Agricultural Produce
Market Committee Vs. Commr. of Income Tax & ANR [2008] INSC 1397 (21 August
2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 (Arising out of
S.L.P. (C) No.6757 of 2007) Agricultural Produce Market Committee, Narela,
Delhi ... Appellant (s) versus Commissioner of Income Tax & Anr. .... Respondent
(s) WITH
Civil Appeal No. ............of 2008 arising out of S.L.P. (C) No.6761 of 2007
Civil Appeal No. ............of 2008 arising out of S.L.P. (C) No.6760 of 2007
S.H. KAPADIA, J.
1.
Leave
granted.
2.
In
this batch of civil appeals a short question which arises for determination is
: whether Agricultural Market Committee ("AMC", for short) is a
"local authority" under the 2 Explanation to Section 10(20) of the
Income-tax Act, 1961 ("1961 Act", for short).
3.
For
the sake of convenience we refer to the facts mentioned in Civil Appeal
No................ of 2008 (arising out of S.L.P. (C) No.6757 of 2007) filed by
AMC, Narela, Delhi.
4.
Appellant-Committee
is established under the Delhi Agricultural Produce Marketing (Regulation) Act,
1998 ("1998 Act", for short). The provisions of the said 1998 Act
enjoin upon the appellant to provide the facilities for marketing of
agricultural produce in Narela, Delhi. This is apart from performing other
functions and duties such as superintendence, 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 3
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 impugned
decision dated 2.6.06, Delhi High Court following 4 its earlier judgment in
the case of Agricultural Produce Market Committee, Azadpur v. Commissioner of
Income- tax - (I.T.A. No.749/2006) dismissed the appellant's appeal. Hence this
civil appeal.
9.
At
the outset, it may be stated that all AMCs at different places were enjoying
exemption from income tax under Section 10(20) of the 1961 Act prior to its
amendment by Finance Act, 2002 w.e.f. 1.4.03.
10.
Prior
to the amendment by Finance Act, 2002, Section 10 (20) of the Income-tax Act,
1961 provided as under:
"CHAPTER III
INCOME WHICH DO NOT FORM PART OF TOTAL INCOME Incomes not included in total
income.
10. In computing the
total income of a previous year of any person, any income falling within any of
the following clauses shall not be included - (20) the income of a local
authority which is chargeable under the head "income from house property",
"Capital gains" or "Income from other sources" or from a
trade or business carried on by it 5 which accrues or arises from the supply
of a commodity or service (not being water or electricity) within its own
jurisdictional area or from the supply of water or electricity within or
outside its own jurisdictional area."
11.
Through
the aforementioned amendment (Finance Act, 2002) the following Explanation
stood added to Section 10(20) of the Income-tax Act, 1961 which reads as
follows:
"Explanation.- For
the purposes of this clause, the expression "local authority" means -
(i) Panchayat as referred to in clause (d) of article 243 of the Constitution;
or (ii) Municipality as referred to in clause (e) of article 243P of the
Constitution; or (iii) Municipal Committee and District Board, legally entitled
to, or entrusted by the Government with, the control or management of a
Municipal or local fund; or (iv) Cantonment Board as defined in section 3 of
the Cantonments Act, 1924 (2 of 1924);"
12.
Mr.
M.L. Verma, learned senior counsel appearing on behalf of the appellants,
submitted that AMC(s) has been held to be a "local authority" under
Section 10(20) of the 1961 Act 6 falling outside the taxing net. In this
connection, learned counsel placed reliance on the judgment of the Delhi High
Court in the case of Commissioner of Income-tax 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, 7 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 delivered prior to Finance Act, 2002
holding AMC(s) to be a "local authority", would continue to apply and
the tests laid down in those judgments would continue to apply even after the
said amendment to Section 10 (20) of the 1961 Act. Therefore, according to
learned counsel, the said Explanation does not adversely affect the
appellant(s) as the appellant(s) is covered by Item (iii) in the Explanation,
which according to the appellant(s), is identical to Section 3 (31) of the 1897
Act on the basis of which AMC(s) is a "local authority".
13.
