Judgment

MADON, J. :- The above three appeals have been filed by certificate granted by the Andhra Pradesh High Court under S. 261 of the Income-tax Act, 1961, against the judgment of that High Court in an income-tax reference. The Respondent, the Andhra Pradesh State Road Transport Corporation, is a Road Transport Corporation established with effect from Jan. 11, 1958, by the State of Andhra Pradesh by a notification issued under section 3 of the Road Transport Corporations Act 1950 (Act No. 64 of 1950) (hereinafter referred to in short as "the RTC Act"). Prior to the establishment of the Respondent Corporation Road Transport in the State of Andhra Pradesh was a department of the Government, being run by the Government of Hyderabad prior to the formation of the State of Andhra and thereafter by the Government of Andhra Pradesh. During the whole of this period the income made from road transport was exempt from income-tax. After the Respondent Corporation was formed, the Income-tax Department took the view that the income of the Respondent Corporation was liable to income-tax and assessed the Respondent Corporation to income-tax for the assessment years 1958-59 and 1959-60. The Respondent Corporation thereupon filed a writ petition in the Andhra Pradesh High Court contending that the property owned by it and the income earned by it were the property and income of a State exempted from Union taxation under Art. 289(1) of the Constitution. This contention was rejected and the writ petitions were dismissed by the High Court. Appeals filed by the Respondent Corporation in this Court were also dismissed. The judgment of this Court is reported as Andhra Pradesh State Road Transport Corpn. v. Income-tax Officer, Hyderabad, (1964) 52 ITR 524, 535-36. (1964) 7 SCR 17, 29-30. After referring to the various provisions of the RTC Act, this Court held:

"Far from making any provision which would make the income of the corporation the income of the State, all the relevant provisions emphatically bring out the separate personality of the corporation and proceed on the basis that the trading activity is run by the corporation and the profit and loss that would be made as a result of the trading activity would be the profit and loss of the corporation .........When we are deciding the question as to whether the income derived by the corporation is the income of the State, the provision made by S. 30 for making over to the State Government the balance that may remain as indicated therein, is of no assistance. The income is undoubtedly the income of the corporation. All that S. 30 requires is that a part of that income may be entrusted to the State Government for a specific purpose of road development. It is not suggested or shown that when such income is made over to the State, it becomes a part of the general revenue of the State. It is income which is impressed with an obligation and which can be utilised by the State Government only for the specific purpose for which it is entrusted to it."

2. Having failed in its contention that its income was exempt from income-tax under Art. 289(1) of the Constitution. the Respondent Corporation filed returns in respect of the assessment years 1960-61, 1961-62, and 1962-63, showing its income as "Nil". In respect of the assessment years 1960-61 and 1961-62, which are the subject of Civil Appeals Nos. 216 and 217(NT) of 1973 before us, it claimed exemption from income-tax under S. 4(3)(i) of the Indian Income-tax Act, 1922 (hereinafter referred to a-, "the 1922 Act"). In respect of the assessment year 1962-63, which is the subject of Civil Appeal No. 218 (NT) of 1973 before us, it claimed exemption under S. 11 of the Income-tax Act, 1961 (hereinafter referred to as the 1961 Act"). The Respondent Corporations claim for exemption was rejected by the I.T.O., Company Circle, Hyderabad. The appeals filed by the Respondent Corporation were allowed by the Appellate Assistant Commissioner of Income-tax, D Range, Hyde