JAGANMOHAN REDDY J. - These are a batch of four writ petitions filed by the Andhra Pradesh Road Transport Corporation, for prohibiting the Income-tax Officer, B-1, B-Ward, Hyderabad, from collecting any tax or taking any proceedings under the Indian Income-tax Act against the petitioner and seeking to quash the assessment orders of the Income-tax Officer, dated February 29, 1960, for the year 1958-59 levying a tax of Rs. 13,60,963.86 nP. for the period, January 11, 1958, to March 31, 1958, and for the year 1959-60 levying a tax of Rs. 34,44,430.48 nP. for the period of 1st April, 1958, to 31st March, 1959.
It may be stated that the Andhra Pradesh Road Transport Corporation (hereinafter called the Corporation) was established under the Road Transport Corporations Act (LXIV of 1950), by a notification issued by the State Government under that Act and has been functioning with effect from January 11, 1958. Prior to the formation of the Corporation, the Road Transport was a department of the Government of Hyderabad and subsequently after the integration that of the Government of Andhra Pradesh and during those years it was treated as being exempt from income-tax. In response to a notice under section 22 of the Indian Income-tax Act issued by the Income-tax Officer, B-1, B-Ward and served on January 29, 1959, a return was furnished under protest stating that the income of the Corporation does not attract liability to tax under the Indian Income-tax Act. Before the Income-tax Officer it was contended on behalf of the Corporation that its status does not fall under any of the five categories of assesses specified in section 3 of the Indian Income-tax Act, viz., individual, Hindu undivided family, firm, company or association of persons and since there is no other category of assesses mentioned in the Act the Corporation cannot be assessed. Secondly, it was contended that inasmuch as the net income of the Corporation goes ultimately to the State of Andhra Pradesh under section 30 of the corporation Act, it is immune from income-tax under article 289 of the Constitution of India and, thirdly, that the Corporation was a local authority exempt from income-tax.
The income-tax Officer discussed the status of the Corporation and held that it was not a company within the meaning of the Indian Companies Act nor does it come within the purview of section 2(5) of the Indian Companies Act, but since it is an independent body carrying on the business of road transport and had the power to issue shares and debentures to the public if it needs further funds for its working, it is to be treated as an association of persons for the purposes of income-tax. On the question of immunity of the Corporation from taxation on the ground that the income belongs to the State, the Officer held that since the Corporation was formed in pursuance of the Road Transport Corporations Act, it is a legal entity having its own existence and since that entity is making income by carrying on the business of road transport, the income-tax department is not concerned with how the income earned was ultimately disposed of. The contention relating to the Corporation being a local authority within the meaning of section 4(3) (iii) of the Indian Income-tax Act was negatived. In the result, after negativing the claim for exemption of the interest payable by the State Government on the capital advanced by it and making other adjustments in terms of the Income-tax Act, the assessment for the period, January 11, 1958, to March 31, 1958, was made on Rs. 18,03,818 and for the year 1959-60 on Rs. 45,09,624.
Before us the learned Solicitor-General raised a preliminary point as to the maintainability of these writ petitions on the ground that there was an alternative remedy under the Indian Income-tax Act which has provided for a hierarchy of Tribunals and that the assessee had availed himself of the opportunity of filing an appeal before the Appellate Assistant Commissioner. While he did not contend that this court had no jurisdiction to entertain these petitions, he has referred us to the latest decision of the Supreme Court in Abraham v. Income-tax Officer, Kottayam, where Shah J., delivering the judgment of their Lordships, observed at page 674 :
'In our view, the petition filed by the appellant should not have been entertained. The Income-tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal.'
That was a case where the Income-tax Officer had discovered that the firm carried on transactions in different commodities in fictitious names and had failed to disclose substantial incomes earned by it. The appellant claimed that no penalty could be levied on the ground that, after the dissolution of the firm by the death of one of the partners, no order of penalty could be passed against the firm. Learned Advocate-General tried to distinguish this case by reference to other Supreme Court decisions and contends that where there is a total lack of jurisdiction in a tribunal to entertain a matter, the remedy by way of writ petition will not be denied. In any case, where a writ of mandamus and prohibition is asked for, the plea of the petitioner having an alternative remedy cannot be availed of. Referring to the circumstances in which the writ petitions have been filed, learned Advocate-General submits that, immediately after the tax demand was raised, the Income-tax Officer and the Chief Executive Officer came to an understanding whereunder, on the Corporation paying three lakhs of rupees under protest, the Income-tax Officer would not insist on payment of the balance of the tax demand. A letter to this effect was also issued by the Income-tax Officer; but later a notice under section 22 of the Income-tax Act for 1960-61 was issued on July 21, 1960, and demand for advance tax under section 18A(1) was made. In these circumstances, the assessee had to file the present writ petitions on August 2, 1960.
