JUDGMENT

B.P. JEEVAN REDDY, J.- Leave granted.

2. The question arising in this batch of appeals is whether the properties vested in the International Airports Authority of India under the provisions of International Airports Authority Act, 1971 can yet be called the properties of the Union within the meaning of Article 285 of the Constitution of India and, therefore, exempt from all taxes imposed by a State or by any authority within a State - to be more precise by the municipality. The Delhi High Court has answered the said question in the negative, i.e., in favour of the Delhi Municipal Corporation whereas the Calcutta High Court has taken a contrary view. A learned Single Judge of the Bombay High Court has also taken the same view as the Calcutta High Court but the said judgment is now the subject-matter of a letters patent appeal before the Division Bench of the same court.

3. Article 285 comprises two clauses. Though clause (2) is not attracted in these matters, we may yet set out the entire article:

"285. Exemption of property of the Union from State taxation.- (1) The property of the Union shall, save insofar as Parliament may by law otherwise provide, 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 provides, 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."

4. According to clause (1), the properties of the Union of India shall be exempt from all taxes imposed by a State or by any other authority within a State except insofar as Parliament may by law provide otherwise. A municipality or a municipal corporation is certainly an authority within a State. Therefore, the municipality is not competent to levy any taxes upon the properties of the Union of India by virtue of this article. But what the Municipal Corporations of Delhi and Calcutta say is that the properties which they are seeking to tax now are not the properties of the Union but the properties of the International Airports Authority of India (Authority) and that the properties of the Authority do not enjoy the immunity in clause (1) of Article 285. For a proper appreciation of the question, it is necessary to examine the provisions of the International Airports Authority of India Act, 1971 which created the said Authority. But before we do that, it would perhaps be appropriate to refer to the taxing provisions in the Delhi Municipal Act and the Bengal Municipal Act and also mention briefly how the disputes have arisen.

5. Section 113 of the Delhi Municipal Corporation Act specifies the several kinds of taxes which the Corporation shall levy for the purpose of the Act. Property tax is one of the taxes mentioned in this section. Section 119 exempts the properties of the Union from taxation. Sub-section (1) of Section 119 is practically a repetition of Article 285. It is not necessary to set out the provisions of this section inasmuch as Article 285 prevails irrespective of the wording of this section. Pursuant to the provisions of the Delhi Municipal Corporation Act, the Municipal Corporation levied property taxes upon the land and properties comprised in Indira Gandhi International Airport Terminal-II. The construction of the said terminal was commenced in May 1986. The Corporation levied taxes with effect from 1-4-1986 upon the properties comprised in the said terminal. When a notice of demand was served upon the Authority for payment of the tax assessed by the Corporation, the Authority filed Writ Petition No. 578 of 1987 in the Delhi High Court challenging the demand. The main contention of the authority was that the property of the Union of India has been vested in it by the Act only for the purpose of its management and administration and that the properties con