1. These two sets of appeals have been filed by the revenue raising mainly common grounds that the Commissioner (Appeals), Bangalore, in his order dated 7-3-1981 erred in holding that the status of these two assessees is that of local authority and, consequently, that they are eligible for exemption under Section 10(20) of the Income-tax Act, 1961 ('the Act'). Though the facts of the cases are slightly different from each other, it is convenient for the disposal of these appeals to pass a common order since the learned representatives of both the assessees combined their efforts in resisting the department's stand in the matter.
2. We would first consider the relevant facts in the case of Communidade de Mapusa as brought out by Shri Sathe, the learned representative of the department. For the assessment year 1974-75, the assessee filed returns in the status of an AOP as also in the status of local authority. In the statement accompanying the returns, net surplus as per income and expenditure account was shown at Rs. 6,45,860 from which the assessee sought deduction of Rs. 61,460 representing income from agriculture and Rs. 5,74,605 in respect of compensation from transfer of agricultural land. The net income disclosed was Rs. 9,795.
The income and expenditure account accompanying the return shows that the receipts of the assessee were from lease rent, from paddy fields, cashew trees, lease rent from leased plots, some miscellaneous receipts, rent from house and com-munidade hall, bank interest and compensation received from the Government on acquisition of agricultural lands. For the assessment year 1976-77, the net surplus was shown at Rs. 1,07,126 out of which deduction was sought in respect of agricultural income of Rs. 24,071 and for compensation received on transfer of agricultural lands of Rs. 83,100. For the assessment year 1977-78, the net surplus was Rs. 26,432 from which deduction for agricultural income of Rs. 40,550 and compensation from transfer of agricultural land of Rs. 2,08,000 was also claimed. For these two years the assessee had imilarly filed the returns both in the status of an AOP and that of local authority. The facts of the assessment year 1975-76 do not arise before us for the reasons which we shall presently point out.
3. Before the ITO, it was claimed that the assessee communidade is a statutory body as it is a local authority. This was because the functions of the communidade are controlled by the State Government and, therefore, exempted under Article 289 of the Constitution.
Reliance was placed on the Code of Communidade Legislative Diploma No.2070 of 15-4-1961. The ITO did not agree with this contention. He held that the assessee could not be considered to be a statutory body created for the purposes of planning, development or improvement of villages or towns which is the object of local authority. It may be a fact that the assessee might be taking interest in planning and developing its own properties but such interest was limited only to the properties owned by the communidade which has come out of pooling the properties from the individual members forming the present communidade.
The ITO was of the opinion that the individual members have come together to form an association which is called communidade. It was only for the purpose of uniformity of approach that the Government had enacted certain laws and rules just as in the case of societies or companies. Just as societies or companies are not treated as local authorities, the present communidade also is not a local authority but an independent group for the purposes of income and expenditure. The ITO also noted that there is a separate Mapusa Municipality for town planning and development which has been considered as local authority where the present assessee is situated. According to the ITO, the most important point to be noted was that no person other than the members of communidade are entitled to the benefits of income or receipts of the communidade and, therefore, it is not an entity which can be considered as local authority. Thus observing, the ITO proceeded to consider the income of the assessee from different sources.
4. In respect of the compensation of Rs. 5,74,605 received by the assessee on acquisition of lands, it was claimed by the assessee that the lands in question being agricultural lands, capital gains could not be charged. The ITO for the detailed reasons given held that there was no evidence to show that the assessee had cultivated the lands under acquisition for the agricultural purposes. He, therefore, proceeded to compute capital gain from the compensation received. The ITO also brought to tax income from other sources and income from house property. For the assessment years 1976-77 and 1977-78 the assessment proceeded; on identical basis. All the three assessments were subject-matter of the directions of the IAC under Section 144B of the Act. The assessee filed appeals against these three assessments before the Commissioner (Appeals). In fact the assessment for the assessment year 1975-76 also was made at the same time but the additions being smaller, the appeal was filed before the AAC, Panaji.
5. The Commissioner (Appeals) decided the appeals for the assessment years 1974-75, 1976-77 and 1977-78 by his order dated 7-3-1981 which is the subject-matter of appeal before us. In this appeal, the Commissioner (Appeals) accepted the assessee's claim that its proper status was that of local authority and that exemption under Section 10(20) was available in respect of income from capital gain, income from house property and income from other sources, etc. Thus, the Commissioner (Appeals) exempted the entire income of the assessee for these three years. We would presently note the various reasons given by the Commissioner (Appeals) for coming to the above conclusion. The appeal for the assessment year 1975-76 was decided by the AAC on 31-3-1982 when the decision of the Commissioner (Appeals) was already available to him. The AAC did not agree with the findings of the Commissioner (Appeals). According to him, every communidade including the assessee composed of jonoeiros, shareholders, etc. He further found that the income of the communidade was distributed among the various jonoeiros and shareholders. The participation by the various members in the profits and loss of the communidade distinguished it from gram panchayat or other local bodies whose funds are expended for the public causes for which such local bodies are established. The AAC observed that he had not come across any local bodies whose surplus income was distributed in the members as it was done by the communidades in Goa.
So, prima facie, the AAC felt that these bodies cannot be considered to be local authorities and exempt under Article 289. Section 10(20) also did not apply. The AAC, however, further observed that each communidade seems to have a private law which constitutes its own bye-laws.
According to him, unless they were referred to, it would not be possible to determine as to how the part of the annual income was distributed by the present assessee or whether any such income was distributed at all. The AAC, therefore, set aside the assessment for fresh scrutiny on examination of the material including private law of the communidade under appeal. The learned representative of the department relied on the reasoning given by the AAC for the assessment year 1975-76 but it is found that though the order of the AAC was passed on 31-3-1982, fresh assessment as per the directions of the AAC did not see the light of the day. The learned representative was not able to produce before us any such fresh assessment orders. We asked the departmental representative whether he wants to rely on any private law as indicated by the AAC. The learned representative of the department expressed his inability to produce any such private law and was content to rest his case on the basis of the Code of Communidade.
The learned representatives of both the assessees also had no objection to proceed with the appeal without reference to the private laws of the respective communidade. We, therefore, proceed to examine the rival contentions on the basis of the Code of Communidade which lays down the framework of all the communidades in Goa.
6. Before proceeding to consider the various reasons which the Commissioner (Appeals) has considered in his order, certain historical aspects of the communidades which were not seriously disputed by both the parties may be stated. They have been brought out broadly by the Commissioner (Appeals) in his order. These historical aspects can be shortly summed up as under.
