New Okhla Industrial Development Authority vs Chief Commissioner of Income Tax and Ors.

General Clauses Act, 1897 – s.3(31) – Applicability of the Act, 1897 in defining the term ‘local authority’ post amendment (Finance Act 2002) to the I.T. Act, 1961 – Held: Prior to Finance Act, 2002 there being no definition of ‘local authority’ under the I.T. Act, the provisions of s.3(31) of the Act, 1897 were pressed into service while interpreting the extent and meaning of ‘local authority’ – The Explanation to s.10(20) now contain the exhaustive definition of local authority, thus, definition of local authority as contained in s.3(31) of the Act, 1897 no more applicable – Income Tax Act, 1961 – cl(ii) of Explanation to s.10(20) (as Amended by Finance Act 2002)

Interpretation of Statutes – Interpretation of a proviso – Principles discussed.

Dismissing the appeals, the Court

HELD: 1. The appellant-New Okhla Industrial

Development Authority has been constituted under section 3 of the U.P. Industrial Area Development Act, 1976. The only issue which needs to be considered in these appeals is as to whether the appellant is a “local authority” within the meaning of section 10(20) as amended by Finance Act, 2002 w.e.f. 01.04.2003. The cl(ii) of Explanation to s.10(20) of the Income Tax Act, 1961, provides that the expression “local authority” means “Municipality as referred to in clause (e) of Article 243P of the Constitution”. The constitutional provisions as contained in Part IXA delineate that the Constitution itself provided for constitution of Municipalities, duration of Municipalities, powers of Authorities and responsibilities of the Municipalities. The Municipalities are created as vibrant democratic units of self-government. The special features of the Municipality as was contemplated by the constitutional provisions contained in Part IXA cannot be said to be present in Authority as delineated by statutory scheme of Act, 1976. It is true that various municipal functions are also being performed by the Authority as per Act, 1976 but the mere facts that certain municipal functions were also performed by the authority it cannot acquire the essential features of the CHIEF COMMNR. OF INCOME TAX

Municipality which are contemplated by Part IXA of the Constitution. The appellant is not covered by the word/expression of “Municipality” in clause(e) of Article 243P. Thus, the appellant is not covered by the definition of local authority as contained in Explanation to Section 10(20). [Paras 2, 14, 27 and 55][785-F; 789-E; 796-G-H; 797-A-C; 814-G-H]

2. The notification dated 24.12.2001 was issued by the Governor in exercise of the powers under the proviso to clause

(1) of Article 243Q and specified the said appellant-Authority to be an “industrial township”. The proviso to sub-clause (1) of Article 243Q is an exception to the constitutional provisions which provide that there shall be constituted in every State a Nagar Panchayat, a Municipal Council and a Municipal Corporation. Exception is covered by proviso that where an industrial township is providing municipal services the Governor having regard to the size of the area and the municipal services either being provided or proposed to be provided by an industrial establishment specify it to be an industrial township. The words ‘industrial township’ have been used in contradiction of a Nagar Panchayat, a Municipal Council and a Municipal Corporation. The object of issuance of notification is to relieve the mandatory requirement of constitution of a Municipality in a State in the circumstances as mentioned in proviso but exemption from constituting Municipality does not lead to mean that the industrial establishment which is providing municipal services to an industrial township is same as Municipality as defined in Article 243P(e). The word constituted used under Article 243P(e) read with Article 243Q clearly refers to the constitution in every State a Nagar Panchayat, a Municipal Council or a Municipal Corporation. Further, the words in proviso “a Municipality under this clause may not be constituted” clearly means that the words “may not be constituted” used in proviso are clearly in contradistinction with the word constituted as used in Article 243P(e) and Article 243Q. Thus, notification dated 24.12.2001 under proviso to Article 243Q(1) is not akin to constitution of Municipality. [Paras 23, 30][794-F; 800-B-F]

Agricultural Produce Market Committee, Narela, Delhi v. Commissioner of Income Tax and another (2008) 9 SCC 434 : [2008] 12 SCR 387; Adityapur Industrial Area Development Authority v. Union of India and others (2006) 5 SCC 100 : [2006] 1 Suppl. SCR 757;

Kishansing Tomar Municipal Corporation Of The City Of Ahmedabad Ad Others (2006) 8 SCC 352 : [2006] 7 Suppl. SCR 454; S. Sundaram Pillai and others v. V.R. Pattabiraman and Others (1985) 1 SCC 591 : [1985] 2 SCR 643; Union of India and others v. R.C. Jain and others (1981) 2 SCC 308 : [1999] 1 SCR 263; A.V. Fernandez v. The State of Kerala AIR 1957 SC 657; Rajasthan Rajya Sahakari Spinning and Ginning Mills Federation Limited v. Deputy Commissioner of Income Tax, Jaipur (2014) 11 SCC 672 : [2014] 7 SCR 336; State of Gujarat and others v. ESSAR Oil Limited and another (2012) 3 SCC 522 : [2012] 2 SCR 1127; Sundaram Pillai and others v. V.r. Pattabiraman and others (1985) 1 SCC 591 : [1985] 2 SCR 643; Gujarat Industrial Development Corporation v. Commissioner of Income Tax (1997) 7 SCC 17 : [1999] 1 SCR 263; Krishi Utpadan Mandi Samiti v. Union of India and another (2004) 267 ITR 460; Agricultural Produce Market Committee v. Commissioner of Income-tax (2006) 156 ITR 286 – referred to.