In our view, there can be no doubt that the existence of even an adequate alternative remedy does not bar the High Courts from issuing a writ in an appropriate case. Since the remedy is a discretionary one, courts have time and again said that they will not interfere where an adequate alternative remedy is available. If it appears that the Tribunal or authority entertaining a particular matter is totally devoid of the jurisdiction, then it will be nothing short of oppressiveness to refuse to entertain petition or to give relief to the aggrieved party to pursue the alternative remedy. Each case must be judged on its own merits. We are fortified in this view by another recent judgment of the Supreme Court (Bench consisting of five judges) in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer. That was a case where the Income-tax Officer had issued a notice under section 34 if the Indian Income-tax Act stating that he had reason to believe that income had escaped assessment and the assessee challenged the jurisdiction of the officer by an application under article 226. At page 380, Das Gupta J., speaking for the majority, observed as under :
'Mr. Sastri next pointed out that at the stage when the Income-tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari of prohibition cannot issue. It is well settled, however, that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences.'
Dealing with a similar argument as that raised by the learned Solicitor-General, viz., that the company would have sufficient opportunity to raise the question before the appellate officer or the Appellate Tribunal or in the High Court under section 66(2) of the Indian Income-tax Act, their Lordships observed that 'the existence of such alternative remedy is not, however, always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action'. It would be unnecessary to multiply authorities on this point which are innumerable and many. The case of the supreme Court just referred to appears to us to be a stronger one in favour of the proposition that were the applicant raises the contention of total absence of jurisdiction, the courts will not refuse to entertain petitions under article 226. The case before us raises important questions relating to type interpretation of the Constitution and the immunity of the State instrumentalities from the application of the India Income-tax Act and the assessees contentions go to the root of the jurisdiction of the Income-tax Officer. In the circumstances, it would not be proper to refuse to entertain the applications merely because of the existence of an alternative remedy.
On the merits of the case, the contentions of the learned Advocate-General are similar to those raised before the income-tax Officer : (1) that there is a constitutional immunity from taxation against all State income. The Corporation, he contends, is in every sense State-owned and State-controlled and consequently on the application of well-settled constitutional principles, the income of the Corporation, being the income of the State, cannot be taxed. The fact that a corporate body has been brought into existence does not impair the principle of this immunity. (2) The Central Legislature which has assumed legislation for income-tax has passed the Road Transport Corporations Act which is complete code prescribing the manner in which the income should be dealt with and distributed which shows a repugnance and inconsistency between the two Acts. Parliament should be deemed not to have preserved the liability under the previous Act and to have exempted the corporations formed under the State Act from the operation of the Income-tax Act. (3) The Corporation does not fall within the categories of an individual, Hindu undivided family, company, firm, association of persons, etc., and, consequently, it cannot be subjected to tax liability. (4) The Corporation is a local authority and is exempt from taxation under the Indian Income-tax Act. (5) Under the Corporations Act, the State Government is entitled to interest on the capital invested by it; as such it is immune from taxation. This is so particularly, having regard to the statement of the Income-tax Officer, that 'obviously the Government are the owners of the Corporation, even as the shareholders are the owners of the company', though on the general question as to the applicability of the Income-tax Act to the income of the Corporation he held otherwise.
We would first take up the third and fourth points before dealing with the first two general questions.