7. It appears that some centuries ago before Goa came successively under the domination of Hindu rulers of Kadamba dynasty, Muslim rulers like Malik Hussain and lastly the Portuguese, a large number of families from across the Western Ghats abandoning their original homestead on account of wars, epidemics or famine came over and settled in Goa. Unlike the development and settlement which took place in other parts of the country, the peculiarity of this settlement lies on the fact that these various families who were known at that time as Gaocares reclaimed and brought under cultivation marshy and other lands lying waste in villages with the assistance of their dependants and servants whom they had brought with them. They cultivated the lands collectively and divided the produce among themselves. It is not possible to know exactly whether originally separate families of Gaocares held land as common property forming a family communidade and later these family communidades federated into village communidades or whether village communidades preceded the family communidades in Goa.
Historically it is also true that these Gaocares followed a community system and governed their affairs in common and also evolved rules for division of surplus income among the registered heirs of the deceased members. In course of time, new families migrated into Goa. These new families were allowed to cultivate the lands which were not already brought under the plough and received from them 'foro-de-Cotubana'.
Some of the new communidades were engaged to work as direct cultivators called Culcharins. Due to subsequent developments in which there were continuous wars between Hindu and Muslim invaders, Gaocares ran into debts and to meet their liabilities issued shares. The shares gave the holders a right to participate in the income of the communidades but not to intervene in its administration. It appears that after the Portuguese established themselves in Goa, they brought the institute of communidades under their administrative tutelage. But the different communidades had different customs and systems of working which were subsequently codified in a formal code in April 1961 which came to be known as the Code of Communidade, 1961. This Code of Com-munidade was made by decree of the Governor General being Legislative Diploma No.2070 dated 15-4-1961. It must be stated that this Code of Communidade was framed before liberation of Goa and even after liberation, the same Code continued to be operative with the difference that the communidades are under the administrative tutelage of the Government with the highest powers exercised by Lt. Governor of Goa. There are more than 225 such communidades in Goa and it is only these two communidades which have raised the dispute regarding their status. It is not known whether any other communidades have been assessed on similar basis. But the fact remains that the point involved in these appeals is unique one and will affect large number of similar institutions in Goa. It is for this reason that we have given anxious thought to the various arguments raised before us by both the parties.
With this background, we would proceed to note down the reasons on the basis of which the Commissioner (Appeals) held the status of the present assessee as that of local authority.
8. It is seen from the order of the Commissioner (Appeals) that he has mostly considered the historical background of the communidades in Goa as have been brought out in the report of the Goa Land Reforms Commission, Chapter IV. After noting these historical aspects which have been summarised by us in paragraph 7 above, the Commissioner (Appeals) proceeded to observe that the Gaocares governed themselves by certain functions dedicated by the ideals of ancient institutions and tempered in the rules of natural justice. Referring to sub-paragraph 6 of the report on page 32, the Commissioner (Appeals) observed that the Code of Communidade made the communidades the absolute owners of the property and they were absolved from the payment of ground rent to the Government with effect from 1961. According to him, the entire land belonged to the whole village and not to any individual. The individuals had only the rights to income being the persons who participated in the village economy. As per the existing law, the communidades could seek the appropriation for public use, the land that they needed for education and protection. From the inception, the communidade was corporate entity and had the corporate status owning the property. It was intimately connected with economic, cultural, social and judicial aspects of the respective villages. Each village had one communidade and this position continues even today as seen from the report. The communidades are under administrative tutelage of the State. The Commissioner (Appeals) then proceeded to note down the powers of the Government as mentioned in article 153 of Chapter IV of the Code of Communidade. Then he referred to Article 30 of the Code of Communidade (the Code) which dealt with the powers of the communidades.
As per these powers a communidade could elect for a period of three years, ordinary attorney and his substitute in the manner established in the Code, it could appoint special attorneys when necessary or dispense with them according to circumstances and interest of the communidade. It could decide over the works and extraordinary expenses to be made. It could decide over the creation and extension of the health centre, extension over the period of duration and maintenance of the same ; it could also decide over the introduction of sweet and saline waters in the 'Casenas'. As per Article 31 of the Code, the decision of the communidade could be implemented only after the sanction of the Governor General (Now Lt. Governor). The Commissioner (Appeals) then noted the present position of the communidades as given in the Rane Commission Report with particular emphasis on the following observations: In its origin the communidade was a socio-economic entity composed of the male descendants of the original settlors in the village or those who were inducted into it later. It had a separate legal personality and owned collectively the lands brought under the plough. The decarers are male descendants of the original settlor and had only an unalienable right to the income of the communidade but had no proprietary right in the land of the communidade. The lands were co-operatively managed and the net profits of agriculture were distributed among the male descendants of the original settlors (Gaocares or jonodires) and at a later date among the Culcharine and shareholders. In some villages the widows and orphans of Gaocares and Culcharine were also entitled to a share. The communidade was an autonomous body and Government did not intervene in its affairs. It provided all civic amenities of the village, was responsible for public education and welfare and for the maintenance of essential common services. In its pristine form it was the embodiment of Mahatma Gandhi's conception of Gram Raj." Thus, after going through the various aspects of the communidades brought out in Rane Commission Report which was submitted in 1977, the Commissioner (Appeals) observed that after going through all these, the only unescapable conclusion was that the system of communidade which is still prevalent in Goa has attributes of a local authority having its origin even before Portuguese came to Goa only for the purpose of managing village economy, and it had the sanction of the Government.
The Commissioner (Appeals) thereafter referred to the decision of the Supreme Court in the case of N.V. Shanmugham & Co. v. CIT  81 ITR 310 and held that there was no element of profit-motive in the organization of communidade and, therefore, it could not be assessed as an APO. According to the Commissioner (Appeals), even the present position of the communidade made it clear that there is no profit-motive. Referring to the observation of the ITO that there was a separate municipality at Mapusa and, therefore, the present assessee could not be considered as local authority, the Commissioner (Appeals) observed that whereas the communidades were looking after the agricultural economy of the village, the municipalities mainly looked after the civic amenities in the urban areas. Thus, the Commissioner (Appeals) found that the assessee communidade clearly fell in the category of local authority as defined in Section 3(31) of the General Clauses Act, 1897. Since Section 10(20) of the 1961 Act exempts income of local authorities arising from capital gains, house property and from other sources, etc., the income assessed under these heads for these three years under appeal was held to be exempt. The Commissioner (Appeals), therefore, deleted the additions made by the ITO under all these heads. In view of his finding that the exemption under Section 10(20) applied, he did not deal with the other grounds raised by the assessee before him particularly those relating to the exemption claimed by the assessee in respect of the capital gains on the ground that the lands were agricultural lands. There were also other grounds challenging levy of interest under Section 139(8) and under Section 217 of the Act. These grounds were not examined by the Commissioner (Appeals) in view of his finding that the income was exempt under Section 10(20).
