Electronics Corporation of India Ltd. Vs. Secretary, Revenue Dept, Govt. of
Andhra Pradesdh & Ors  INSC 187 (5 May 1999)
Babu,SSM Quadri, M.B. Shah. BHARUCHA. J.
challenge is the principal judgment and order dated 30th July, 1982 of the High
Court of Andhra Pradesh in the case of Glectronics Corporation of India Ltd.
(Civil Appeal No. 142 of 1983) and the orders following the principal judgment
and order in the cases of M/s. Parel Investment and Trading Co. Limited (Civil
Appeal No.3937-38 of 1990) and Hindustan Shipyard Ltd. (Civil Appeal
Nos.3939-41 of 1990 and 3393 of 1991).
enough to set out the facts pertaining to Civil Appeal No. 142 of 1983 filed by
the Electronics Corporation of India Ltd. ("the appellant company")
in as much as the same Issue of law Is involved m all the appeals and
appellants are companies registered under the Companies Act.
Andhra Pradesh Non Agricultral Lands Assessment Act, 1963 ("the Act")
defilled "owner" to include "any person for the time bein receving
or entitled to receive whether on his own account or as agent, or trustee,
guardian, manager, receiver for another person or for any religious,
educational or charitable purpose, font or profits from the non agricultural land
or for the structure constructor on such land, in respect of which the word is
used". Consequent upon amending Act 28 of 1974, with effect from 1st July,
1974, the definition of "owner" was amended and the following, so far
as is relevant here, was added:
also includes in respect of the land owned by the State Government or the
Central Government (i) the 'lessee, if the land has been leased out by that
Government for any commercial, industrial or other non agricultural purpose
........". Section 3 is the charging section of the Act and provides for
the levy of assessment on non agricultural land, to be paid by "the owner
of such land". Section 12 of the Act sets out the categories of land to
which the Act does not apply. Prior to amending Act 28 of 1984, the Act did net
apply to land owned by the State Government or the Central Government
Thereafter it did net apply to land owned by the State Government or the
Central Government "other than (i) the land leased out for any commercial,
industrial or other non agricultural purpose.........".
1963 the State of Andhra
Pradesh had granted a
large area of land to the Department of Atomic Energy of the Central
Government. In 1964 the Department of Atomic Energy gave 220.25 acres
("the said land") thereout to the appellant company. On 1st October,
1978, the first respondent issued to the appellant company notices of demand
for non-agricultural assessment on the said land under the Act For the period
1970-71 to 1973-74 the sum demanded was Rs. 1,91,189.68. For the period 1974-75
to 1978-79 the sum demanded was Rs. 11,98,826.32.
appellant company filed a writ petition in the High Court of Andhra Pradesh
impugning the said notices of demand. The contention of the appellant company
in the writ petition, as set out in the judgment and order under appeal, was
that it was the lessee of the said land which belonged to the Union of India
and, since the property of the Union of India could not, by virtue of Article
285 of the Constitution, betaxed by a State legislature, the Act did not apply
to the said land and, accordingly, no demand thereunder could be made
"upon the petitioner, which is a lessee of the Union of India. It is
stated that an area of approximately 1,000 acres was granted by the State
Government to the Department of Atomic Energy, Government of India, and that
the Department of Atomic Energy, in turn.
out an extent of 280.25 acres to the petitioner corporation for establishing
its plant and machinery. It is further contended that out of the extent granted
to the petitioner an extent of 29 acres is covered by buildings, an extent of
12 acres bv roads, and the rest of the area is meant for futureexpansion. It is
also submitted that an extent of 14.25 acres is being used for agricultural
response on behalf of the State Government to the writ petition was contained
in an affidavit made bv N. Janakiramulu. The tenor of the affidavit was that
the Act had been amended by Act 28 of 1974 and that, thereby, the appellant
company had become liable to pay non agricultural assessment upon the said
High Court, by the principal judgment and order (which is reported in AIR 1983
AP 239), held that Article 285 was not attircted and that the State Government
was entitled to levy and collect the non agricultural assessment from the
appellant company so long as it continued to be a lessee of the Central
Government in respect of the said land. It clarified that the assessment could
be levied only upon land which was actually used for any of the specified
purpose, namely, commercial, industrial or any other non-agricultural purpose,
including residential purpose.
extent of the said land was so used and what was the appropriate rate
applicable was a matter for the assessing authority to decide. The appellant
company was permitted to file an appeal to the appellate authority under the
Act against the impugned demands, wherein it would be open to the appellant
company to establish the actual extent of land used for the aforesaid purposes.