It appears to us that the contention of the learned Advocate-General that section 3 of the Income-tax Act does not apply to the Corporation or that it is a local authority within the meaning of section 4(3) (iii) has little force. The Income-tax Officer had declared it an association of persons; but we cannot accept the view inasmuch as, even on the assumption that the corporations could be included in the term 'persons', the use of the plural would show that there must be more than one person, that is, either several corporations or a corporation and other persons. Merely because a corporation has the power to issue shares and debentures to the public in case it needs further funds for its working, and many comprise of shareholders, that cannot by itself make the corporation an association of persons. If that be so, the assumption that an individual should be a human being alone or that an a association of persons should consist of human individuals has been given the quietus by a series of authoritative pronouncements. Of the two views, the view that the word 'individual' is wide enough to include a group of persons forming a unit and includes a corporation created by a statute, e.g., a university or a bar council or the trustee of a baronetcy trust, has been accepted by some of the High Courts and the Supreme Court, while the other view that after the amendment of the Income-tax Act in 1939, the word 'individual' can only mean a natural person, viz., a human being, has been adopted by the Allahabad, Lahore, one of the Bombay cases and by the Pakistan Federal Court. As far as this case is concerned, the view adopted by the Supreme Court is the one which would prevail. Under section 3 of the Road Transport Corporations Act, a State Government may, by notification in the Official Gazette, establish a Road Transport Corporation for the whole or any part of the State under such name as may be specified in the notification and by section 4 every corporation has been made a body corporate by the name notified under section 3 having perpetual succession and a common seal and can sue and be used in that name. Such corporate body brought into existence by a statute like the Bar Council under the Indian Bar Councils Act has been held to be an individual in the case of Commissioner of Income-tax v. The Bar Council, Madras. The Madras Bar Council was assessed to income-tax on the fees paid by persons enrolled as advocates, the examination fees paid by candidates and interest on investments. The Bar Council claimed total exemption under section 4(3) (i) of the Income-tax Act on the ground that it has been treating its investments and income therefrom as applicable to legal education and a formal statement was made on behalf of the Bar Council that it will utilize its income from investments solely for legal education and for expenses in connection therewith. The Madras High Court held that the Bar Council was an individual or an association of persons within the meaning of section 3, and that while the income from investments was exempt under section 4(3) (i), the income derived from enrollment and examination fees was taxable. The learned Chief Justice observed : 'The Council has been taxed as an individual, and there can be no doubt that it is an individual or association of persons within the meaning of the section.' In Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax, the trustees were made a body corporate by Act 4 of 1913 for purposes of executing the trust, the powers and purposes specified in the Act and were to hold properties and manage the same. The income-tax authorities had assessed the trustees as an association of persons; but Beaumont C.J. held that the corporation was an individual and not an association of persons. The question of the legality of the assessment was taken to the Privy Council and although this point was not directly raised there, the judgment of the Bombay High Court was affirmed. Leach C.J., in another case from Madras in Commissioner of Income-tax v. Salem District Urban Bank Ltd., adopted the views of Beaumont C.J. and observed at page 278-79 :
'If a corporate body created by a statute is an individual within the meaning of the section and I hold that it is -a co-operative society registered under the Co-operative Societies Act must fall within the same category. It is a corporate body and has perpetual succession. I consider that it is not reasonable to suppose that the legislature intended that there should be a difference in the meaning of the word individual and the plural individuals.... To give the word individual the meaning of person only would, it seems to me, be to disregard the scheme of the Act and to rob the word of an accepted meaning.'
Their Lordships of the Supreme Court in Commissioner of Income-tax v. Sodra Devi, while considering the terms 'any individual' and 'such individual' occurring in section 16(3) of the Indian Income-tax Act, confirmed this view observing at page 620 that 'the word individual includes a corporation created by a statute, e.g., a university or a Bar Council, or the trustee of a baronetcy trust incorporated by a Baronetcy Act.' But in construing the words 'any individual' or 'such individual' in section 16(3) of the Act, it was held that the meaning was restricted in their connection as applicable only to the male species. The learned Advocate-General submits that the Supreme Court was merely referring to the view expressed in various decisions but has not in fact decided the matter. We are not inclined to accept his contention and have no hesitation in saying that the Supreme Court has endorsed the principles laid down by the decisions of the High Courts, as otherwise where there were two views on the matter, one view alone would not have been referred to. In R. A. Nos. 20 and 21 of 1959, a Bench of this court (to which one of us was a party) also took the same view. On these authorities, there can be little doubt that The Road Transport Corporation would be an individual within the meaning of section 3 of the Indian Income-tax Act.
On the question whether the Corporation is a local authority, though this point was raised, the learned Advocate-General did not seriously press it. In our view, the provisions of section 4(3) (iii) of the Income-tax Act itself by the use of the words 'within its own jurisdictional area' excludes a corporation such as this which has operational jurisdiction in the whole of the State, from being a local authority. The expression 'local authority' has not been defined in the Income-tax Act, but clause 31 of section 3 of the General Clauses Act, inter alia, defines it as an authority with the control of or management of a municipality or local fund. It is submitted that since the Government has declared the funds of the Corporation to be a local fund in its Notification G. O. Ms. No. 522 dated May 16, 1958, the Corporation is a local authority. As pointed out by the Income-tax Officer, the declaration of the Government is specifically for the purposes of free remittance facilities under the remittance facilities scheme of the Reserve Bank of India and not for all purposes. It is an advantage given to this Corporation, but that by itself does not in any view of the matter make it a local authority.
The main question which has now to be considered is, on the basis that the Corporation is an individual, is it immune from taxation either on the ground that it is State-owned or State-controlled attracting the immunity under article 289 of the constitution, or as the provisions of the Road Transport Corporations Act are repugnant to the Income-tax Act, to the extent of that repugnance, the Income-tax Act should be deemed to have been impliedly repealed and therefore inapplicable to this Corporation.