9. The above decision of the Commissioner (Appeals) has been challenged before us by the department in the three appeals. Before proceeding to make his submissions, Shri Sathe, the learned representative of the department, took us through important provisions of the Code. For the proper appreciation of the rival contentions, it is necessary for us to note down certain important provisions of the said Code. The respondents have been good enough to provide us with the English translation of the original Code. Neither side has disputed the correctness of the translation. We, therefore, have proceeded broadly on the basis that the translation, which though some times made a bit clumsily, brings out the essential substance of the original Code. The first few pages of the Code give in brief the reasons of the present codification. The learned representative of the department relied on the following observation made therein: The ground rents that the communidades used to pay to the revenue office have been abolished. Historical truth, focussed by Cunha Revera, was thereby restored by recognising that the land belonging to the communidades belong to them as perfect (sic) property and the ground rents not necessarily correspond to their division into produce and property, the former belonging to the communidades and later to the State." We now proceed to note down the important clauses that were brought to our notice. Article 3 of the Code provides that each communidade is composed of (a) jonoeiros, (b) shareholders, (c) jonoeiros and shareholders, (d) shares. The part of the annual income to be claimed by the jonoeiro is called jono and that of the shareholder is called dividends. In case the disentail of the communidades has taken place followed by the distribution of their lands or estate to the jonoeiros or shareholders, 'the owners of such land or estate shall substitute in everything, the same jonoeiros or shareholders, transferring to these all the duties that befell on the respective communidades'. Article 4 of the Code provides that only the jonoeiros and the shareholders can participate in the profits and losses of communidades and only they are liable to rights and duties that are guaranteed and imposed to the components of communidade by this Code. [Emphasis supplied] For the purpose of this article, the orphans of the jonoeiros, their widows and maid-daughters who have right to draw the income of jonos or life pension according to the private law of the respective com-munidades are considered jonoeiros. Article 5 of the Code provides that the communidades are under administrative tutelage of the State, according to the rules contained in the Code and their lands may be given in long lease or transfer in the form established in the Code. [Emphasis supplied] From the year 1962, the communidades shall not have to pay ground rent to the 'Fazenda' (revenue office). Article 8 of the Code provides that the communidades may seek, according to the existing law, the expropriation for public utility of the land that they need for irrigation and protection. Article 9 of the Code prohibits the communidades from filing any civil suit without the consent of the Administrative Tribunal. Article 10 of the Code states that the communidades shall be represented in courts of law or other public offices by ordinary attorneys effective or substitute on duty or by special attorneys. Article 11 of the Code provides that the personal summons of the communidades shall be made on the person of the respective administrator or the person in charge of the administration.
Article 13 of the Code provides that the income by way of jonos on the components of the communidades and the right to future income may only cease from the dates of the sale to the respective communidades. Under Article 16 of the Code, all the services hereditarily rendered by certain families and paid out of the produce from certain lands are abolished. Under Article 18 of the Code, the communidades may create health centres after consultation with the directorate of health service and the application shall be invited by the directorate of civil administration in accordance with the law in force. Under Article 19 of the Code, all the fines established in the Code and those mentioned in the clauses of contract or auction will be recovered according to the terms contained in title V when not paid voluntarily and shall be credited to pensioner's savings bank. Under Article 20 of the Code, the components of the communidades are the following persons: (1) Those who can claim the jonos either per capita or per stripes and their male descendants through male line.
(2) Those who possess in the communidade registered shares in their own name.
(3) Those who can claim a part of the net income of the communidade, whatever the nature and the name of the claim since it is registered in respective book of communidade on application addressed to the administrator with the document of transaction attached. Under Article 21 of the Code, the right to jono of the components to which item (1) of Article 20 refers is personal, intransmissible and imprescriptible and it takes place only after registration, except when registration takes place after the judgment of the appeal.
Under Article 22 of the Code, the rights given to the shareholders under item (2) of Article 20 start with the registration of respective shares. Article 23 of the Code states that the jonos to be earned in future are not transferable in any form but under Article 24 of the Code the shares of the communidade are transmissible and transferable in accordance with the terms contained in the Code. Article 26 of the Code lists out the rights of the components of the communidade, that is to say, the members of the communidade. The rights include the right to intercede, discuss and vote in the meeting of communidade, right to be elected or appointed to any post in the communidade, to make up for the deficit, to urge the president of the administration board to convene the communidade with necessary justification, to urge to the president to hold an extraordinary meeting of the board with the mention of the subject to be discussed and finally to denounce the deviation of the fund of communidade, usurpation of its lands or other illegal acts as well as any irregular procedure or mistake of the employees of the communidade. Article 28 of the Code refers to persons who cannot take part in the decisions of the communidade.
Amongst them are minors or insolvents, debtors of the communidade, those who have instituted suits against the communidade (only as regards the matter pertaining to the suit), those who have been deprived of the right to vote by judgment against which no appeal has been filed and foreigners. Similarly under Article 29 of the Code, some more categories of persons are mentioned who cannot be elected or appointed to the posts existing in the communidade. Here also the same categories as under Article 28 appear. Article 30 specifies the different powers enjoyed by the communidade. These have been referred to by the Commissioner (Appeals). As mentioned earlier, Article 32 of the Code provides that for creation of expenses of prominent nature or of any other extraordinary expenses for purposes other than the benefit of the communidade, the matter can be voted only by the number of components (members) who represent at least two third of the capital invested. [Emphasis supplied] Article 114 of the Code prescribes that in the normal season of payment of jonos and dividends the key keepers usually calculate the amount that is necessary for such payments by drawing the average of the payments made in the same season during the last three years. Articles 118 and 119 of the Code refer to the appointment of the administrators of communidade. Article 153 is devoted to the powers of the Governor General. Chapter V containing Article 154 of the Code refers to the powers of administrative tribunal. Articles 182, 183, 184 and 185 of the Code mainly deal with the registration of jonoeiros. This has prescribed inscription of jonoeiros which is to be made in the month of May each year. The purpose of these provisions appear to be to ascertain in each year the persons who can be recognised as jonoeiros and in case of death, the legal heirs. Article 193 of the Code is regarding admission of jonoeiros. Unless the jonoeiro is admitted, he cannot claim jonos.