The applicable rate could also be ascertained in such appeal.
against the principal judgment and order that all the appeals are really
first submission of Mr. Adhyaru, counsel for the appellant company, was that,
in fact, the appellant company was not a lessee of the Union of India in
respect of the said land and that there was no lease in its favour. The
submission Is quite the reverse of the case of the appellant company in its
writ petition. It is, therefore, an impermissible submission, and we indicated
to learned counsel when he made it that we declined to entertain it Article
285(1) of the Constitution of India, upon which reliance has been placed by the
learned counsel for the appellant company, reads thus :
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." In learned counsel's submission, the
property of the appellant company was the property of the Union of India in as
much as the appellant company was a Government company, its shares being wholly
owned by the Union of India. The said land was, therefore, the property of the
Union of India and the legislature of the State of Andhra Pradesh was barred by the provisions of
Article 285 from imposing any tax, including non-agricultural assessment, on
the property of the Union of India.
counsel supported the submission by reference to Article 265, which provides
that "no tax shall be levied or collected except by authority of
law," and to Article 366(28), which says that "taxation includes the
imposition of any tax or impost, whether generator local or special, and tax
shall be construed acvordingly." Learned counsel then referred to Article
289 which deals with the exemption of property and income of a State from Union
taxation and reads thus :
The property and income of a State shall be exempt from Union taxation.
Nothing in clause (1) shall prevent the Union from imposing, or authorising the
imposition of, any tax to such extent, if any, as Parliament may by law provide
in respect of a trade or business of any kind carried on by, or on behalf of,
the Government of a State, or any operations connected therewith, or any
property used or occupied for the purposes of such trade or business, or any
income accruing or arising in connection therewith.
Nothing in clause (2) shall apply to any trade or business, or to any class of
trade or business, which Parliament may by law declare to be incidental to the
ordinary functions of Government." Our attention was drawn by learned
counsel to the judgment of this Court on Article 289, namely, New Delhi
Municipal Council vs. State of Punjab & Ors. 1997(7) SCC 339. In construing
Article 289, reference was made to Article 285 and it was said in the majority
judgment that ".Article 285 imposed a ban, which was absolute and emphatic
and there was no way in which a State Legislature could levy a tax upon the
property of the Union of India." Article 289 was different by reason of
clauses 2 and 3 thereof.
next case cited by learned counsel, namely, Air India Statutory Corporation
& Ors. vs. United Labour Union & Ors., 1997(9) SCC 377, this Court was
dealing with which was the "appropriate Government" in relation to an
establishment pertaining to an industry "carried on by or under authority
of the Central Government" and it was held that the statutory corporation.
Air India, was such a industry and the
"appropriate Government" for the purposes of the Contract Labour
(Regulation and Abolition) Act, 1970, was the Central Government. Reliance was
placed by learned counsel upon the propositions enunciated in paragraph 26 of
the majority judgment, thus:
The constitution of the corporation or instrumentality or agency or corporation
aggregate or corporation sole is not of sole material relevance to decide
whether it is by or under the control of the appropriate Government under the
it is a statutory corporation, it is an instrumentality or agency of the State.
If it is a company owned wholly or partially by a share capital, floated from
public exchequer, it gives indicia that it is controlled by or under the
authority of the appropriate Government." In our view, neither has Article
285 any application to these appeals nor arc we concerned with whether or not
the appellants are controlled by or under the authority of the Central
Government With effect from 1st July, 1974, Section 12 of the Act was amended
so that it now applied to land which was owned by the Central or a State
Government and was leased out for any commercial, industrial or other
non-agricultural purpose. With effect from that date, by reason of the
amendment of Section 2(j), an "owner" Included a lessee of land owned
by the Central or a State Government if the land was leased out by such
Government for a commersial industrial or other non-agricultural purpose. By
virtue of Section 3, the obligation to pay non-agricultural assessment on the
leased land lay upon the owner lessee.
the case of the appellant company in its writ petition that it is the lessee of
the Department of Atomic Energy of the Union of India in respect of the said
said land, therefore, is of the ownership of the Central Government and, being
leased out to the appellant company for an industrial and commercial purpose,
is land to which the Act applies. By virtue of the amended definition of
"owner" under Section 2(j) of the Act, the appellant company is the
owner of the said land and, by virtue of Section 3, is liable to pay
non-agricultural assessment thereon.
clear distinction must be drawn between a company and its shareholder, even
though that shareholder may be only one and that the Central or a State
Government In the eye of the law, a company registered under the Companies Act
is a distinct legal entity other than the legal entity or entities that hold
Western Coalfields Limited vs. Special Area Development Authority Korba &
Am.. 1982(1) SCC 125, this Court reviewed earlier judgments on the point It
held that even though the entire share capital of the appellant before it had
been subscribed by the Government of India, it could not be predicated that the
appellant itself was owned by the Government of India. Companies, it was said,
which are incorporated under the Companies Act, have a corporate personality of
their own, distinct from that of the Government of India. The lands and the
buildings in question in that matter were vested in and owned by the appellant.