The argument of the learned Advocate-General in respect of the first point of the main question is that the State can carry on by itself or by a corporation owned or controlled by the State, trade or business, industry or service, whether to the exclusion, complete or partial, of the citizens or otherwise and, if it so carries on, it is immune from taxation under article 289 of the Constitution which exempts the property and income of a State from Union from taxes imposed by a State or any authority within the State, and that the Corporation is such a State-owned or State-controlled body and its income is therefore exempt. In support of this contention, he has referred us to several American cases beginning from Locus Classicus of Marshall C.J. in MCulloch v. State of Maryland and the statement of law in Corpus Juris Secundum. It may be stated that the American Constitution did not contain provisions similar to article 285 or 289, or like section 114 of the Australia Constitution Act or section 92 of the British North American Act. At an early stage in the history of the American Constitution, the question whether Congress can tax State property or income or State securities or the salary of a State judicial officer or the property or revenues of municipalities and conversely whether the State Government can tax the agents or instrumentalities by which the Federal Government performs its functions came up for consideration. In these cases it was recognized that under the Constitution there was reciprocal exemption of Federal instrumentalities from State interference and of State instrumentalities from Federal interference on the basis that the scheme of the Constitution being the establishment of separate quasi-sovereign Government, necessity requires that every power of each must be construed as limited and restricted so as not to impair the independence of the other. This principle necessarily implied a limitation which precludes a State from taxing the agencies whereby the Central Government performs its functions; for, otherwise it will be within the power of the States to cripple the operations of the national Government and similarly the national Government cannot tax the State instrumentalities, whether by taxation or regulative legislation by one Government over the operations of the other. Marshall C.J. expressed the view that the power to tax involves the power to destroy. He depressed the doctrine tersely thus : 'The Sovereignty of a State extends to everything which exists by its own authority, or is introduced by its permission; but does it extend to those means which are employed by Congress to carry into execution powers conferred on that body by the people of the U. S. A. We think it demonstrable that it does not.' The principle which these American authorities establish may, however, be stated only to see to what extent our Constitution has recognised this principle. In 84 Corpus Juris Secundum, page 499-7(a), this is how it has been summed up :
The property of public corporations and organisations functioning as governmental agencies and instrumentalities of the State is exempt under constitutional and statutory provisions exempting such property, or construed to have the effect, but property of a public corporation, in order to be exempt under such provisions, must be held by it in the exercise of its functions as a governmental agency, and not in its proprietary capacity, nor will the exempting provisions operate to exempt property held by government agency as trustee for private organisations of their affairs........... and a private corporation which does not function as a governmental agency is not entitled to the exemption, even though its business is managed by State agencies, acting under statutory authority.'
The principle of reciprocal immunity of State and Union property from taxation by the other has found recognition in the paramount instruments governing the Constitutions of Canada, Australia and India. While this is so, the specific extent to which that doctrine applies in the United States has not been recognised or accepted inasmuch as it is governed or limited by the ambit and scope of the provisions relating thereto in the Constitution. Speaking generally, the Privy Council has never accepted the doctrine as enunciated in the American decisions as applicable to the limitation of Federal and State powers described in either the British North America Act, 1867, or the Australia Constitution Act, 1900. In Bank of Toronto v. Lambe, on similar facts as those in MCulloch v. The State of Maryland, Lord Hobhouse described the principles upon which the Privy Council should construe the British North America Act thus :
'Their Lordships have to construe the express words of an Act of Parliament which makes an elaborate distribution of the whole field of legislative authority between two legislative bodies, and at the same time provides for the federated provinces a carefully balanced constitution, under which no one of the parts can pass laws for itself except under the control of the whole acting through the Governor-General. And the question they have to answer is whether the one body or the other has power to make a given law. If they find that on the due construction of the Act a legislative power falls within section 92, it would be quite wrong of them to deny its existence because by some possibility it may be abused, or may limit the range which otherwise would be open to the Dominion Parliament.'