Learned
counsel next contended that even after the amendment to Section 10(20), the
appellant(s) is covered by Item (iii) of the said Explanation as it is a
"local authority" performing municipal functions and as it is legally
entitled to the control of local fund, namely, Market Fund. In this connection,
learned counsel pointed out that the appellant(s) has the power and authority
to levy and collect fees called 8 "Market Fees" and in fact it
levies and collects "Market Fees" and the fact that the Government
exercises control, does not take away the statutory power of the appellant(s)
under Section 62 of the 1998 Act.
14.
Learned
counsel next contended that it is true that the words "other
authority" appearing in Section 3(31) of the 1897 Act do not find place in
the Explanation to Section 10(20) of the 1961 Act, however, that would not
change the basis of decision of this Court in the case of R.C. Jain (supra).
Learned counsel urged
that the judgment of this Court in the case of R.C. Jain (supra) is squarely
applicable to the facts of the present case and applying the tests laid down in
the said judgment the position which emerges is that AMC(s) is a "local
authority" of "like nature and character" as a Municipal Committee
performing municipal functions and legally entitled to the control of the local
fund, namely, the Market Fund.
One more aspect needs
to be mentioned. An Explanatory Note (at pages 114 to 116 of the paper book of
S.L.P.(C) No.6757 of 2007) states that "Agricultural Produce Marketing
Boards"
9 and
"Agricultural Marketing Societies" are not entitled to exemption
after insertion of the said Explanation in Section 10 (20) of the 1961 Act.
According to learned counsel AMC(s) is neither "Agricultural Produce
Marketing Board" nor "Agricultural Marketing Society".
Therefore, according to learned counsel even the Explanatory 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 10 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 resolved in favour of that assessee.
16.
Mr.
Parag P. Tripathi, learned Additional Solicitor General of India, submitted
that before the insertion of the Explanation, under Section 10(20) of the 1961
Act, by Finance Act, 2002, various High Courts were of the view that since
"local authority" has not been defined under 1961 Act, the definition
may be borrowed from Section 3(31) of the 1897 Act.
However, according to
learned counsel, after the insertion of the Explanation, vide Finance Act, 2002
whereby "local authority" stood defined exhaustively, it was not
necessary to invoke Section 3(31) of the 1897 Act. He further contended that
the Notes on Clauses in the Finance Bill 2002 shows that 11 Parliament intended
to restrict the exemption to Panchayat and Municipality, as referred to in
Article 243(d) and Article 243P(e) of the Constitution of India, Municipal
Committees and District Boards, legally entitled to or entrusted by the
Government with the control or management of a local fund as well as Cantonment
Boards as defined under Section 3 of the Cantonment Act, 1924. In this
connection, learned counsel urged that AMC(s) is not mentioned in the
Explanation.
Therefore, according
to learned counsel, it would not be proper to read AMC(s) into the Explanation
particularly when Section 10(20) of the 1961 Act is an exemption provision.
17.
It
was next contended that Section 3(31) of the 1897 Act was not bodily
incorporated in the Explanation to Section 10 (20) of the 1961 Act as it sought
to be contended on behalf of the appellant(s). Learned counsel submitted that
Parliament in its wisdom has excluded the expression "other
authority", found under Section 3(31) of the 1897 Act, from the
Explanation to Section 10(20) of the 1961 Act. According to learned counsel,
this conspicuous absence has to be 12 understood in the context, namely, that
in the case of R.C. Jain (supra), the focus of this Court was on the said
expression "other authority" under Section 3(31) of the 1897 Act and,
therefore, reliance placed by the appellants herein on the judgment of this
Court in the case of R.C. Jain (supra) was misplaced.
18.
Learned
counsel further submitted that the explanation/definition clause inserted by
Finance Act, 2002 is exhaustive as it uses the expression "means" as
contradistinct from the expression "includes". Learned counsel
submitted that borrowing definition from other 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 13
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 enacted there
were District Boards and Municipal Committees in certain areas. Those District
Boards, according to learned counsel, were different from the Municipalities.
