Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2008 Supreme(SC) 1259

2008(6) Supreme 520
Supreme Court of india
S.H. Kapadia and Sudershan Reddy, JJ.
Agricultural Produce Market Committee, Narela, Delhi — Appellant (s)
versus
Commissioner of Income Tax & Anr. — Respondent (s)
Civil Appeal No. 5180 of 2008
(Arising out of S.L.P. (C) No.6757 of 2007)
With
Civil Appeal No. 5181 of 2008 arising out of S.L.P. (C) No.6761 of 2007
Civil Appeal No. 5182 of 2008 arising out of S.L.P. (C) No.6760 of 2007
Decided on : 21-08-2008

Advocates appeared:
For the Appellant :M.L. Verma, Sr. Adv., Mrs. Avnish Ahlawat, Pawan Chaudhary, Mrs. Rani Chhabra, Ms. Lalita Chaudhary, Ms. Simran Singh and Satya Mitra, Advocates.
For the Respondents:Parag Tripathi, ASG., P. VishwanathaShetty, Sr. Adv., Amey Nargolkar, Ms. Shweta Garg, Rahul Kaushik and B.V. Balaram Das, Advocates.

Important Point
AMC(s) is not entitled to exemption under Section 10(20) of the 1961 Act w.e.f. 1.4.03.

Headnote:(a)General Clauses Act, 1897 – Section 3(31) r/w Section 10(20), explanation, Income Tax Act, 1961 – The words “other authority” in Section 3(31) of the 1897 Act omitted in the Explanation/definition clause inserted in Section 10(20) of the 1961 Act vide Finance Act, 2002 – This deliberate omission is important – Explanation to Section 10(20) provides a definition to the word “local authority” which is exhaustive wherein the words “other authority” do not find place – Therefore, functional test and the test of incorporation is not applicable to the Explanation to Section 10(20) of the 1961 Act. (Paras 27 and 28)
       (1981)2 SCC 308 – Distinguished.
       [2001] 250 ITR 369 – Referred.
       (b)Interpretation of statute – When the statute is silent about definition of some word or expression, functional and incorporation tests as also test of like names have to be applied for importing relevant definition from other statutes – Nevertheless, 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. (Paras 28, 29 ad 31)
       (1981)2 SCC 308 – Relied upon.
       (c)Income Tax Act, 1961 – Section 10(26AAB) – Income of AMC(s) is exempt with effect from 1.4.2009. (Para 32)
       (d)Income Tax Act, 1961 – Section 10(20) – AMC(s) is, therefore, not entitled to exemption under Section 10(20) of the 1961 Act after insertion of the said Explanation vide Finance Act, 2002 w.e.f. 1.4.03. (Para 33)
       Facts of the case :
       1.In these appeals the question for determination is : whether Agricultural Market Committee (“AMC”, for short) is a “local authority” under the Explanation to Section 10(20) of the Income-tax Act, 1961.
       2.Appellant-Committee is established under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998. The provisions of the said 1998 Act enjoin upon the appellant to provide the facilities for marketing of agricultural produce in Narela, Delhi. This is apart from performing other functions and duties such as superintendence, direction and control of markets for regulating the marketing of agricultural produce.
       3. For the assessment year 2003-04, the appellant-Committee claimed exemption from payment of tax under income earned by it on the ground that it was a “local authority” within the meaning of Section 10(20) of the said 1961 Act. It relied upon the definition of “local authority” in Section 2(l) of the said 1998 Act.
       4.The A.O. rejected the appellant’s claim for exemption relying upon Circular No.8/2002 dated 27.8.02 issued by CBDT.
       5. Aggrieved by the said order, appellant filed an appeal before CIT(A) who upheld the view taken by the A.O. and declined the exemption claimed by the appellant.
       6. A further appeal by the appellant, before the Tribunal, also failed.
       7. Aggrieved by the decision of the Tribunal, the appellant moved the High Court by way of Income Tax Appeal which was dismissed.
       Finding of the Court :
       AMC(s) is not entitled to exemption under Section 10(20) of the 1961 Act w.e.f. 1.4.03.
       Result : Appeals dismissed.

Judgment

S.H. Kapadia, J. —

1.Leave granted.

2.In this batch of civil appeals a short question which arises for determination is : whether Agricultural Market Committee (“AMC”, for short) is a “local authority” under the Explanation to Section 10(20) of the Income-tax Act, 1961 (“1961 Act”, for short).

3.For the sake of convenience we refer to the facts mentioned in Civil Appeal No. 5180 of 2008 (arising out of S.L.P. (C) No.6757 of 2007) filed by AMC, Narela, Delhi.

4.Appellant-Committee is established under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998 (“1998 Act”, for short). The provisions of the said 1998 Act enjoin upon the appellant to provide the facilities for marketing of agricultural produce in Narela, Delhi. This is apart from performing other functions and duties such as superintendence, direction and control of markets for regulating the marketing of agricultural produce.

5.For the assessment year 2003-04, the appellant-Committee claimed exemption from payment of tax under income earned by it on the ground that it was a “local authority” within the meaning of Section 10(20) of the said 1961 Act. It relied upon the definition of “local authority” in Section 2(l) of the said 1998 Act. The A.O. rejected the appellant’s claim for exemption relying upon Circular No.8/2002 dated 27.8.02 issued by CBDT. The view taken was that the amended provisions of Section 10(20) of the 1961 Act were not attracted to “Agricultural Produce Marketing Societies” or “Agricultural Market Boards” even when they may be local authorities under Central or State Legislations.

6.Aggrieved by the said Order, appellant filed an appeal before CIT(A) who upheld the view taken by the A.O. and declined the exemption claimed by the appellant.

7.A further appeal by the appellant, before the Tribunal, also failed.

8.Aggrieved by the decision of the Tribunal, the appellant moved the High Court by way of Income Tax Appeal No.819/2006 under Section 260A of the 1961 Act. By impugned decision dated 2.6.06, Delhi High Court following its earlier Judgment in the case of Agricultural Produce Market Committee, Azadpur v. Commissioner of Income-tax - (I.T.A. No.749/2006) dismissed the appellant’s appeal. Hence this civil appeal.

9.At the outset, it may be stated that all AMCs at different places were enjoying exemption from income tax under Section 10(20) of the 1961 Act prior to its amendment by Finance Act, 2002 w.e.f. 1.4.03.

10.Prior to the amendment by Finance Act, 2002, Section 10 (20) of the Income-tax Act, 1961 provided as under :

“CHAPTER III

INCOME WHICH DO NOT FORM PART OF TOTAL INCOME

Incomes not included in total income.

10.In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(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.”

11.Through the aforementioned amendment (Finance Act, 2002) the following Explanation stood added to Section 10(20) of the Income-tax Act, 1961 which reads as follows :

“Explanation.- For the purposes of this clause, the expression “local authority” means -

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

(ii)Municipality as referred to in clause (e) of article 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 (2 of 1924);”

12.Mr. M.L. Verma, learned senior counsel appearing on behalf of the appellants, submitted that AMC(s) has been held to

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2008 Supreme(SC) 1259

Important PointAMC(s) is not entitled to exemption under Section 10(20) of the 1961 Act w.e.f. 1.4.03.

Cases Referred (1)

Important Point
AMC(s) is not entitled to exemption under Section 10(20) of the 1961 Act w.e.f. 1.4.03.