Articles 199 to 201 of the Code deal with inscription of shareholders. Article 410 of the Code states that the shares are transferable and the form of transfer is the 'portence' (belonging to) written at the back of the respective shares. In Table 8 of the Schedule of the Code, the rules relating to the distribution of jono as applicable to the different communidades, including these two Mapusa and Nerul, the present assessees are elaborated.
10. After taking us through the Code of Communidade, the learned representative of the department stated that there are three main points for consideration: (1) Whether the assessee is a State and enjoys exemption under Article 289? Here at this stage Shri Inamdar, the learned advocate for the assessee, intervened and stated that it is not the case of the assessees that they can claim exemption under Article 289. Thus, this, aspect of the matter, though submitted for our consideration by the learned representative of the department, is not adjudicated upon in view of the concession given by the representative of the respondents.
(2) Whether the assessee "can be considered to be a local authority as defined under the General Clauses Act (3) If the assessee cannot be assessed as local authority, whether it could be assessed as an AOP Alternatively, it was submitted that if the status of an AOP cannot be upheld, the status of BOI could be substituted and such a claim can be made for the first time by the department before the Tribunal.
11. Taking up the main contention of the department that the present assessees cannot be considered to be local authorities, the learned departmental representative firstly relied on the order of the AAC for the assessment year 1975-76 wherein the AAC observed that in view of the peculiar nature of the communidade under which every member was entitled to a specific share in the surplus, the communidade could not be considered as local authority. Referring to the definition of local authority as contained in Section 3(31), Shri Sathe, the learned departmental representative, then argued that the assessee can neither be considered to be an authority and less so, a local authority like municipal committees, district board, etc. According to him, there is a large difference between a local authority like gram panchayat or municipal committee and the present assessees. He compared the present assessees with a limited company or a village co-operative society. He stated that historically, the original settlors or Gaocares established themselves into the various communidades in respect of villages and collectively brought under plough the land they undertook to cultivate.
The collective management of vast areas brought under cultivation necessarily required them to provide common facilities like preparing roads, making available the irrigation facilities and generally to look after the common welfare of the members composing the different communities. This history clearly shows that their common cultivation is more in the nature of agricultural co-operative societies. Just as a cooperative society owns a land, distributes it or allots it to various members for cultivation and earns income thereby which is distributed by way of dividend, similarly, in the case of communidades, the land absolutely belongs to the communidades and the produce that is collectively grown is distributed amongst the jonoeiros. But as the time has passed, most of the lands have been leased out and instead of direct cultivation, the communidades are earning income from lease rent which has now remained its main source of income. This peculiar development of the communidade has to be contrasted with development that took place in other parts of the country which successively were under the rulership of different native rulers or under the British Government. Under the system prevailing in other parts of the country, though ideally the Government owns all the land, for practical purposes, every land owner owns his piece of land. The municipal body or the gram panchayat does not own the respective lands owned by the private farmers. The function of municipal body or a gram panchayat is to provide common services like roads, drainage, water supply, irrigation to the various owners and for maintenance of this common service, the representative of the different owners elect a body which manages it or supervises the maintenance of the common services. The representatives manage the fund which is popularly known as local fund, for the benefit of the community. They do not have any personal interest in it whereas in the present type of communidades all the acts that the communidades do are incidental to the ownership of vast lands.
The learned representative of the department then stated that there are ownerships created by the well known companies, e.g., by Tata Iron & Steel Co. in Jamshedpur or Walchandnagar Industry in Walchand. These towns are mainly composed of the employees of the company. In a large area owned by a co-operative society, roads might be constructed or drainage system might be provided but merely because such services are given like any other municipality, it cannot be stated that the co-operative societies become local authorities. The entire composition of the communidade and its code has to be seen as a machinery for maintaining its own property. There might be superficial similarities in the sense that the communidades might be maintaining public services or establishing health centres or for the proper functioning of its rules sometimes might be imposing fines also. In this behalf the learned representative of the department took us through some extracts from the book Goa Garcari--the Old Village Association, Vol. II by Rui Gomes Pereira. He particularly referred to us the following passage: "The communities although exercising municipal functions were never municipal bodies since they always cater only to the private interests of their members and never to public interest, which is an essential feature of a municipal corporation. It is erroneously believed that the communities also had judicial jurisdiction and according to the popular tradition, some sacred places which are found to this day in almost all the villages might have been meeting centres of the elders for exercising the above functions. There is no other evidence in this regard." The learned representative alsol referred to us the other Chapters in the said book. He particularly referred to the Chapters dealing with the estate of the communidade, the Chapter dealing with the possession of the land and the Chapter dealing with division of the surplus amongst the Gaocares and shareholders.
12. Referring to the definition of local authority, the learned representatives of the department relying on the decision of the Calcutta High Court in the case of Calcutta State Transport Corporation v. CIT  108 ITR 922 submitted that the present assessee before us can by no stretch of imagination be considered to be an authority.
According to him, the word 'authority' is a body having a legal right to command and be obeyed. This power has to be exercised over others.
Viewed in that light, the present assessee could not be said to have an authority over the outsiders to command and be obeyed. Similarly, the words 'other authority' according to him should be interpreted ejusdem generis with the words preceding, viz., municipal committee, district board, body of Port Commissioner. According to him, the unique feature of the communidades is division of profit or loss amongst the jonoeiros and only jonoeiros having right to vote. There is no parallel to this feature in any of these bodies mentioned in this definition. Moreover, according to him, considering the past history of the communidades, it cannot be said that any Government has entrusted the control or management of a municipal or local fund to the communidade. The communidades have been managing their own funds and there was never any question of any entrusting of it by the Government. In this behalf, he referred to the written submissions made by the assesseee before the Commissioner (Appeals) at p. 16 of his compilation. In these submissions the assessee had stated that the assessee could not be anything else than local authority, that the entire land of the village by itself forms fund of communidades, income from that was the incoming flow in the hands to be used for the purpose of the welfare of the people and residents of the village and other people who had interest in the village for the maintenance of churches, temples for the maintenance of amenities and the livelihood of the people who were rendering service to the village communities like barbers, carpenters, poojaries, etc., which had the authority of settling the judicial issues as is clear even from the code. Shri Sathe, the learned representative of the department, argued that these submissions were absolutely untenable and to call the property of the communidades as local fund was preposterous. According to him, if the communidades were conducting various activities such as maintenance of churches and temples, it was doing so only for its own members. If, for example, in a village for the benefit of some 100 families temples or churches were built or roads were constructed, it was with a view to provide services to its own members. Merely because the other people in the village could inadvertently enjoy the benefit not as a matter of right but as a sort of concession could not elevate the activities of communidade to the level of a local authority. A large establishment say like railways do maintain dispensaries and health centres for the benefit of its large number of employees. This arises primarily as a result of its anxiety to take care of the welfare of its employees. In similar manner, the communidades were and are undertaking the various activities for the benefit of its own members. This is not very uncommon in case of large companies or co-operative societies but because of these similarities they cannot be considered to be local authority. In other words, what the learned representative of the department implied was that local authorities may render public services like construction of roads or construction of health centres but every entity constructing roads or health centres cannot be considered to be local authority.