Learned counsel urged
that if one looks at the said Explanation in its entirety, it would be clear
that Parliament 14 intended to grant exemption to Panchayat, Municipality,
Municipal Committee and District Boards legally entitled to the control or
management of a local fund. Learned counsel contended that an AMC(s) is not a
Municipal Committee. He contended that the constitution of Panchayat and
Municipality indicated them to be a representative body which is not there in
the case of AMC(s). Learned counsel submitted that even in the case of a
Municipal Committee the body consists of representatives of the people whereas
in the AMC(s) that is not the case. In the circumstances, learned counsel
submitted that AMC(s) cannot be equated to the Municipal Committee under the
said Explanation.
21.
Learned
counsel lastly urged that the entire finances of AMC(s) are under the control
of Agricultural Marketing Board as defined under Section 5 of the 1998 Act and,
therefore, it cannot be said that AMC(s) is legally entitled to the control or
management of a local fund. In this connection, learned counsel submitted that
even in the matter of prescription of fees the upper and lower limits regarding
the fees to be 15 charged by AMC(s) are fixed by the Government. Therefore,
according to learned counsel there is no merit in these civil appeals.
22.
Before
analyzing the submissions made, we quote hereinbelow the relevant sections of
the Delhi Agricultural Produce Marketing (Regulation) Act, 1998 which read as
under:
"CHAPTER I
PRELIMINARY
2. Definitions -(1)
In this Act, unless the context otherwise requires, (c) " Board"
means the Delhi Agricultural Marketing Board constituted under section 5;
(l) "local
authority" means, in relation to an area within the local limits of:- (i)
The Municipal Corporation of Delhi, that Corporation;
(ii) the New Delhi
Municipal Council, that Council; and (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;
16 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 such
marketing committee, trader, godown-keeper or other functionary and shall also
have power to seize or take into possession against proper receipt the records
accounts books stocks of notified agricultural produce alongwith its containers
and carriers.
(3) It may authorise
officer/officers of the Board and/or marketing committees to inspect works
undertaken by the marketing committees and Board and to take corrective
measures.
(4) Subject to the
provisions of this Act and the rules and regulations made thereunder, the Board
may employ such persons for the performance of its functions as it may consider
necessary and the method of recruitment, the scale of pay and other conditions
of service of such persons shall be such as may be provided in the regulations
made by the Board in this behalf.
(5) The Board shall,
subject to the provisions of this Act, perform the following functions and
shall have the power to do such things as may be necessary or expedient for
carrying out these functions, namely:- 17 (i) Coordination of the working of
the marketing committees and other affairs thereof including programmes
undertaken by such marketing committees for the maintenance of markets,
sub-markets, check posts and other sites in the market areas;
(ii) undertake the
planning and development of markets for agricultural produce;
(iii) administer the
Market Development Fund;
(iv) issue direction
to Marketing Committees in general or to one or more Marketing Committees in
particular with a view to ensuring improvement thereof;
(v) any other
function specially entrusted to it by this Act;
(vi) such other
functions of like nature as may be entrusted to the Board by the Government.
(6) Without prejudice
to the generality of the foregoing provision, such functions of the Board shall
include :- (a) to consider proposals for selection of new site(s) 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;
18 (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 progress report, balance sheet
and statement of assets and liabilities and send copies thereof to all the
members of the Board and a copy to the Government;
(i) to make necessary
arrangements for dissemination of information on matters relating to regulated
marketing of notified agricultural produce;
(j) to provide
facilities for the training of officers and members of the staff of the Board
as also the Marketing Committees;
(k) to prepare and
adopt its budget for the ensuring year;
(l) to sanction the
budget of the Marketing Committees;
(m) to grant
subventions of loans to the Marketing Committees for the purposes of this Act
on such terms and conditions as the Board may determine;
(n) to arrange or
organize seminars or workshops or exhibitions, etc. on subjects related to
agricultural marketing;
(o) to perform such
other functions as may be of general interest to the Marketing Committees or
considered necessary for efficient functioning of the Board or the Marketing Committees.
19 (p) to transfer
or to provide marketing technology and market assistance to the Marketing
Committees as and when required.