The Privy Council has in every case looked at the particular facts and given judgment in accordance with what it conceived was the intention and meaning of the Acts. The Australian High Court, on the other hand, at one time did apply the American doctrine very closely, but there has been a swing from one side to the other and its decisions were in some cases at total variance with those of the Privy Council for this reason. In Webb v. Outrim cited by the learned Solicitor-General, the respondent, an officer of the Australian Commonwealth, resident in Victoria, and receiving his official salary in that State, was assessed in respect thereof for income-tax imposed by an Act of the Victorian Legislature. The Supreme Court had upheld the respondents objection to being assessed, but the Privy Council held that the Victorian Legislature had the competence to impose the tax. Meeting the assumption in the argument of Griffith C.J. of Australia in DEmoen v. Peddar, that the framers of the Australian constitution who were familiar with the two English speaking federations, viz., the Constitution of the United States and of the Canadian Dominion, intended that like provisions should receive like interpretation, and gave preference to the American principle. Their Lordships of the Privy Council observed at pages 90-91 as under :
'It is, indeed, an expansion of the canon of interpretation in question to consider the knowledge of those who framed the Constitution and their supposed preferences for this or that model which might have been in their minds. Their Lordships are not able to acquiesce in any such principle of interpretation. The Legislature must have had in their minds the constitution of the several States with respect to which the Act of Parliament which their Lordships are called upon to interpret was passed. The 114th section of the Constitution Act sufficiently shows that protection from interference on the part of the Federal power was not lost sight of. It is impossible to suppose that the question now in debate was left to be decided upon an implied prohibition when the power to enact laws upon any subject whatsoever was before the Legislature.'
The cardinal principle that has been followed in the Constitution Act enacted by Parliament in the Government of India Act and adopted by the Indian Constitution is the division of legislative powers between the States and the Union. The Union has power over List I of the Schedule VII, while the State is vested with power over List II. Apart from the two Lists, there is List III, the Concurrent List, which vests both Parliament as well as the legislature of the States with powers to legislate. If in exercise of these powers either one or the other makes a law, that law is supreme in that field. In determining whether the State or the Union impinges upon the legislative functions of the other, courts have had recourse to the principle of pith and substance of the legislation to determine as to whether the exercise of the power by the legislature falls properly within its ambit.
Once a law has been held to have been enacted in exercise of the powers conferred on the Union or the State that law cannot be assailed. In this case, the validity of the Income-tax Act as such has not been challenged but only its inconsistency with a later Act of the same legislature and the immunity from taxation of State property and income. The relevant provisions of the Constitution which deal with the mutual immunity of the Central and State Governments may now be examined. Article 19(6) as amended in 1951 and article 289 which are relevant for purposes of this case are as under :
'19. (1) All citizens have the right -
(a) to (f) .................................
(g) to practice any profession, or to carry on any occupation, trade or business.
(2) to (5) ..................................
(6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall effect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to, -
(i) the professional or technical qualifications necessary for practicing any profession or carrying on any occupation, trade or business, or
(ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise.
289. (1) The property and income of a State shall be exempt from Union taxation.
(2) 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.........
(3) 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.'
It is apparent from the articles, firstly, that the State can also by law carry on trade or business either by itself or by a corporation owned and controlled by the State, whether to the exclusion, complete or partial, of the citizens or otherwise. To the extent that the State is permitted to carry on trade and business, etc., to the exclusion of the citizen, his fundamental right is abridged. Secondly, the principle laid down in articles 285 and 289 is narrower than the doctrine of immunity of the instrumentalities as propounded in the Constitution of the United States inasmuch as these articles exempt only the property and not the functions or the instrumentalities of the Union. Further, under the Government of India Act, while section 155 which corresponds to article 289, exempts only lands and buildings, article 289 exempts any property and income of the State from Indian Union taxation which means that the movable property and income, which was not exempt under section 155 of the Government of India Act, now enjoy immunity subject to the authority of Parliament to make any law under clause (2) authorising the imposition of a tax to such extent as may be 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. Clause (2) is in the nature of a limitation of the State and a reservation in favour of the Union in that nothing in clause (1) shall prevent it from imposing or authorising the imposition of any tax. Clause (3) states that the business in the exercise of its ordinary functions, the income or profits arising therefrom are immune from taxation. It further postulates that if the State carries on a trade or business which is not incidental to the ordinary functions of the Government, it will not be immune from taxation. While it does not prevent the State from carrying on any trade or business unless sanctioned by an Act of Parliament, all that it means is that if Parliament by law declares any such trade or business to be incidental to the ordinary functions of Government, it shall not be liable to be taxed by the Union. Sinha C.J. in Kesheoprasad v. State of Madhya Pradesh explained the provisions of clauses (2) and (3) in these words :
'Clause (2) of article 289 of the Constitution contemplates that the State may engage in any trade or business. When it does so, the Union may impose or authorise the imposition of any tax touch extent as Parliament may by law provide. Clause (3) contemplates that any trade or business may be incidental to the ordinary functions of Government. When the State engages in any such trade or business unless sanctioned by an Act of Parliament. All that it means is that if Parliament by law declares any such trade or business to be incidental to the ordinary functions of Government, it shall not be liable to be taxed by the Union.'
