1948 (3) TMI 36

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....the question is whether the income derived by the Corporation by the supply of water is subject to tax. This water was supplied from the Municipal water works situated outside the City of Bombay on property belonging to the Corporation and the supply was metered at the water works. The Municipal Corporation's contention is that the surplus of receipts over expenditure with regard to this supply is exempt from income-tax under Section 4(3)(iii) of the Income-tax Act. Now, sub-section (3) of Section 4 contains various kinds of incomes which are not to be included in the total income of the person receiving it and one of those kinds of income is the one mentioned in clause (iii) of that sub-section which is the income of local authoriti....

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.... supply and Section 261 provides for the supply of water to the City of Bombay and Section 262 provides that the Municipal water works shall be managed and kept it repair by the Municipal Commissioner. Sector 288 gives the power to the commissioner to supply water from a Municipal water work to any local authority or person without the city on such terms as to payment and as to the period and conditions of supply as shall be, either generally or specifically, approved by the Corporation. Therefore, it is clear that the water works vest in the Municipality in trust for the purposes of the Act. Water is supplied to the city as an obligatory duty under section 261 of the Act and to the extent that water is supplied outside the City of Bombay t....

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....unable to accept that contention, because the mere owning property does not extend the jurisdiction of the Bombay Municipality. That jurisdiction essentially is confined to the limits of the City of Bombay. It has also been contended by the Advocate-General that in doing what it has done the Bombay Municipality has discharged a discretionary duty cast upon it by the statute and to that extent it has been doing a municipal function and not doing trade or business. It is suggested that the supply of water falls within Section 63(k) as constituting a measure for the promotion of public health and convenience. In my opinion the whole of Chapter III which deals with duties and powers of the Municipal Authorities deals with those duties and power....