CHAPTER V MARKET OF
NATIONAL IMPORTANCE
26. Establishment of
market of national importance and Marketing Committee thereof - (1)
Notwithstanding anything contained in this Act, where the Government is
satisfied that on account of the national importance of marketing of any
commodity, in any area, it is expedient to ensure the efficient regulation of
the marketing of such commodity in such area, it may establish - (a) in such
area, special market, known as "Markets of National Importance" for
such commodities; and (b) independent Marketing Committees known as
"Marketing Committees of Market of National Importance" in relation
to such markets, notwithstanding that such 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;
20 (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 DUTIES
55. Powers and duties
of the Marketing Committees- (1) Subject to the provisions of this Act, it
shall be the duty of a Marketing Committee:
(i) to implement the
provisions of this Act, and rules, regulations and bye-laws made there under
for the market area;
(ii) to provide such
facilities for marketing of notified agricultural produce therein as the Board
may, from time to time, direct;
(iii) to perform
other functions as may be required in relation to the superintendence,
direction and control of markets, or for regulating and control of markets, or
for regulating the market area and for purposes connected with the matters
aforesaid, and, for this purpose, may exercise such powers and perform such
duties and discharge such functions as may be provided by or under this Act.
(2) Without prejudice
to the generality of the foregoing provisions, a Marketing Committee may - (a)
regulate the entry of the persons and of vehicular traffic into the market;
21 (b) supervise the
conduct of those who enter the market for transacting business;
(c) grant, renew,
refuse suspend or cancel licences;
(d) provide for
settling disputes arising out of any kind of transaction connected with the
marketing o notified agricultural produce and all matters ancillary thereto;
(e) prosecute persons
for violating the provisions of this Act and to the rules regulations and
bye-laws made thereunder;
(f) maintain and
merge the market, including the regulation of admissions to, and conditions for
use of, the market;
(g) regulate the
marketing of notified agricultural produce in the market area and the market,
and weighment, delivery of and payment for, such agricultural produce;
Explanation - For the
purposes of clause (g) the word `regulate' shall include - (i) making, carrying
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 22 (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 the market as the Government may, from time to
time notify in the official Gazette.
(i) acquire, hold and
dispose of any movable or immovable property (including any equipment) necessary
for the purpose of efficiently carrying out its duties;
(j) collect,
maintain, disseminate and supply information in respect of production, sale
storage, processing, prices and movement of notified agricultural produce
(including information relating to crop-statistics and market intelligence) as
may be required by the Director or the Board;
(k) take all such
steps to prevent adulteration and to promote grading and standardization of
such agricultural produce, as may be prescribed;
(l) enforce the
provisions of this Act and of the rules, regulations and bye-laws made
thereunder including the conditions of the licences granted, under this Act;
(m) perform such
other duties as may be prescribed;
23 (n) arrange to
obtain fitness certificate of health from a veterinary doctor in respect of
animals, cattle or birds brought for sale or sold in the market/sub-market;
(o) disseminate
information about the benefits of regulation, the system of transaction,
facilities provided in the market yard, etc. through such means as posters,
pamphlets, hoarding, cinema slides, film shows, group meetings, etc., or
through nay other means considered by it more effective or necessary;
(p) ensure payment in
respect of a transaction which takes place in a market to be made on the same
day to the seller, and in default thereof to seize the agricultural produce in
question alongwith other property of the commission agent or purchaser if no
commission agent is involved in the transaction;
(q) make arrangement
for weighmen palledars for weighing and transporting of goods in respect of
transactions held in the market yard/sub-yard;
(r) recover the
charges in respect of weighmen and palledars and distribute the same to
weighmen and palledars if not paid by the purchaser 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
assess, to the best of his judgment, the amount of market fee due from such
commission agent.
Provided that before
finalizing any such assessment, the commission agent concerned will be given a
reasonable opportunity of showing cause as to why the assessment should not be
finalized.
(2) The amount of the
market fee assessed under sub-section (1), less than sum, if any, already paid,
shall be paid by the commission agent within fifteen days from the date of the
receipt of the assessment order by him.
(3) If any commission
agent fails to pay the amount of market fee as required by sub-section (2), he
shall, in addition to market fee due, be liable to pay simple interest on the
amount so due at two per cent per month from the date immediately following the
last date for submission of return under clause (b) of section 65, upto the
date of assessment under sub-section (1) and at the rate of three percent per
month thereafter till realization.
CHAPTER X MARKET
DEVELOPMENT FUND AND MARKET FUND AND AUDIT THEREOF
84. Constitution of
Market Development Fund--(1) All moneys received by the Board shall be credited
into a fund to be called the Market Development Fund.