It is therefore evident that unless the trade or business is incidental to the ordinary functions of Government or has been declared to be so by Parliament, the income will not escape tax. The amendment in article 19(6) does not in any way determine the question whether any business or trade carried on by the State is in exercise of its ordinary functions as it was necessitated to clear doubts as to whether the State could carry on trade or business.
In the instant case the first question that would arise for determination is whether the State under the Corporations Act is said to carry on trade or business of road transport and whether the income of the Corporation is the income of the State. Learned Advocate-General by a reference to the several provisions of the Road Transport Corporations Act seeks to contend that the Corporation is an instrumentality of the Government and the income therefore is the income of the State. Apart from sections 3 and 4 which deal with the establishment of a Road Transport Corporation, appointment of its chairman and nominations of representatives by the State and Central Governments and representatives of the shareholders where the capital is raised by the issue of shares, appointment of chief executive officer and the chief accountant and the advisory councils by the State Government, power of the Corporation to borrow with the consent of the State Government and the provision for depreciation and the computation of net profits. The fact that the Government is authorised to appoint the chief executive officer and the chief accountant does not by itself make the Corporation a State owned one, nor does its contribution to the capital give it that character. Section 23(1) provides for the contribution of the capital by the Central and State Governments in such proportion as may be agreed to between the two Governments on such terms and conditions as are not inconsistent with the provisions of the Act and where the capital of the Corporation is not provided by the State or the Central Government, under sub-section (2) of section 23, the Corporation may raise by the issue of shares such capital as may be authorised by the State Government. Sub-sections (3) to (6) prescribe the manner in which the shares are to the divided and allotted and the number which shall be subscribed by the State and Central Governments and other parties, including persons whose undertakings have been acquired by the Corporation. Section 24 gives power to raise additional capital by the issue of new shares if the capital is not sufficient. Under section 25 the State Government guarantees the payment of the principal and the payment of the annual dividend at such minimum rate as may be fixed by the State Government by notification published in the Official Gazette at the time of issuing the shares. The Corporation has the power to borrow under section 26 and under section 27 every Corporation shall have its own fund and all receipts and all payments shall be made thereto. It is further provided by that section that, except as otherwise directed by the State Government, all moneys belonging to that fund shall be deposited in the Reserve Bank of India or with the agents of the Reserve Bank of India or invested in such securities as may be approved by the State Government. Section 28 provides for payment of interest on the capital contributed by the State and the Central Governments or, where the capital comprises of shares, payment of dividend shall be deemed to be part of the expenditure. Section 29 deals with provisions for depreciation and reserve funds and section 30 concerns with the disposal of the net profits.
Inasmuch as a great deal of emphasis had been laid upon sections 28, 29 and 30, it may be profitable to read those sections :
'28. Payment of interest and dividend. - (1) Where the capital of a Corporation is provided by the Central Government and the State Government, under sub-section (1) of section 23, the Corporation shall pay interest on such capital at such rate as may, from time to time, be fixed by the State Government in consultation with the Central Government and such interest shall be deemed to be a part of the expenditure of the Corporation.
(2) Where the Corporation raises its capital by issue of shares, it shall pay dividend on such shares at such rate as may, from time to time, be fixed by the Corporation, subject to any general limitations which may have been imposed by the State Government in consultation with the Central Government, and such dividend shall be deemed to be a part of the expenditure of the Corporations.
29. Provision for depreciation and reserve and other funds. - (1) A Corporation shall make such provisions for depreciation and for reserve and other funds as the State Government may, from time to time, direct.
(2) The management of the said funds, the sums to be carried from time to time to the credit thereof and the application of the moneys comprised therein shall be determined by the Corporation :
Provided that no fund shall be utilised for any purpose other than that for which it was created without the previous approval of the State Government.
30. Disposal of net profits. - After making provision for payment of interest and dividend under section 28 and for depreciation, reserve and other funds under section 29, a Corporation may utilise such percentage of its net annual profits as may be specified in this behalf by the State Government for the provision of amenities to the passengers using the road transport services, welfare of labour employed by the Corporation and for such other purposes as may be prescribed with the previous approval of the Central Government, and out of the balance such amount as may, with the previous approval of the State Government and the Central Government, be specified in this behalf by the Corporation and the remainder, if any, shall be made over to the State Government for the purpose of road development.'