13. Referring to the fact that the Lt. Governor of the State is in charge of the affairs of the communidade and the State Government appoint officers for different purposes under the code, the learned representative argued that this was only for the purposes of management and to see that the funds of the communidade were properly managed. The words 'administrative tutelage of the State' in Article 5 only mean guardianship of the State. A guardian cannot be, by reason of guardianship, the owner of the property of the person whose guardian he is.
14. Finally, the learned representative of the department once more stressed the fact that sharing of profit or loss arising to the communidade by the jonoeiros as provided under Article 4 is a feature which completely goes against the concept of local authority. In the case of Calcutta State Transport Corpn. (supra), it was claimed by the State Transport Corporation that it was a local authority. The Calcutta High Court rejected this contention. In this case also, the assessee had claimed that there were various rules framed by the State Government by which the State Transport Corporation was bound. Under Rule 11 of the West Bengal State Road Transport Corporations Rules, 1960, State Transport Corporation fund was to be raised and which was to be notified as local fund under S.R. 439 of the Treasury Rules, West Bengal, Vol. I. On the strength of the aforesaid statutory provision, the assessee contended that not only it was an authority functioning directly under the control and guidance of the Government but it was also entitled to the control and management of a local fund.
15. The Calcutta High Court in deciding the issue has referred to the decision of the Andhra Pradesh High Court in Andhra Pradesh State Road Transport Corpn. v. ITO  47 ITR 101, confirmed on appeal by the Supreme Court in Andhra Pradesh State Road Transport Corpn. v. ITO  52 ITR 524. It also considered the decision of the Supreme Court in the case of Valjibhai Muljibhai Soneji v. State of Bombay AIR 1963 SC 1890. The point whether the assessee was managing any local fund was not decided because the High Court held that the assessee before them was not authority and, therefore, it was unnecessary to examine the aspect regarding local fund. The Calcutta High Court held that the assessee before it was, no doubt, a judicial person duly incorporated and was having independent legal existence but apart from certain functions which it was permitted to carry out within the framework of the statute and the rules, no authority had been conferred upon it. The authority even in respect of its internal matters was in the absolute control of the State. The learned representative of the department drawing analogy from this reasoning submitted that in the present case also, the assessee could not be considered to be an authority.
16. Dealing with the consequent point regarding the status of an AOP, if the assessee was not to be considered as local authority, the learned representative of the department submitted that the Commissioner (Appeals) did not correctly appreciate the ratio of the decision of the Supreme Court in N.V. Shanmugham & Co.'s case (supra).
He pointed out that the assessee before the Supreme Court was assessable under Section 41 of the Indian Income-tax Act, 1922. It was a case of partnership wherein the matters had reached the Court for dissolution of partnership and for taking of the accounts, the Court had appointed receivers. The receivers had carried on business. They were undoubtedly assessable as the representative assessees. The question arose whether the status of the persons whom they represented or on whose behalf they carried on the business were AOP or not. The learned representative of the department pointed out to the observations of the Supreme Court on p. 315 wherein it was observed that the control and management of the business was in the hands of the receivers who had joined in a common purpose and they acted jointly on behalf of the persons who were the owners of the business. They could not have represented individual interests of various owners of the business. If they had done so, there would have been chaos. The profits were earned on behalf of the persons who had a common interest created by the order of the Court and were on that account an AOP. [Emphasis supplied] According to the learned representative of the department in the case before the Supreme Court, the erstwhile partners had pocketed the profits and because of this acquiescence were held to be an AOP.The Supreme Court in this very case had referred to its decision in the case of CIT v. Buldana District Main Cloth Importers Group  42 ITR 172. In this case also the various persons did not voluntarily join the group, they were put together by the Dy. Commissioner and were asked to work together which they did.
On parity of reasoning the representative argued that in the present case also historically there was every evidence to show that the jonoeiros who were the main components of the communidades had come together for common cultivation of land with a view to earn income jointly therefrom. The control and management was unified and because of the acquiescence of the jonoeiros in accepting the share year after year they could constitute an AOP. The learned representative, therefore, urged that the status of the assessee was rightly taken as that of an AOP.17. He requested that if the status of an AOP was not proper in this case, he may be permitted to urge that the status of a BOI be adopted.
For this purpose, he relied on the decision of the Madras High Court in the case of N.P. Saraswathi Ammal v. CIT  138 ITR 19 wherein, under similar circumstances, the High Court had upheld the Tribunal's decision to entertain new plea of the department to substitute the status of a BOI, in place of an AOP. On the authority of this decision, the learned representative of the department urged that the status of a BOI could be taken in the present case.
18. The various contentions raised by the department were replied by Shri Robinson, the advocate representative of Communidade de Nerul, and Shri S.N. Inamdar, the advocate representative of Communidade de Mapusa.
19. Shri Robinson filed a compilation of 38 pages. In this compilation, he had extracted firstly the Goa, Daman & Diu Communidade Employees' (Conditions of Service) Act, 1981 passed by the Government of Goa, Daman & Diu on 23-10-1981. Notifications dated 19-3-1982 and 11-1-1982 brought out by the Government under Section 3 of the said Act were next extracted.
20. Shri Robinson then relied extensively on the judgment of the Supreme Court in the case of Union of India v. R.C. Jain AIR 951. In this decision, the Supreme Court was concerned under the Payment of Bonus Act, 1965 to see whether Delhi Development Authority was a local authority or not. Following passages from paragraph 11 and paragraph 2 were heavily relied upon and they are, therefore, extracted below: . . . when it is said that one of the attributes of a local authority is the power to raise funds by the method of taxation, taxation is to be understood not in any fine and narrow sense as to include only those compulsory exactions of money imposed for public purpose and requiring no consideration to sustain it, but in a broad generic sense as to also include fees levied essentially for services rendered. It is now well recognised that there is no generic difference between a tax and a fee ; both are compulsory exactions of money by public authority . . . the Delhi Development Authority is constituted for the sole purpose of the planned development of Delhi and no other purpose and there is a merger, as it were, of specific and general purposes. The statutory situation is such that the distinction between tax and fee has withered away, (para 11) 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. 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. Broadly, they may be entrusted with the performance of civic duties and functions which would otherwise be Government duties and functions. Finally, they must have the power to raise funds for the futherance 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 of management of the fund must vest in the authority. Case law discussed." (para 2) (P. 951) According to Shri Robinson, all the tests laid down by the Supreme Court regarding local authority are fulfilled in the case of communidades. He pointed out that the assessee had undoubtedly a separate identity as a legal entity. Secondly, its area of operation was specified as was clear from Schedule I of the Code. Thirdly, they were elected by the inhabitants of the area. Fourthly, they enjoyed certain degree of autonomy with liberty to decide for themselves, the, question of policy affecting the area administered by them. Each communidade operated in each village and could, therefore, be said to have a definite territorial jurisdiction.