25 (2) No
expenditure from the Market Development Fund shall be defrayed unless it is sanctioned
by the competent authority. The Market Development Fund shall be operated in
the manner as may be prescribed in the rules.
Explanation--For the
purpose of this sub-section `competent authority' shall mean the Board, or
Vice-Chairman or any other officer of the Board to whom the powers of the Board
to incur expenditure have been delegated, as the case may be.
(3) The amount
standing to the credit of the Market Development Fund shall be kept or invested
in such manner as may be prescribed.
89. Application of
Market Fund--(1) Subject to the provisions of section 88, the Market Fund may
be expended for the following purposes only, namely:-- (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;
26 (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;
(viii) the collection
and dissemination or information relating to crop statistics and marketing of
agricultural produce;
(ix) expenses
incurred in auditing the accounts of the marketing committee;
(x) payment of
honorarium to Chairman travelling allowances of Chairman, Vice-Chairman and
other members of the Marketing Committee and sitting fees payable to number for
attending the meeting;
(xi) contribution to
the Board as prescribed and Consolidated fund of the National Capital Territory
of Delhi to the extent required for salary of the employees of the Government
as provided in clause (b) of sub-section (2) and sub-section (3) of this
section;
(xii) contribution to
any scheme for development of agricultural marketing including transport and
scientific storage;
(xiii) to provide
facilities like grading services and communication to agriculturists in the
market area;
(xiv) to provide for
development of agricultural produce in the market area;
(xv) payment of
expenses on elections under this Act;
(xvi) incurring of all
expenses for research, extension and training in marketing of agricultural
produce;
(xvii) prevention, on
conjunction with other agencies, State, Union Territory, Central and others in
relation to distress sale of agricultural produce;
27 (xviii) fostering
co-operative marketing and assisting co- operative marketing societies in the
procurement and organization of profitable disposal of produce particularly the
produce belonging to small and marginal farmers;
(xix) acquisition of
land for construction of office building, guest house for farmers and visitors
and staff quarters and maintenance thereof; hiring built up accommodation for
office use, guest house or for other purpose of agricultural marketing;
(xx) any other
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 thousand rupees, on the first Rs.10,000 ten percent.
28 On the next five
thousand rupees or part thereof...
fifteen percent (iii)
if the annual income of a marketing committee exceeds fifteen thousand rupees,
on the first Rs.10,000 Ten percent on the next Rs.5,000 Fifteen percent on the
remaining income Twenty percent (b) to the Government, the cost of any special
or additional staff employed by the Government, in consultation with the
marketing committee, for giving effect to the provisions of this Act in the
market area.
(3) The Government
shall determine the cost of the special or additional staff referred to in
clause (b) of sub- section (2) and shall, where the staff is employed for the
purposes of more than one marketing committee, apportion such cost among the
marketing committees concerned in such manner as it things fit and the decision
of the Government determining the amount payable by any marketing committee
shall be final.
CHAPTER XI BUDGET AND
ACCOUNTS
91. Budget and
Account of a Marketing Committee-- (1) Everything marketing committee shall
prepare and pass the budget on its income and expenditure for the ensuing year
in the prescribed Form and shall submit it to the Board for sanction before the
prescribed date. The Board shall sanction the budget with or without
modification within three months from the date of receipt thereof. If the
budget is not returned by the Board within three months, it shall be presumed
to have been sanctioned.
29 (2) No
expenditure shall be incurred on any item if there is no provision in the
sanctioned budget thereof, unless it can be met by reappropriation from saving
under any other Head and has sanction for re-appropriation of the Vice-Chairman
of the Board.
95. Preparation of
Balance and administrative report-- (1) At the end of every year, a marketing
committee shall draw up its 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) 30
24. The short
question which arises in this batch of civil appeals is : whether Agricultural
Marketing Committee [AMC (s)] is a "local authority", so as to be
entitled to the benefit under Section 10 of the 1961 Act after insertion of the
Explanation in Section 10(20) vide Finance Act, 2002 w.e.f.
1.4.2003.