The aforesaid provisions do not, to our mind, contemplate the creation of a Corporation which is entirely State-owned. It is not necessary for the State or the Central Government to contributtee any capital at all. The capital can comprise of shares issued to the public entirely or partly by Central Government or the State Government. When the Government notifies the formation of a Corporation under the Road Transport Corporation Act, no question of contribution of capital arises at that stage. It is only when the Corporation is brought into existence that the Central and the State Government can decide how the capital or the manner in which capital is contributed that determines the character of the Corporation. If that be so, the status of the Corporation will be changing from time to time according to the manner of the capital contribution. That, we think, is not the criterion that will determine the status of the Corporation. The Corporation under the statute is a body corporate and is an independent legal entity apart from the Government. It is not necessarily owned by the Government though the Government may contribute its capital. It can sue and be sued in its name. It can borrow in its name and, under section 31, it has power to spend such sums as it thinks fit on objects authorised under the Act. It has its own budget though the State is given power to say what proportion or percentage should be set apart for depreciation, reserve and other funds, does not take it out of the category of assessees carrying on business, profession or vocation taxed under section 10 of the Income-tax Act in respect of profits or gains arising out of the trade or business carried on by it. In our view, the supervision of the Government by appointing a chairman and chief officers or by sanctioning the budget or having the accounts audited or directing the provision for depreciation and other funds does not make it a State-owned Corporation nor can it be said that the income belongs to the State. There are many limited companies in which the Government have a large share-holding, sometimes as much as 51%. The articles of association of such companies provide for nomination by the Government, of director, who could virtually control the company. None the less, it has never been and cannot, in our view, be suggested that that company is a State-owned company or that the income of it is not subjected to income-tax. No doubt, under section 68A of the Motor Victuals Act, which has been added for the purpose of nationalisation of road transport, 'State transport undertaking' has been defined to mean : (i) undertaking providing road transport services, where such undertaking is carried on by the Central Government or a State Government; (ii) any Road Transport Corporations Act, 1950; (iii) the Delhi Road Transport Authority established under section 3 of the Delhi Road Transport Authority Act, 1950, and (iv) any Municipality or any Corporation or company owned or controlled by the State Government. If the Road Transport Corporation established under section 3 of the Road Transport Corporations Act, 1950, was a Corporation owned or controlled by the State Government, there was no necessity to categorise it separately under section 68A(b) (ii) as that has been already provided for in section 68A(b) (iv). The purpose of Chapter IV-A in only to enable the State to provide for an efficient, adequate, economical and properly co-ordinated road transport service to be operated by the State transport undertaking to the exclusion, complete or partial, of other persons. We are clearly of the view that the Corporation is not a State-owned Corporation nor is the Corporation carrying on business on behalf of the Government. In this view of the matter, it is unnecessary to consider the further question whether the business of the Road Transport Corporation is incidental to the ordinary functions of the Government.
Since the Corporation is not a State-owned Corporation nor is the business of road transport carried on by or on behalf of the Government, the provision of the Income-tax Act would be applicable; but it is contended that since there is a conflict between the provision of the Income-tax Act and the Road Transport Corporations Act, the provisions of the Road Transport Corporations Act should alone prevail. We are unable to accept this contention as sound, firstly, because the doctrine of repugnancy is one which arises in relation to the law made by two legislative authorities in exercise of the powers vested in them by the paramount instrument. It is in such circumstances that the courts are called upon to determine whether the exercise of the power by the legislative authority does not impinge or transgress upon the field of the other. If the enactments in question are made by the same legislature, then different considerations will prevail, viz., that there must be an attempt to harmonize both the Acts inasmuch as it cannot be postulated that the legislature intended to make laws which are in conflict with one another and if they cannot be harmonious the canons of interpretation establish that the later Act would prevail. Bhagwati J. in Tika Ramji v. The State of Uttar Pradesh observed, at page 641, with respect to repugnancy, as follows :
'Repugnancy falls to be considered when the law made by Parliament and the law made by the state Legislature occupy the same field because, if both these pieces of legislation deal with separate and distinct matters though of a cognate and allied character, repugnancy does not arise. So far as our Constitution is concerned, repugnancy is dealt with in article 254. ..... We are concerned here with the repugnancy, if any, arising by reason of both Parliament and the State Legislature having operated in the same field in respect of a matter enumerated in the Concurrent List...'
In a recent case of this court in W. P. No. 337/59, the conflict between the law made by the State Legislature and Parliament came up for consideration and the argument which was pressed upon in the case was that there is inconsistency between the laws made by the legislature of the Hyderabad State and the other laws made by Parliament and that former should prevail by reason of article 254. It was observed :
'In order that any state law should be governed by article 254, there should be incongruity between it and the laws made by Parliament. It is true that for the applicability of article 254 of the Constitution, it is not necessary that there should be any direct conflict between the terms of the State legislation and those of Parliament. But the parliamentary law should be a complete and exhaustive code in order to evict provincial legislation from the field. Parliament should disclosed its intention, directly or impliedly, that its enactment should be complete and exclusive law governing a particular matter.'
