TaxTMI 
TaxTMI 
2010 (9) TMI 833
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.... The petitioner has housing property in the township of Patna to accommodate its offices. A portion of the same was in excess of its needs and was let out to tenant(s). The petitioner had submitted returns claiming the benefit of reduced rate of taxation as per the provisions of section 197 of the Central Act on the ground that it is a "local authority" within the meaning of section 10(20) of the Act. The same was accompanied by particulars provided in Form 13 (annexure II), framed in terms of rule 28(1) of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules"). The contention has been rejected by the impugned order, whereby it has been held that it is not a local authority within the meaning of section 10(20) of the Act and is, therefore, not entitled to the benefit of taxation at lower rate in terms of section 197 of the Central Act. Hence this writ petition. 3. Ms. Kalpana, learned counsel for the petitioner, assails the validity of the impugned order on the ground that the learned Assistant Commissioner has proceeded on a wrong footing and has completely misjudged the status of the petitioner organization. She submits that, on a true interpretation of the....
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....ause (d) of article 243 of the Constitution, or (ii) Municipality as referred to in clause (e) of article 243 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). ; . . . " (emphasis added) 7. Local authority has not been defined in the Act. The same has indeed been defined in sub-section (31) of section 3 of the Bihar and Orissa General Clauses Act, 1917 (Bihar and Orissa Act 1 of 1917), which reads as follows : " `local authority' shall mean a Municipal Committee, District Board, or any other authority entrusted by any Government with, or legally entitled to, the control or management of a Municipal or local fund." 8. The definition of "local authority" fell for consideration of the Supreme Court in the case of Union of India v. R. C. Jain, AIR 1981 SC 951 paragraph 2 of which lays down the law and is reproduced hereinbelow : "2. Let us, therefore, concentrate and confine our attention and enq....
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....tioner will have to satisfy the tests indicated by the Supreme Court in paragraph 2 of the judgment reproduced hereinabove. It must have separate legal existence. We will have to examine the aims and objects and the scheme of the Bihar Act to ascertain whether or not the petitioner is a local authority, and has separate legal existence. Section 3 of the Bihar Act reads as follows : "3. Constitution of the agency.-(1) The State Government may at any time after the commencement of this Act constitute an agency or agencies for the integrated rural and agricultural development of the command area of any irrigation project and/or such other area as the State Government may, by notification in the Official Gazette, specify : Provided that the State Government may, by notification in the Official Gazette include at any subsequent stage, any area within the agency so declared ; or exclude any area from any such agency or transfer any area from one agency to another. (2) The name and composition of any such agency constituted under sub-section (1) shall be specified in the notification. (3) The agency shall be a body corporate having perpetual succession and....
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.... the Supreme Court is that the body must function in a defined territorial area which the petitioner fulfils, but is wholly devoid of a major requirement that its governing body must comprise of persons elected by inhabitants of the area. 13. It is next to be ascertained whether or not the petitioner organization has any amount of authority, and the freedom, to decide the questions of policy affecting the area administered by it. Section 9 of the Bihar Act is headed "Functions of the agency", section 10 is "Powers of the agency", section 11 is "Power to prevent work adversely affecting plan", section 12 is "Provision of plan", and section 13 is "Stage and manner of preparation of the plan". Sections 14 to 20 prescribe the procedure which shall be followed for special schemes affecting the rights and interests of any individual. It thus appears to us that the petitioner has the requisite authority and the freedom, or shall we say the duty and the responsibility, to formulate policies for integrated rural and agricultural development in the area it administers, irrigation facilities, rural electrification, etc. However, the authority and freedom is substantially diluted by ....
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....he Bihar Act read as follows : "25. Power of agency to spend.-The agency shall have the power to spend such sums as may be necessary for performing the functions and discharging the duties imposed on it under this Act, subject to the budget provision and/or any other directions, issued by the State Government in this behalf. 26. Recovery of the amounts due to the agency.-The principal amount of loan and interest due from any person to whom the agency has advanced loan for purposes of this Act and the amount due from any person as his share of contribution for development work in any area under section 14 shall be recoverable as public demand under the Public Demand Recovery Act, 1914 (Bihar and Orissa Act IV of 1914)." 18. We have already held hereinabove that the main sources of the funds of the authority are the Bihar Government and the Central Government. Its power to spend is subject to the budget provisions of the State Government, and/or any other directions issued by it. The authority's budget is subject to approval of the State Government. It is thus evident that the control and management of the funds available to it is not vested in it, and i....