25. Before analyzing
the above question, we quote hereinbelow a comparative chart containing the
Explanation to Section 10(20) of the 1961 Act on one hand in juxtaposition to
Section 3(31) of the 1897 Act:
Explanation to
Section 10(20) of Section 3(31) of the 1897 Act the 1961 Act 31
"Explanation.- For the purposes 3. DEFINITIONS.- In this Act, and in of
this clause, the expression all Central Acts and Regulations made "local
authority" means - after the commencement of this Act, unless there is
anything repugnant in the subject or context, - (i) Panchayat as referred to in
clause (d) of article 243 of the (31). "local authority" shall mean a
Constitution; or municipal committee, district board, body of port
commissioners or other (ii) Municipality as referred to in authority legally
entitled to, or entrusted clause (e) of article 243P of the by the Government
with, the control or Constitution; or management of a municipal or local fund.
(iii) Municipal
Committee and District Board, legally entitled to, or entrusted by the
Government with, the control or management of a Municipal or local fund; or
(iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2
of 1924);
26. At the outset, it
may be noted that prior to Finance Act, 2002, the said 1961 Act did not contain
the definition of the word "local authority". That word came to be
defined for the first time by Finance Act, 2002 vide the said
Explanation/definition clause.
27. Certain glaring
features can be deciphered from the above comparative chart. Under Section
3(31) of the General Clauses Act, 1897, "local authority" was defined
to mean "a 32 municipal committee, district board, body of port
commissioners or other authority legally entitled to the control or management
of a municipal or local fund. The words "other authority" in Section
3(31) of the 1897 Act has been omitted by Parliament in the
Explanation/definition clause inserted in Section 10(20) of the 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 `2' in the case of R.C. Jain (supra). We quote
hereinbelow para `2' which reads as under:
"2. Let us,
therefore, concentrate and confine our attention and enquiry to the definition
of "local authority"
33 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, therefore, many, if not all, of the
distinctive attributes and characteristics of a Municipal Committee, District
Board, or Body of Port Commissioners, but, possessing one essential feature,
namely, that it is legally entitled to or entrusted by the government with, the
control and management of a municipal or local fund. What then are the
distinctive attributes and characteristics, all or many of which a Municipal
Committee, District Board or Body of Port Commissioners shares with any other
local authority? First, the authorities must have separate legal existence as
corporate bodies. They must not be mere governmental agencies but must be
legally independent entities. Next, they must function in a defined area and
must ordinarily, wholly or partly, directly or indirectly, be elected by the
inhabitants of the area. Next, they must enjoy a certain degree of autonomy,
with freedom to decide for themselves questions of policy affecting the area
administered by them. The autonomy may not be complete and the degree of the
dependence may vary considerably but, an appreciable measure of autonomy there
must be.
Next, they must be
entrusted by statute with such governmental functions and duties as are usually
entrusted to municipal bodies, such as those connected with providing amenities
to the inhabitants of the locality, like health and education services, water
and sewerage, town planning and development, roads, markets, transportation,
social welfare services etc. etc. Broadly we may say that they may be entrusted
with the performance of civic duties and functions which would otherwise be
governmental duties and functions. Finally, they must have the power to raise
funds for the furtherance of their activities and the fulfilment of their
projects by levying taxes, rates, charges, or fees. This may be in addition to
moneys provided by government or obtained by borrowing or otherwise. What is
essential is that control or management of the fund must vest in the authority."
28. As stated above,
it has been argued on behalf of the appellants that AMC(s) is not a Municipal
Committee. The words "Municipal Committee" finds place in Item (iii)
of the said Explanation. According to the appellants, although AMC (s) is not a
Municipal Committee still it is a "local authority" of a like nature
and character to that of a Municipal Committee performing municipal functions
legally entitled to control the local fund, namely, the Market Fund. For that
proposition reliance is placed on para `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 35 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 case of R.C. Jain (supra) this Court was aware that DDA is neither a
District Board nor a Body of Port Commissioners. Therefore, the only question
the Court had to address to was : whether DDA would fall within the meaning of
the words "other authority" in Section 3(31) of the 1897 Act.
