Corporation of India Vs. Municipal Committee, Jalalabad
& ANR  INSC 229 (27 July 1999)
M.B.Shah D.P. Wadhwa, J.
Corporation of India ('Corporation' for short) is aggrieved by the judgment
dated December 13, 1994 of the Division Bench of the Punjab and Haryana High
Court dismissing its writ petition challenging the order of assessment of its
properties under the Punjab Municipal Act by the second respondent, the
Municipal Committee, Jalalabad, District Ferozpur in the State of Punjab.
contended before us that the Corporation is exempt from taxation under Article
285 of the Constitution and that valuation and assessment of the properties has
been completed without taking into account the provisions of Section 3 of the
Punjab Municipal Act under which house tax is to be arrived at on the basis of
the "annual value" on which the properties can be let.
Court has held that assessment of the property tax was based on agreed fair
rent as stated by the Municipal Committee. There is no challenge to this
averment by the Corporation. It is, therefore, difficult for us to hold that
the agreed rent is not the fair rent and that there has been any violation of
the provisions regarding fixation of annual value. This contention of the Corporation
appellant Corporation is constituted by the Food Corporation Act, 1964 (for
short the 'Act'). Under Section 3 of this Act, the Corporation shall be body
corporate with that name, having perpetual succession and a common seal with power,
subject to the provisions of the Act, to acquire, hold and dispose of property
and to contract and may, by that name, sue and be sued. If we refer to Section
42 of the Act, the Corporation is a company within the meaning of the
Income-tax Act, 1961 and liable to tax on its income, profits and gains.
However, under Section 43, provision of law relating to winding up of companies
or corporations do not apply to the Corporation and it cannot be placed in
liquidation save by order of the Central Government. It is, thus, apparent that
the Corporation is a distinct entity from the Union of India.
submitted before us that the Corporation is nevertheless a statutory
corporation incorporated by an Act of parliament and runs entirely on the
subsidies provided by the Central Government and in fact it has taken over the
role earlier performed by the Directorate of Food in the Government of India
and further that the Corporation has no profit motives. Lastly, it is submitted
that the Corporation is obliged to follow directions/instructions issued by the
Central Government from time to time and its management is also provided by the
Central Government. It was, thus, submitted that for all intent and purposes,
the Corporation is nothing but an extended arm of the Central Government and it
is thus exempt from taxation under Article 285 of the Constitution.
285 of the Constitution is set out as under :
Exemption of property of the Union from State taxation.-(1) The property of the
Union shall, save in so far as Parliament may by law otherwise provides, be
exempt from all taxes imposed by a State or by any authority within a State.
Nothing in clause (1) shall, until Parliament by law otherwise provided,
prevent any authority within a State from levying any tax on any property of
the Union to which such property was immediately before the commencement of
this Constitution liable or treated as liable, so long as that tax continues to
be levied in that State." The question that arises before us is: If the
property of the Corporation is property of the Union of India and, thus, exempt
from taxation imposed by the State or any authority within a State. Authority
in the present case would include local authority. A Constitution Bench of this
court in Electronics Corporation of India Ltd. & Ors. vs. Secretary,
Revenue Department, Government of Andhra Pradesh [(1999) 4 SCC 458 = 1999 (3)
SCALE 123] has held that a Government company is distinct from the Central
Government and cannot claim exemption from taxation under Article 285 of the
Constitution. The case of the Corporation cannot be any different. The Act
under which it is constituted specifically makes the Corporation a body
corporate having the attributes of a company. In State of Punjab & Ors. vs. Raja Ram & Ors.
[AIR 1981 SC 1694 = (1981) 2 SCC 66] the question raised was if acquisition of
land under the Land Acquisition Act, 1894 for the Food Corporation of India was
valid as it was said that Corporation is not a company to which the provisions
of that Act would apply.
its amendment in 1984, Section 3(e) of the Land Acquisition Act defined the
expression 'company' as under:
expression "company" means a company registered under the Indian
Companies Act, 1882 or under the (English) Companies Act, 1862 to 1890 or
incorporated by an Act of parliament of the United Kingdom or by an Indian Law,
or by Royal Charter or Letters patent and included a society registered under
the Societies Registration Act 1860, and a registered society within the meaning
of the Co-operative Societies Act, 1912 or any other law relating to co-
operative societies for the time being in force in any State." The
expression 'corporation' had not been defined earlier which now finds place in
clause (cc) of Section 3 of the Land Acquisition Act. Clause (e) which defined
the expression 'company' has also thus been amended. However, we are concerned
with the old definition of 'company'. In this case land was acquired for the
Corporation and the question was if the Corporation was a company within the
meaning of Section 3(e) (old) of the Land Acquisition Act.
Court after referring to Section 3 of the Act observed that sub-section (2)
thereof clothes the Corporation with the attributes of a company and it cannot,
therefore, be contended that the Corporation is not a company within the
meaning of the definition of that term appearing in clause (e) of Section 3 of
the Land Acquisition Act. This Court also did not accept the argument that
Corporation is a Government Department. It said :
Government department has to be an organisation which is not only completely
controlled and financed by the Government but has also no identity of its own.
The money earned by such a department goes to the exchequer of the Government
and losses incurred by the department are losses of the Government. The
Corporation, on the other hand, is an autonomous body capable of acquiring,
holding and disposing of property and having the power to contract. It may also
sue or be sued by its own name and the Government does not figure in any
litigation to which it is a party.
true that its original share capital is provided by the Central Government (S.5
of the F.C. Act) and that 11 out of 12 members of its Board of Directors are
appointed by that Government (S.7 of the F.C. Act) but then these factors may
at the most lead to the conclusion (about which we express no final opinion)
that the Corporation is an agency or instrumentality of the Central
Government." The Court further said that even if the Corporation is an
agency or instrumentality of the Central Government, that did not lead to the
inference that the Corporation is a Government department. The reason is that
Act has given the Corporation an individuality apart from that of the
hold that the Corporation is not exempt from taxation under Article 285 of the
appeal fails and dismissed with costs.