New Okhla Industrial Development Authority Vs CCIT (Supreme Court)
Appellant namely ‘New Okhla Industrial Development Authority; claimed that he is covered by Clause (ii) of the Explanation to Section 10(2) i.e. Municipality as referred to in clause (e) of Article 243P of the Constitution. We, while discussing above provisions, have already held that the appellant is not covered by the word/expression of Municipality in clause (e) of Article 243P. Thus, the appellant is not clearly included in sub-clause (ii) of Explanation. It is not even the case of the appellant that the appellant is covered by Section 10(20) except clause (ii).
FULL TEXT OF THE SUPREME COURT JUDGMENT
The appellant by these appeals has challenged the Division Bench judgment of Allahabad High Court dated 28.02.2011 dismissing the writ petition filled by the appellant challenging the notices issued by the Income Tax Authority under Section 142 of the Income Tax Act, 1961 as well as the judgment dated 04.11.2011 rejecting the review application.
2. The facts giving rise to these appeals are:
The appellant-New Okhla Industrial Development Authority (hereinafter referred to as the “Authority”) has been constituted under Section 3 of the U.P. Industrial Area Development Act, 1976 (hereinafter referred to as the ‘Act, 1976’) by notification dated 17.04.1976. The Act, 1976 was enacted by State Legislature to provide for the constitution of an Authority for the development of certain areas in the State into industrial and urban township and for matters connected therewith. Under the Act, 1976 various functions have been entrusted to the Authorities. Notices under Section 142 of the Income Tax Act dated 28.07.1998 and 08.08.1998 were issued to the appellant. The appellant challenging the said notices filed writ petition contending that appellant is a local authority, hence, is exempted from payment of income tax under Section 10(20) and Section 10(20A) of Income Tax Act, 1961 (hereinafter referred to as “I.T.Act, 1961). The writ petition was allowed by the Division Bench of the Allahabad High Court on 14.02.2000 holding that the appellant is a local body. It was held that it is covered by the exemption under Section 10(20A) of I.T.Act, 1961. The Division Bench, however, did not go into the question whether it is also exempt under Section 10(20).
3. By the Constitution (74thAmendment) Act, 1992, the Parliament had inserted Part IXA of the Constitution providing for the constitution of Municipalities. A notification dated 24.12.2001 was issued by the Governor in exercise of the power under the proviso to clause (1) of Article 243Q of the Constitution of India specifying the appellant to be an “industrial township” with effect from the date of the notification in the Official Gazette. A notice dated 29.08.2005 was issued by the Assistant Commissioner of Income Tax to the appellant for furnishing Income Tax Return for the assessment year 2003-2004 and 2004-2005. Notice mentioned that after omission of Section 10(20A) w.e.f. 01.04.2003 the Authority has become taxable. Notice under Section 142(1) was also enclosed for the above purpose.
4. Notices were also issued to different Banks requiring different information. The appellant vide its letter dated 20.09.2005 replied the notice dated 29.08.2005 stating that it is a local authority and exempt from Income Tax hence notice under Section 142 be withdrawn. The Income Tax authorities also issued notice to the different Banks to deduct TDS as required under Section 194A of the Income Tax Act and remit the same to the Central Government Account.
5. The appellant filed a writ petition praying for quashing the notice under Section 142 of the Income Tax Act dated 29.08.2005. The appellant also challenged notice dated 31.08.2005 issued under Section 131 to the Bankers of the appellant. Notice dated 21.09.2005 under Section 194A was also sought to be quashed. The writ petition was contested by the Income Tax Department. The High Court in the writ petition decided the only question “whether New Okhla Industrial Development Authority (NOIDA) is a local authority after 01.04.2003 within the meaning of Section 10(20) of the Income Tax Act, 1961”. The Division Bench of the High Court relying on two judgments of this Court in Agricultural Produce Market Committee, Narela, Delhi vs. Commissioner of Income Tax and another, (2008) 9 SCC 434 and Adityapur Industrial Area Development Authority vs. Union of India and others, (2006) 5 SCC 100, held that after 01.03.2003 the NOIDA is not a local authority within the meaning of Section 10(20) of the I.T.Act, 1961. The writ petition was consequently dismissed. Although, the appellant had prayed for quashing notices issued to its Bankers and notice under Section 194A but the High Court did not advert to the said issue. We do not find any necessity to advert to the aforesaid issues, since, different concerned Banks have already filed civil appeals challenging the judgment of the High Court rendered in their writ petition which has been separately challenged by a group of civil appeals being Civil Appeal arising out of SLP(C) No.3168 of 2017-Commissioner of Income Tax(TDS), Kanpur vs. Canara Bank where we have considered and decided those issues by our judgment of this date. After dismissal of the writ petition dated 28.02.2011 the appellant filed a review application which too was dismissed on 04.11.2011. Aggrieved by those two judgments Civil Appeal Nos.792-793 of 2014 have been filed by the appellant.
