Local authority status for market committee accepted under income tax law, securing exemption for its income.

The Agricultural Produce Marketing Committee was examined under the definition of "local authority" in section 10(20) of the Income-tax Act, 1961 read with section 3(31) of the General Clauses Act, 1897. Applying the settled criteria for bodies resembling municipal committees, the court considered separate corporate existence, local autonomy, functional similarity to municipal bodies, popular representation and control over a local fund. Because the committee was a body corporate with a defined market area, elected office-bearers, power to regulate markets, levy fees, maintain a market fund and exercise supervisory control over the market, it satisfied the statutory tests for a local authority and its income was treated as exempt.

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Issues: Whether the Agricultural Produce Marketing Committee is 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, and whether its income is exempt from tax.

Analysis: The expression "local authority" under section 3(31) of the General Clauses Act, 1897 was applied in light of the tests laid down for bodies akin to municipal committees, district boards or port commissioners. The decisive features considered were separate corporate existence, autonomy, functional similarity to municipal bodies, popular representation, and control over a local fund. On the relevant statutory scheme, the market committee was a body corporate with a defined operational area, elected office-bearers, power to regulate markets, levy and collect fees, maintain a market fund, and perform functions connected with superintendence, direction and control of the market. These features satisfied the settled criteria for a local authority.

Conclusion: The committee was held to be a local authority and its income was held to be exempt under section 10(20) of the Income-tax Act, 1961.

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