21. In order to show that there was delegation of the governmental functions, Shri Robinson made reference firstly to Article 30(4)(c) where-under the communidades had power to create health centres.
According to Shri Robinson, the health centre was a subject-matter of the governmental function which has been delegated to the communidade.
He then relied on Article 30(4)(d) whereunder the communidades had power to decide and determine introduction of sweet and saline water in the Casanas. Elaborating this function, Shri Robinson pointed out that the Casana is a peculiar process by which prawns are cultivated. For this purpose, the paddy fields on the sea-shore are bounded off by introducing either the river or sea water in the bounded area. This was used for cultivation of prawns. According to Shri Robinson, conventionally, this was a revenue function to allow the change of land from agricultural to any other purposes. The fact that the communidade could change the character of the land from that of agriculture to that of fishery indicated that there was a delegation of power by the Government to allow the change over.
22. Shri Robinson then referred to Article 64 of the Code which contains the provisions regarding the powers of the administrative board. The administrative board was constituted by elected representatives just like in any other local authority. The president of the board was appointed by the Lt. Governor. According to Shri Robinson, the function of the administrative board was similar to that of a local authority. In this context, he also referred to Article 39 of the Code. Shri Robinson then referred to the provisions relating to the appointment of attorney and treasurer who could be appointed from amongst the components on election. Referring to the powers of the board once again as laid down in Article 64, Shri Robinson referred to Article 64(9) under which the communidades were given powers regarding permission of centres of agricultural labourers, formation of reserve fund for agricultural development and fisheries, formation of reserve fund and investment in foundation of institutions of social assistance and providence for the benefit of its components and of the agricultural population of the respective village. [Emphasis supplied] According to Shri Robinson, it was, thus, clear that the functions were not only restricted to the component members of the communidade but also for the benefit of the agricultural population of the entire village where the communidade was situated.
23. Shri Robinson then made reference to Article 253 of the Code where-under the private parties who owned paddy fields and took advantage of the irrigation work done at the cost of communidade had to pay a sum fixed by the managing body. This was, according to Shri Robinson, a clear case of raising funds by taxation and by taxation Shri Robinson hastened to add he meant in its broader sense as held by the Supreme Court in the case of R.C. Jain (supra).
24. Referring to Article 298 of the Code, Shri Robinson pointed out that the communidades had power not only to impose fines if the lease rent was not paid but also to enforce confiscation of the produce for the purposes of recovery of the lease. In this behalf, he also referred to Article 590 of the Code. According to Shri Robinson, he could not conceive of a possibility by which any person other than local authority or the Government could impose fine or order confiscation.
Thus, Shri Robinson built up his arguments based on the decision of the Supreme Court in the case of R.C. Jain (supra). By pointing out that the assessee had a separate existence, that it had definite jurisdiction over a particular area, that it was managed by a board which came into being after the elective process and lastly that there was delegation of the governmental functions such as construction of health centres, changing the character of agricultural land, imposing taxation and ordering confiscation. To further support the argument, Shri Robinson made reference to Goa, Daman & Diu Employees' (Conditions of Service) Act and pointed out that the very fact that the Government had legislated the Act to control the conditions of its employees was a clear indicator of the facts that the communidade was nothing but a local authority.
25. In the course of his submissions, we asked Shri Robinson how the distribution of profit or loss amongst the jonoeiros could be explained if the authority was a local authority and whether he could point out any authority or decision of the Court wherein in spite of the division of income, the concerned entity was held to be a local authority. Shri Robinson very fairly admitted that there was no such decided case but according to him if all the tests laid down by the Supreme Court (Appeals), according to him, had brought out and correctly appreciated the essence of the assessee's arguments.
27. As regards the status of an AOP, Shri Inamdar submitted that the very fact that there was intervention of the Government at every stage would show that there could be no voluntarily coming together of the members of the communidade, which is the very basic requirement of an AOP. He stated that too much has been read by the department in the observations of the Commissioner (Appeals) wherein he held that there was no element of profit-motive. He stated that if we examine the various sources for which the assessee is taxed, there was no question of any association. For example, he pointed out that an AOP cannot be assessed in respect of the income from house property as is clear from Section 26 of the Act. As regards income from other sources and capital gains, he pointed out that this is a mere passive realisation of income and did not require any activity and nobody had come together to earn income from other sources or capital gains. It was, therefore, fallacious to even state that there was any association by anybody to justify the status of an AOP. The ITO not having pointed out any other status and the association having taken place on the basis of an AOP, Shri Inamdar vehemently opposed admission of any fresh contention for the first time, before us to adopt the status of a BOI. Thus, according to Shri Inamdar, the Commissioner (Appeals) decision was wholly justified and required to be upheld.28. Shri Inamdar further submitted that the learned departmental representative was not right in emphasising that nobody has entrusted any local fund to the communidades. This, he said, would be ignoring the earlier part of the definition which is satisfied if the concerned entity was legally entitled to any local fund.
29. Shri Inamdar wound up his argument by pointing out that the department's reliance on certain commentary by Rui Gomes Pereira in his book Goa Gaokari--the Old Village Association was wrong. After all it was an opinion of a person and it would hardly have even a persuasive value. He thereafter pointed out that the report of the Rane Commission to which extensive reference has been made by the Commissioner (Appeals) may be considered. He also, for the sake of information, brought on record a Marathi book by one Shri Khalap on Community System in Goa. At this juncture, the learned departmental representative desired to caution that one should not go by the comments of different members of the Rane Commission as they tend to be coloured by personal ideology and political consideration. Thereupon Shri Inamdar clarified that he wanted to rely on the report of the Commission only insofar as it brought out the factual information about the system of communidade in Goa.