6. We have heard Shri Balbir Singh, learned senior counsel appearing for the appellant and Shri K Radhakrishnan, learned senior counsel appearing for the Revenue. We have also heard various learned counsel appearing for different Banks.
7. Learned counsel for appellant submits that both the judgments of this Court relied on by the High Court for dismissing the writ petition were not applicable and clearly distinguishable. He submits that judgment of this Court in Agricultural Produce Market Committee, Narela(supra) was a case where this Court was concerned with status of Agricultural Produce Market Committee which was not akin to the appellant in view of the statutory provisions contained in Act, 1976, hence, reliance on such case was misplaced.
8. With regard to judgment of this Court in Adityapur Industrial Area Development Authority(surpa), it is submitted that this Court essentially has considered in the above case regarding the exemption under Article 289 of the Constitution of India whereas appellant does not rely on Article 289. He further submits that Governor of U.P. has issued notification dated 24.12.2001 under the proviso to Article 243Q(1)(a) which provision was not considered in the above mentioned two cases, hence, the present case is clearly distinguishable from the aforesaid two judgments. It is submitted that Municipal Services are being provided by the authority, hence, it is a local authority entitled to the benefit of Section 10(20) of the I.T. Act, 1961. The constitutional scheme envisages performance of municipal functions even by a body which may not be elected and yet performs municipal functions. Article 243Q envisaged such authority and also having been recognised such an authority by issuing the notification, it is a local authority and is entitled for the benefit of exemption. There does not exist any elected municipality for the industrial development area and it is the appellant which is entrusted to discharge municipal functions as enumerated in the 12thSchedule under Article 243P of the Constitution. The appellant was not only a creation of a statute but has been statutorily charged to perform functions, including municipal functions. The appellant is a local body having local fund and its accounts are audited by the Examiner of the Local Fund accounts. The appellant also has authorisation by law to levy tax in contradistinction to a mere development authority.
9. Learned counsel appearing for the Revenue refuting the submissions of appellant contends that in view of the Explanation added to Section 10(20) of the I.T.Act, 1961 by Finance Act, 2002, the appellant is no longer covered by the definition of ‘local authority’. The definition of ‘local authority’ as contained in Explanation is not an inclusive definition but being an exhaustive definition unless the appellant is covered by any of the clauses mentioned in the Explanation it cannot claim an exemption. It is further submitted that omission of Section 10(20A) by the same Finance Act clearly indicates that those authorities which were treated as local authority prior to Finance Act is no longer entitled to avail the benefit of exemption. It is evident from the Constitution 74thAmendment Act, 1992 that the Parliament has introduced certain minimum safeguards so that municipalities could act as vibrant democratic units of self-government so as to not leave them to the vagaries of laws being enacted by different State Legislatures. The Parliament was focussed on making provisions of local self-government alone and not on the aspect of municipal services and Legislation on municipalities operates in a different legislative field as compared to Legislation on Industrial Development Authorities. After the Constitution Amendment both U.P. Municipality Act, 1916 and U.P. Municipal Corporation Act, 1959 have been amended in the light of constitutional provisions as contained in Part IXA of the Constitution whereas no amendments have been made in Act, 1976 which clearly indicates that the authority was never treated as municipality within the meaning of Article 243Q. There are large number of factors which must be possessed by the municipality under the constitutional scheme which is absent in the authority.
10. Hence, Constitution never recognised industrial township as referred to in proviso to Article 243Q as equivalent to municipality. Further, the notification under the proviso to Article 243Q dated 24.12.2001 itself indicates that no municipality has been constituted in the area in which appellant operated. The Authority clearly is not a local authority. The Finance Act, 2002 brought substantial changes in the definition of local authority by defining local authority exclusively and by omitting Section 10(20A), the benefits earlier enjoyed by various authorities which were treated local authorities were taken away. The provisions of Section 10 sub-section (20) are clear and taking plain and literal meaning of the provision, the appellant is not entitled for exemption; the High court has rightly dismissed the writ petition filed by the appellant.
11. Learned counsel appearing for the Banks have also adopted the submissions made by the learned counsel for the Revenue in support of their contention that the appellant is a local authority within the meaning of Section 10 sub-section (20) of the I.T. Tax, 1961.
12. Learned counsel for both the parties have relied on various judgments of this Court which shall be referred to while considering the submissions made by the parties.
13. We have considered the submissions made by the learned counsel for the parties and perused the records.
14. 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. Before we proceed further, it is necessary to notice the provisions of Section 10(20) which existed prior to its amendment by Finance Act, 2002 and after amendment w.e.f. 01.04.2003:
