TaxTMI 
TaxTMI 
2008 (8) TMI 8
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....erintendence, 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 impugn....
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....ax v. Agricultural Marketing Produce Committee - [2001] 250 ITR 369 and the reasoning given by this Court in the case of Union of India and others v. R.C. Jain and others - 1981 (2) SCC 308. According to learned counsel, even after the amendment to Section 10(20) of the 1961 Act, by inserting the Explanation thereto, the AMC(s) continues to be covered by Item (iii) in the said Explanation as it is a "local authority" performing the municipal functions and is legally entitled to the control of local fund, namely, Market Fund under the said 1998 Act. In this connection, learned counsel urged that vide Finance Act, 2002, Parliament has bodily lifted the definition of the "local authority" under Section 3 (31) of the General Clauses Act, 1897 ("1897 Act", for short) and has incorporated the said definition vide Explanation inserted in Section 10(20) and consequently AMC(s) is a "local authority" and continues to be a local authority even after the said amendment to Section 10(20) of the 1961 Act. According to learned counsel, since Section 3(31) of the 1897 Act is bodily incorporated into Section 10(20) of the 1961 Act, it follows that the judgments of various High Courts earlier deliv....
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....planatory Note indicates that AMC (s) is covered by the Explanation and, therefore, AMC(s) is entitled to the continuance of the benefit of exemption even after Finance Act, 2002. Further, in the Explanation to Section 10(20) there are three items - Item (i) refers to "Panchayat", Item (ii) refers to "Municipalities" whereas Item (iii) refers to "Municipal Committees" and "Development Boards". According to learned counsel, there is no independent definition of "Municipal Committee". According to learned counsel, the Department is also not able to answer whether any Municipal Committee still exists so as to constitute a separate category or whether they would be covered under Item (ii) in the said Explanation which refers to "Municipality". Therefore, according to learned counsel, AMC (s) is a "local authority" of like nature and character as a Municipal Committee performing municipal functions legally entitled to control the local fund. 15. Lastly, learned counsel urged that in any event it is well- settled rule of construction of taxing statutes that if two views are possible then the view that is favourable to assessee should be executed and in case of doubt it should be resolv....
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....r statutes is not a safe guide, particularly, when the explanation is a definition section, specifically designed for grant of the exemption under Section 10(20) of the 1961 Act. 19. Learned counsel next contended that in the hierarchy, mentioned in 1998 Act, the Delhi Agricultural Marketing Board, as defined under Section 5, is in complete control of the finances of AMC(s) and, therefore, according to learned counsel, the clarification, issued by CBDT, expressly states that Agricultural Marketing Societies and Agricultural Marketing Boards shall stand excluded from the said Explanation. According to learned counsel, since the said Board is the highest authority under the 1998 Act, the CBDT Circular clarifies that the exemption shall not be admissible to such Agricultural Marketing Boards and when such an exemption is not admissible to Agricultural Marketing Boards it would not be admissible to a subordinate body under the 1998 Act, namely, AMC(s). 20. Mr. P. Vishwanatha Shetty, learned senior counsel appearing for the Department, has adopted the arguments of the learned Addl. Solicitor General. Learned counsel submitted that earlier in 1897 when General Clauses Act stood....
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....sp; (iii) the Delhi Cantonment Board, that Board; Explanation- It is hereby clarified that, for the purpose of this Act, the Delhi Development Authority constituted under the Delhi Development Act, 1957 and the Board and a marketing committee established under this Act, shall be deemed to be local authority; CHAPTER III CONSTITUTION AND POWERS OF DELHI AGRICULTURAL MARKETING BOARD 17. Powers and functions of the Board - (1) The Board shall exercise superintendence and control over the marketing committees. (2) The Government or the Chairman or the Vice-Chairman of the Board or any other official of the Board authorized in this behalf by the Board may call for from any marketing committee or any trader, godown-keeper or any other functionary operating within the market area any information or return relating to agricultural produce and shall have the power to inspect the records and accounts of....
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....for establishment of the markets and to make recommendations to the Director for establishing principal market and sub-markets as per provisions of sub-section (2) of section 22; (b) to approve proposal for providing infrastructural facilities in the market and market area; (c) to construct a market or to approve plans, designs and estimates for constructing markets; (d) to sanction, supervise and guide a Marketing Committee in the preparation of plans and estimates for maintenance and improvement works undertaken by the Marketing Committee; (e) to execute all works chargeable to the Market Development Fund; (f) to encourage marketing of the agricultural produce on cooperative basis; (g) to maintain accounts in such forms as may be prescribed and get the same audited in such manner as may be prescribed; (h) to publish annually at the close of the financial year, its progre....
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....area falls within the local limits of the jurisdiction of any other Marketing Committee or Committees already functioning in that area. (2) The Government may, after consideration of such aspects as, the turnover, upstream catchment area, down-steam servicing (number of consumers served), and price leadership (whether the market influences the price at the national level), declare an area as a special market area known as "Market area of the market of National Importance". Provided that no such market shall be established:- (a) if it handles less than one lakh tones of produce per year; (b) if, out of the total produce handled by it, less than thirty percent thereof is received from two or more State or Union Territories; and (c) if the market does not influence the price of the commodity referred to in sub-section (1) at the national level. CHAPTER VII MARKETING COMMITTEES - POWERS AND DUT....
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....ying out, enforcing or cancelling of nay contract of sale of a notified agricultural produce; (ii) conducting or supervising of a transaction of sale or purchase of a notified agricultural produce in accordance with the procedure laid down under this Act, or rules, regulations and bye-laws made thereunder; (iii) specifying any place or spot where a notified agricultural produce shall be stored or displayed for purpose of sale by open auction; (iv) fixing the time for holding auction; and (v) cancelling an auction if it is not held in the presence of the employees of the marketing committee. (h) arrange for the collection - (i) of such notified agricultural produce in the market in which all trade therein is to be carried on exclusively by the Government by or under any law for the time being in force for that purpose, or (ii) of such other notified agricultural produce in ....
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....ser or seller, as the case may be. 62. Power to levy and collect market fee--Every Marketing Committee shall levy and collect such fee (hereinafter referred to as the `market fee") not being in excess of, or less than, the amount determined by the Government by notification published in the official Gazette from every purchaser of notified agricultural produce sold in a market area. Provided that the amount to be determined by the Government shall not be less than one rupee per one hundred rupees of the sale price of the notified agricultural produce. 66. Assessment market fee payable by commission agent and payment thereof— (1) If no return is furnished in respect of any period by the specified date, or if the Marketing Committee is not satisfied that the return furnished by commission agent is correct or complete, an officer of the Marketing Committee specifically authorized by it in this behalf (hereinafter referred to as the assessing officer) shall proceed in such manner, as may be prescribed in the bye-laws to asses....
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....bsp; (i) the acquisition of a site or sites for the market yard; (ii) the establishment, maintenance and improvement of the market yards; (iii) the construction and repair of buildings necessary for the purposes of the market and for convenience or safety of the persons using the market yard; (iv) the maintenance of standard weights and measures; (v) the meeting of establishment charges including payment and contribution of provident fund, pension, gratuity, leave encashment on retirement or yearly basis, actual reimbursement of hospitalization expenses in the authorized hospitals or other items as may be laid down in the regulations/rules; (vi) loans and advances to the employees of the committee; (vii) the payment of interest on the loans that may be raised for the purpose of the market and provisions of sinking fund in respect of such loans; (vii....
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....er purpose connected with the marketing of agricultural produce under this Act whereon the expenditure of the marketing committee fund is in the public interest subject to the prior sanction of the Board. (xxi) contribution to centralized pension fund of the Board as may be prescribed. (2) Without prejudice to the generality of sub-section (1), every marketing committee shall, out of the "market fund" pay— (a) to the Board, as contribution, such percentage of its income derived from the licence fee, market fee, fines received as specified below, to enable the Board to defray its expenses on office establishment and other expenses incurred by it in the interest of the marketing committee generally,- (i) if the annual income of a marketing committee does not exceed ten thousand rupees, ten percent. (ii) if the annual income of a marketing committee exceeds ten thousand rupees but does not exceed fifteen ....
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....ts final accounts of receipts and expenditure and a balance sheet of its assets and liabilities and prepare an annual administrative report in such manner and in such Form as may be prescribed. (2) Copies of accounts, balance sheet and administrative report referred to in sub-section (1) shall be submitted to the Board and the Director by such time as may be prescribed." (emphasis supplied by us) 23. We also quote Section 3(31) of the General Clauses Act, 1897 herein below which reads as under: "GENERAL DEFINITIONS "3. DEFINITIONS.- In this Act, and in all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context, - (31). "local authority" shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund;" (emphasis supplied by us) 24. The short quest....
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....he 1961 Act vide Finance Act, 2002. Therefore, in our view, it would not be correct to say that the entire definition of the word "local authority" is bodily lifted from Section 3(31) of the 1897 Act and incorporated, by Parliament, in the said Explanation to Section 10(20) of the 1961 Act. This deliberate omission is important. It may be noted that various High Courts had taken the view prior to Finance Act, 2002 that AMC(s) is a "local authority". That was because there was no definition of the word "local authority" in the 1961 Act. Those judgments proceeded primarily on the functional tests as laid down in the judgment of this Court vide para Rs. 2' in the case of R.C. Jain (supra). We quote hereinbelow para Rs. 2' which reads as under: "2. Let us, therefore, concentrate and confine our attention and enquiry to the definition of "local authority" in Section 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of Section 3(31) suggests that an authority, in order to be a local authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefo....
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....titled to control the local fund, namely, the Market Fund. For that proposition reliance is placed on para Rs. 2' of the judgment in the case of R.C. Jain (supra), as quoted hereinabove. However, it may be noted that this Court in the case of R.C. Jain (supra) was required to consider the question as to whether "Delhi Development Authority" is a "local authority" as its employees stood outside the purview of Payment of Bonus Act, 1965. Under Section 32(iv) of the Payment of Bonus Act, 1965 it is stated that nothing in the said 1965 Act shall apply to employees employed by an establishment engaged in any industry carried on by or under the authority of any Department of the Central Government or State Government or a local authority. It is in this context that the Court was required to consider in the case of R.C. Jain (supra) as to whether DDA is a "local authority". There was no definition of "local authority" in the said 1965 Act. Therefore, this Court had to go back to Section 3(31) of the 1897 Act. As quoted hereinabove, Section 3(31) of the 1897 Act defines "local authority" to mean - a Municipal Committee, District Board, body of Port Commissioners or other authority. In the ....
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....lanation. In our view, Parliament has defined "legal authority" to mean - a Panchayat as referred to in clause (d) of Article 243 of the Constitution of India, Municipality as referred to in clause (e) of Article 243P of the Constitution of India. However, there is no reference to the Article 243 after the words "Municipal Committee" and "District Board". In our view, the Municipal Committee and District Board in the said Explanation are used out of abundant caution. In 1897 when General Clauses Act was enacted there existed in India Municipal Committees and District Boards. They continued even thereafter. In some remote place it is possible that there exists a Municipal Committee or a District Board. Therefore, in our view, apart from a Panchayat and Municipality, Parliament in its wisdom decided to give exemption to Municipal Committee and District Board. Earlier there were District Board Acts in various States. Most of the States had repealed those Acts. However, it is quite possible that in some remote place District Board may still exists. Therefore, Parliament decided to give exemption to such Municipal Committees and District Boards. Therefore, in our view, advisedly Parliam....