Local authority status for Market Committees confirmed where corporate existence, autonomy, and control of market funds are established.

A Market Committee under the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 is treated as a local authority for section 10(20) of the Income-tax Act and section 3(31) of the General Clauses Act because it has separate corporate existence, operates within a defined market area, functions autonomously, performs regulatory and civic functions, and controls its own market fund. The market fund was regarded as a local fund since its administration vests in the Committee. On that basis, income covered by the exemption is not taxable, while income outside the exemption remains assessable; the challenge to the notices and assessments failed on the exemption issue.

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Issues: Whether the Market Committee constituted under the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 is a "local authority" within section 10(20) of the Income-tax Act and section 3(31) of the General Clauses Act, 1897, so as to claim exemption on the relevant income.

Analysis: The Court applied the settled tests for a local authority: separate legal existence, defined territorial area, autonomy in decision-making, performance of civic or governmental functions, and power to raise and control funds. The Market Committee was held to satisfy these requirements because it is a body corporate with perpetual succession, functions within a defined market area, is elected and autonomous, discharges regulatory and civic functions in relation to marketing, and raises and administers its own market fund through fees and other receipts. The Court also treated the market fund as a local fund because control and management of the fund vest in the Committee. Support was drawn from the statutory scheme of the APMC Act, the definition in the General Clauses Act, and the binding departmental circular recognising such committees as local authorities.

Conclusion: The Market Committee is a local authority for purposes of section 10(20) of the Income-tax Act, and the challenge to the notices and assessments failed on that issue, though taxable income not covered by the exemption could still be assessed.

Ratio Decidendi: A statutory body is a local authority when it has separate corporate existence, autonomy, control over a local fund, and performs governmental or civic functions within a defined area.

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