As we have already pointed out, there is no question of any repugnancy in the sense discussed above, inasmuch as both the laws, viz., the Income-tax Act and the Road Transport Corporations Act, are both Central laws. There is here no conflict between the enactment made by Parliament and the enactment made by the State Legislature. On the other question, viz., whether the provisions of the Income-tax Act, we are clearly of the view that no such conflict, in fact, arises because both the Acts deal with different matters. It is true that certain provisions of the Road Transport Corporations Act relating to depreciation, computation of net profits, etc., are not the same as those in the Income-tax Act; but that Act is concerned only with the ascertainment of the profits for the purposes of taxation. The Income-tax Act is an act to tax income, profits and gains and if the legislature intended it, the tax can be levied at such rate or rates as may be prescribed without any deductions. Parliament, however, has laid down certain provisions for deductions and allowances from profits to arrive at the taxable profits. The basis of these deductions and allowances are, if need be, varied or changed from year to year under the Finance Acts to suit the exigencies of revenue. The Income-tax Act, therefore, in unconcerned with the special requirements of the statutory undertaking or the motives which impel an assessee to make allowances and deductions from the gross profits before ascertainment of net profits. It the two statutes are at variance, it cannot be said that there is a conflict and that the later provision should overrule the earlier provision. In our view, the provisions of the Income-tax Act and the Road Transport Corporation act can stand side by side and can be harmonized. The Income-tax Act is not concerned with the destination of the profits or with the manner in which the profits are computed by the assessee. The learned Solicitor-General has given an apt illustration of this principle by reference to the provisions of the Indian Companies Act applicable to private limited companies. In the Income-tax Act, under section 23A, the Income-tax Officer has the power to pass an order to pass an order deeming entire profits whether declared, and, on that basis, assess the private limited company to income-tax. It is of no avail to say that the Companies Act or the memorandum or the articles of association of the company has provided for specific deductions in respect of depreciation, buildings, reserve fund and other expenditure which was permissible under the Act or the constitution of the company. It may be a sound policy to build up reserves or to pay to the employees bonuses, dourness allowances or to provide other amenities, but that is no concern of the Income-tax Act. All that the Income-tax Act is concerned with the provisions of that Act or the provisions of the Finance Act passed each year amending the provisions relating to such matters. In this view, the provisions of sections 28 and 29 relating to the payment of interest and dividend and provision for depreciation, reserve and other funds before computing net profits do not really affect the provisions of the Income-tax Act. Both these provisions can exist side by side.
It is interesting to note that the rules made by the Government in exercise of the powers vested in it under section 44 of the Road Transport Corporations Act show that the levy of income-tax contemplated in computing net revenue accounts. Rule 29(e) provided that the Corporation should show in computing net revenue accounts the interest paid on capital and loans, income-tax, etc., and the appropriation of the net revenue, after meeting the charges, to such of the funds as are not provided for under 'Working Expenses'. By an amendment to Grant 6, dated June 21, 1960, taking effect from April 1, 1960, under the heading 'Sanction to expenditure under the grants' it is provided that the income-tax if leviable should be excluded. In so far as this grant is concerned, it is stated that because the payment was being made, the rule has been changed; but even so under rule 29, the deduction of income-tax in computing the net revenue account had already been provided. Apart from that, it is stated that, even when the Road Transport Corporation was a Government department, it was paying 23 taxes such as the property tax, municipal tax, barbardari tax, vehicle tax registration fees for inspections, passenger tax, sales-tax, excise duty, etc., all of which were levied under the appropriate Acts levying those taxes. In the view we have taken on both the questions, general as well as the questions of conflict or repugnancy between the Income-tax Act and the Road Transport Corporations Act, we hold that the income of the Road Transport corporations is liable under the Income-tax Act.
On the question whether the Income-tax Officer was justified in refusing to deduct interest payable to the Government on the capital, the learned Solicitor-General fairly conceded that he has not got the necessary material to say that that should be allowed or not. His contention was that, since the interest was payable on the capital invested by the State in much the same way as payment dividend on the shares held by the State, that cannot be treated as an expenditure under the Income-tax Act. Since the learned Advocate-General also has not seriously pressed for its determination at this stage, this matter may be left to the income-tax appellate authorities to determine on the facts and materials on record in accordance with law.
In the result, the petitions are dismissed with costs. Advocates fee Rs. 250 in each.