30. In his rejoinder, the learned departmental representative countered the arguments of both the representatives by a general proposition that the entire Code of Communidade should be viewed as a whole and so viewed, all the aspects which have been underlined by the learned representatives of the assessee can be explained away as incidents of ownership of large areas of land by the communidade. Since the communidade consisted of a number of jonoeiros and since its management was complicated, the rules had naturally to be framed for the proper management of the communidade. Merely because a company or a society had its bye-laws, it cannot mean that it is performing a legislative function of a Government. For example, for recovery of dues from its members the communidades might have made different provisions enforcing recovery. Superficially, this may appear to be similar to a Governmental function but if it is viewed as a normal incident of an associate body controlling its transactions with its numerous members, such power of imposing fine or ordering confiscation is easily explained. These fines were imposed not on others but on the members only. Broadly, therefore, he urged that the communidade should be viewed a s large village co-operative society.
31. Dealing with specific submissions made by Shri Robinson, he firstly referred to the decision of the Supreme Court in the case of R.C. Jain (supra) and submitted that this decision has to be considered to be an authority for its own facts. He urged that in deciding whether a particular entity is a local authority or not, the answer will depend on the individual composition of the particular legal entity as also the functions. It would be difficult to match the colour of one case with that of another. He proposed that a decision should be considered to be an authority for what he holds and not for what may logically follow from that decision. He relied, for this purpose, on the decision of the Supreme Court in the case of State of Orissa v. Sudhansu Sekhar Misra AIR 1968 SC 647 and observations at p. 651. He disputed that the tests laid down by the Supreme Court in paragraph 2 were satisfied in the present case. According to him, the present communidades cannot be considered to be of like nature and character as municipal committee, district board, etc. ; the most distinguishing feature being sharing of profits or losses of the communidade by the jonoeiros as provided under Article 4. He next submitted that the communidades cannot be said to have a jurisdiction like that of a municipal committee. Only because the communidades are situated in different areas or villages, it cannot be said that they are having any jurisdiction in that area. Whereas the local authority should be directly or indirectly elected by inhabitants of the area, in the present case, the inhabitants of a village do not have any right to vote in a communidade election. It is only the jonoeiros who, because of the membership in communidade, enjoy that right. In matters of autonomy, the communidades do not enjoy the freedom to decide the questions of policy as such decisions have to be taken in consultation with the Government. Similarly, there is no entrust-ment by statute of any governmental functions nor is there any power to raise funds by levying taxes, rates or fees, 32. Referring to the submission of Shri Robinson that there is a delegation of the governmental function to the communidades with special reference to Articles 30, 39, 64, 253 and 298, the learned representative of the department submitted his disagreement. He first stated that there is nothing like a specific governmental function which is peculiar only to the Government, e.g., the construction of roads, provision of irrigation facilities, creation of health centres can all be incidental to normal working of any big establishment which has very large area of operation. It is not uncommon to see railways and other big establishments opening health centres, co-operative societies having cattle breeding farm, agricultural centres, an industrial company laying down the roads and so on. These works are undertaken by the establishment for facilitating their own working and in the process such activities may benefit other strangers. In the present case also if the communidades are viewed as agricultural cooperative society, their anxiety to build up health centres or provision of facilities for cultivation of prawns as an ancillary agricultural activity, provision of irrigation facilities for the benefit of members, etc., is seen in setting out rules for the same.
Only because similar functions are also performed by the Government cannot mean that in the present case, there is any delegation of the Governmental functions. Referring to Article 253, the learned representative of the department argued that recovery of any fees from those private parties who benefited from the facilities provided by the communidades cannot be equated to a power of taxation. The fees are the sums recovered as a result of the advantage which the private parties take with the consent of the communidades. This is purely a liability arising out of a contract of providing some facilities to the strangers. As regards the so-called power to levy fines and order confiscation under Article 298, the learned representative of the department had a ready answer. He said that even a small library imposes a fine if there is delay in returning the book. This arises simply because of membership of the library carries with it the consequence of delayed payment. Though such a payment might be called a fine in essence it is an extra fee paid by the member. In the present case also, the fines are imposed if the rent is not paid within time limit. Now the rent is payable to the assessee under a contract of lease and any extra payment that is required to be paid will be as a result of the contract and such a payment cannot be considered to be some extraordinary power similar to the Government. A confiscation is nothing but exercising a lien as a creditor over the crop and again it cannot be equated with the power of the Government or local authority.
33. Referring to the separate rules framed by the Government of Goa, the learned representative of the department submitted that since the Government was supervising the activities of communidades, they have notified that the same rules which apply to other Government servants in regard to the service matters will apply to the employees of the communi-dades. That application of rules does not make them Government or semi-Government servants nor for that matter nor do they become public servants. The rules under notification should be viewed as a simple expedient of adopting the Government rules for the employees of the communidades also.
34. Lastly, referring to Shri Robinson's suggestion that the share of income of the communidade by the jonoeiros is only an additional factor and that if otherwise the communidades satisfy the tests laid down by the Supreme Court for a local authority, the share of income will not detract from holding the communidades as local authorities, the learned representative of the department stated that this is begging the question. When the enquiry is made whether the communidades can be considered to be local authority, all its peculiarities have to be taken into account including that of sharing of income or loss. It would be wrong to keep aside this feature or to ignore it altogether and apply the test of local authority and thereafter to brush aside the sharing of income as only an additional factor.
35. Shri Sathe, the learned representative of the department also rebutted various contentions raised by Shri Inamdar, advocate, on behalf of the assessee. He laid particular stress on Shri Inamdar's submission regarding the Government's intervention. He submitted that the Government's intervention or supervision in many private bodies like co-operative societies is not unknown. He illustrated the submission by making reference to the Maharashtra Co-operative Societies Act. Chapter VI of the said Act contains elaborate provisions as to how the co-operative societies are obliged to utilise their profits for specified purposes laid down under the said Act. Reference was also made to Sections 79A and 79B of the Maharashtra Co-operative Societies Act which reserve to the Government powers giving directions to the co-operative societies in the public interest and the registrar's power to remove member for failure to supply the agricultural produce to the processing society. Reference was made to Section 137 of the Maharashtra Co-operative Societies Act under which recovery of loans is made of the dues of the Land Development Bank as if it is an arrears of land revenue. He then questioned whether it would be proper to consider the co-operative societies as local authorities merely because the Government directed its affairs or because in the present day conditions the Government has entrusted or delegated many obligations on the co-operative societies in regard to the rural development. In fact, the present day co-operative societies h ave become the Government agencies through which the Government hopes to pass on its welfare measures to the rural public, but no co-operative society has ever tried to masquerade as a local authority on that count as it essentially remains as a private body existing for its members and dividing its income amongst them.