Therefore, we have to read para `2' of the judgment in the case of R.C. Jain
(supra) in the context of Section 3(31) of the 1897 Act as the word "local
authority" was not defined in the Payment of Bonus Act, 1965. The Court,
therefore, in the case of R.C. Jain (supra) had to fall back upon Section 3(31)
of the 1897 Act and in doing so this Court in the case of R.C. Jain (supra) applied
the functional and incorporation tests.
29. One more aspect
needs to be mentioned. In the case of R.C. Jain (supra) the test of "like
nature" was adopted as the words "other authority" came after
the words "Municipal Committee, District Board, Body of Port Commissioners".
Therefore, the words
"other authority" in Section 3(31) took colour from the earlier
words, namely, "Municipal Committee, District Board or Body of Port
commissioners". This is how the functional test is evolved in the case of
R.C. Jain (supra).
However, as stated,
earlier Parliament in its legislative wisdom has omitted the words "other
authority" from the said Explanation to Section 10(20) of the 1961 Act.
The said Explanation to Section 10(20) provides a definition to the word "local
authority". It is an exhaustive definition. It is not an inclusive
definition. The words "other authority" do not find place in the said
Explanation. Even, according to the appellant(s), AMC(s) is neither a Municipal
Committee nor a District Board nor a Municipal Committee nor a Panchayat.
Therefore, in our
view functional test and the test of incorporation as laid down in the case of
R.C. Jain (supra) is no more applicable to the Explanation to Section 10(20) of
the 37 1961 Act. Therefore, in our view the judgment of this Court in the case
of R.C. Jain (supra) followed by judgments of various High Courts on the status
and character of AMC(s) is no more applicable to the provisions of Section
10(20) after the insertion of the Explanation/definition clause to that sub-
section vide Finance Act, 2002.
30. The question
still remains as to why Parliament has used the words "Municipal
Committee" and "District Board" in Item (iii) of the said
Explanation. 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 38 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 Parliament has retained exemption for Municipal Committee and
District Board apart from Panchayat and Municipality. Our view finds support
from the provisions contained in Part IX of the Constitution of India. Article
243N provides for continuance of existing laws and Panchayats. It states, inter
alia, that notwithstanding anything in Part IX, any law relating to Panchayats
in a State immediately before commencement of the Constitution (Seventy-third
Amendment) Act, 1992, which is inconsistent with the provisions of Part IX,
shall continue to be in force until repealed by a competent Legislature.
Similarly, under 39 Part IXA there is Article 243ZF which refers to the
"Municipalities". This Article, inter alia, states that
notwithstanding anything in Part IXA, any provision of any law relating to
Municipalities in force in a State immediately before the commencement of the
Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with
the provisions of Part IXA, shall continue to be in force until amended or
repealed by a competent Legislature. In our view, Article 243N and Article
243ZF indicates that there could be enactments which still retain the entities
like Municipal Committees and District Boards and if they exist, Parliament
intends to give exemption to their income under Section 10 (20) of the 1961
Act.
31. Before concluding
we quote hereinbelow an important principle of law enunciated by this Court in
the case of R.C.
Jain (supra) which
reads as under:
"...it is not a
sound rule of interpretation to seek the meaning of words used in an Act, in
the definition clause of other statutes."
32. Since we are of
the view that AMC(s) is neither a Municipal Committee nor a District Board
under the said Explanation to Section 10(20) of the 1961 Act, we refrain from
going into the question : whether the AMC(s) is legally entitled to the control
of the local fund, namely, Market Fund, under the said 1998 Act. There is one
more reason why we do not wish to express any opinion on the said question.
Vide Finance Act, 2008, income of AMC(s) is exempt. Sub-section 26AAB of
Section 10 comes into force with effect from 1.4.2009. Therefore, we do not
wish to express any opinion on the question as to whether AMC(s) is legally
entitled to the control of the local fund.
33. We hold that
AMC(s) is, therefore, not entitled to exemption under Section 10(20) of the
1961 Act after insertion of the said Explanation vide Finance Act, 2002 w.e.f.
1.4.03.
34. For the
aforestated reasons, we find no merit in this batch of Civil Appeals and
accordingly the said Civil Appeals are dismissed with no order as to costs.
.................................J.
(S.H. Kapadia)
.................................J.
(B. Sudershan Reddy)
New
Delhi;
August
21, 2008.
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