. Article 285 of the Constitution is set out as under :

“285. Exemption of property of the Union from State taxation.-(1) The property of the Union shall, save in so far as Parliament may by law otherwise provides, be exempt from all taxes imposed by a State or by any authority within a State.

(2) Nothing in clause (1) shall, until Parliament by law other­wise provided, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediate­ly before the com­mencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State.”

7. The question that arises before us is : If the property of the Corporation is pro­perty of the Union of India and, thus, exempt from taxation, imposed by the State or any authority within a State. Au­thority in the present case would include local authority. A Constitu­tion Bench of this court in Electro­nics Corporation of India Ltd. & Ors. v. Secretary, Revenue Department, Government of Andhra Pradesh1 has held that a Government company is distinct from the Central Government and cannot claim exemption from taxation under Article 285 of the Consti­tuti