The Government of India only owned the share capital.
Cavasjee Cooner vs. Union of India, 1970(1) SCC 248, it was held, "A
company registered under the Companies Act is a legal person, separate and
distinct from its individual members. Property of the company is not the property
of the shareholders. A shareholder has merely an interest in the company
arising under its Articles of Association, measured by a sum of money for the
purpose of liability, and by a share in the distributed profit." In Heavy
Engineering Mazdoor Union vs. State of Bihar, 1969(1) SCC 765, this Court held that an incorporated company has a
separate existence and the law recognises it as ajuristic person, separate and
distinct from its members.
are, in the premises, left in no doubt that the State Government was entitled
to levy non-agricultural assessment upon the said land and recover it from the
counsel then submitted that, in anv event, the recovery of lion agricultural
assessment in respect of the said land could not have been effected from the
appellant company by reason of the application of the principle of promissory estoppel.
In this behalf he referred to a letter dated 7th February, 1967 addressed by
the Under Secretary to the Government of India to the Secretary' of the
Government of Andhra Pradesh, Industries Department, in regard to the
"transfer of land to the Department of Atomic Energy for the location of
the Electronics Plant and other plants." The letter stated that it had
been agreed by the State Government that this land would be exempt from the
levy of tax under the Act "irrespective of whether the plants are managed
departmentally or through a Public Section Undertaking". The letter
requested that "notifications exempting the lands already handed over to the
Department of Atomic Energy or to be handed over in future from levy of tax
under Andhra Pradesh Act 14 of 1963, while vesting in the Department of Atomic
Energy or in public sector projects would also require to be issued." The
issuance of the same was, therefore, requested. In reply, the Deputy Secretary
of the Government of Andhra Pradesh, Industries Department, stated on 17"*
October, 1967 that "no separate notification is required exempting the
land given to the Atomic Energy Department for establishment of Atomic Energy
Complex at Hyderabad from payment of non-agricultural assessment under the A.P.
Assessment Act so long as the units are run by the Government of India in
Public Sector." It was contended by learned counsel that the appellant
company had acted upon this promise. Accordingly, the State Government was
bound by its promise and was estopped from going back upon it There are two
short answers to this contention. In the first place, there can be no estoppel
against a statute.
second place, tlie letter dated 17th October, 1967 needs to be. carefully read. It says that no notification
was required for exempting the land from payment of non-agricultural assessment
"so long as the units arc run by the Government-of India in Public Sector". The
appellant company is a separate and distinct legal entity that runs its own
industry. The letter dated 17th October, 1967 cannot be read as promising exemption to companies, though their shares
be held wholly by the Union of India.
learned counsel for M/s. Pare) Investment and Trading Co. Limited (appellant in Civil Appeal Nos.3937-38 of
1990), adopted the submissions aforementioned. He submitted that Article 285
was intended to protect public revenues; the shares of the appellant companies
being fully owned by the Central Government, their funds were public revenues.
It was, therefore, necessary to read down the provisions of Section 2(j) and
Section 12 of the Act to exclude therefrom all but private owners and lessees
of land. The question of reading down comes in if it is found that these
provisions are ultra vires as they stand. We have held that these provisions
are not ultra vires because Article 285 does not apply when the property that
is to be taxed is not of the Union of India but of a distinct and separate
legal entity. Each of the appellants being companies registered under Companies
Act, they are entities other than the Union of India. The question of reading
down does not, therefore, arise.
discussion so far relates to demands for non-agricultural assessment subsequent
to 12th July 1974, when the amendments made by Act 28
of 1974 in the Act came into effect. The defence to the writ petition filed by
the appellant company was, as we have already stated, exclusively based upon
the amendments made by Act 28 of 1974 in the Act These amendments have no
retrospective effect No demand for non-agricultural assessment could,
therefore, have been made upon the appellant companies for any period prior to 12th July, 1974. To tills extent, the demands are
regard to demands for non-agricultural assessment subsequent to 12th July,
1974, which are upheld, the appellant companies shall be at liberty to file
appeals within 8 weeks from the date of this order, wherein it will be open to
them to establish the actual extent of the land that was used at the relevant
time for commercial, industrial or other non-agricultural purposes. Only upon
such land can non-agricultural assessment be levied. What the applicable rate should
be can also be canvassed and decided in such appeals.
extent aforestated, the appeals succeed and are allowed. Orders on the appeals
accordingly. No order as to costs.