Referring to the Government tutelage, Shri Sathe submitted that the Government sometimes appointed collector as the Court of Wards or as a guardian of minor's property, but did not affect the minor's property.
36. Shri Sathe then submitted that the assessee's learned advocate has relied too much on the historical aspects to clarify its democratic set up. But the fact remains that thi s democratic set up of electing representatives for the management of the communidades is no way different from electing the board of directors or governing body to manage the affairs of the company or a co-operative society. The voting rights have specifically been given only to the jonoeiros who are the members of the communidades. In case of local authorities, however, the voting rights are given to the entire population and the concept of conferring voting right only on members is alien to the concept of a local authority. A Gram Raj or a Gram Panchayat has no relevance in considering the definition of local authority. Referring to Shri Inamdar's submission that dividend paid the jonoeiros can be considered to be a remuneration to the services rendered, Shri Sathe submitted that Article 4 provide that jonoeiros and shareholders are to participate not only in the profits but also the losses of the communidades. Sharing of loss completely negates the submission that it is a remuneration for services rendered.
37. In dealing with the next submission of Shri Inamdar that an organisation which is entirely governed by the Government cannot be considered to be an AOP as there is no voluntarily coming together of the members, Shri Sathe once again referred to the decision of the Supreme Court in the case of N. V. Shanmugham (supra), wherein the decision of Buldana District Main Cloth Importers Group's case (supra) was referred. This was a case where Dy. Commissioner of the District had appointed the members constituting the group to import and distribute the cloth and the members of the group did not voluntarily join the group. They were put together by the Commissioner and were asked to act together which they did. In view of the Supreme Court's clear authority, Shri Sathe submitted that it provides complete answer to the submissions of Shri Inamdar. Referring next to Section 26, Shri Sathe submitted that the section only states that if the shares are specific, then, only assessment of property income cannot be made in the status of an AOP. According to him an AOP is a status recognised in the Act and like any other taxable entity, an AOP can earn income which is passive in nature such as income from capital gains and other sources.
38. In concluding his argument, Shri Sathe once again relied on the authorities which he has referred to earlier, particularly, that of the Calcutta High Court in the case of Calcutta State Transport Corpn.
39. At this point, we invited attention of Shri Sathe to the decision of the Bombay High Court in the case of CIT v. Associated Cement & Steel Agencies  147 ITR 776 and asked him to explain as to how he would justify his alternate ground requiring us to substitute the status of BOI in place of an AOP. In reply Shri Sathe submitted that in the present case, the return was filed in the status of an AOP and that was exactly the status which had been adopted by the ITO. Situation would have been different if the ITO had wanted to adopt a status different from the one returned by the assessee. In the present case, the assessee was entitled to raise a dispute regarding the status as is clear from Section 246(1)(c), read with Explanation (c), of the Act.
This section can have a meaning only if the appellate authority is allowed to give a finding on the appropriate correct status to be adopted in the case. According to Shri Sathe, it would be erroneous to give a finding that the assessee is neither a local authority nor an AOP and to stop there. When the question of status is put in issue by the assessee by first filing an appeal to the Commissioner (Appeals) it would be only appropriate for the Tribunal to give directions. In this behalf, he referred to us the decision of this Bench in Shri Rajesh B.Rathi Trust v. ITO  8 ITD 273 wherein this Bench was pleased to hold, in deciding the appeal filed by the assessee, to order adoption of a status different from the one adopted by the ITO. Thus, Shri Sathe submitted that it was permissible for us to look into the question of status and if we do not agree with the finding of the lower authorities, to give proper directions for adopting the proper status.
40. We have considered and examined the various facts and arguments of the rival parties and we hold that the assessee does not qualify to be classified as a local authority. At the outset, we may mention that the learned Commissioner (Appeals) has proceeded entirely on the historic aspects of the communidade rather than considering the issues in the present time frame.
41. We have before us the decision of the Supreme Court in the case of R.C. Jain (supra) wherein the tests for determining whether a particular authority is considered to be local authority have been laid down. We do agree what the assessee has got separate legal existence of its own and that it operates in its specified area also. In this sense we also agree that it has certain jurisdiction but the further tests laid down by the Supreme Court are not satisfied in the present case.
We cannot forget the fact that communidades are essentially the bodies or groups of families who have settled down and who have been cultivating properties jointly and share the profit and loss of their joint labour for centuries. The various rules by which they govern themselves may have outward similarity with any democratic organisation such as any local self-Government. But the comparison stops there. The local bodies are representative bodies and they are, so to say, representatives of the State Government operating in a local area. They do not have any private interest in the local fund which they manage.
The local fund has not been defined in the Maharashtra Co-operative Societies Act though it is possible to describe it. A local fund can be contrasted with a general fund. A local fund would be available for certain local purposes to be utilised for a specified purpose. The idea of sharing the local fund would be completely alien to a local fund.
Here we find, under Article 4 of the communidades, that not only profits but losses also are to be shared by the jonoeiros and shareholders. How can such a fund which is shared by certain specified individuals be equated with a local fund We are not prepared to accept the submission of Shri Robinson that sharing of income is just an additional factor. As rightly pointed out by the AAC in his appellate order for the assessment year 1975-76, we have not come across any local authority which has this peculiar feature. Shri Inamdar's submission that a district board or port authority making a provision for distribution of dividend is completely inappropriate in our view. The port authority is specifically covered under the definition of local authority. In that case, it perhaps may not matter but if our answer to question whether a particular entity is local authority or not depends on several factors, we cannot help noticing the sharing of surplus of loss as a factor which completely negates the concept of the local authority.
42. As rightly pointed out by the learned departmental representative, the assessee is basically a community centre giving benefit of common cultivation, etc., to its components. As it has sufficient resources, the Government is overseeing its activities through legislation which is not materially different from the legislation in the rest of India regarding companies, co-operative societies, etc. The Government nominates directors in many companies. It also encourages village co-operatives to take up general welfare activities but this does not make them local authorities. None of the articles of the Code on which reliance is placed helps in acceptance of local authority as defined under Section 2(31) of the Act. The civic and general utility functions mentioned in the Code are by and large optional. The treatment of employees (long after the period covered by these appeals) by giving them benefits and liabilities of the Government servants does not take away the basic character of the communidade, viz., that it is an institution existing primarily for cultivation of lands on a collective basis but on a commercial pedestal. There is nothing to show that it was required to sell its produce at a nominal profit or below market or subsidised price. It is not clear how the Commissioner (Appeals) came to the conclusion that there is no profit-motive. The distribution of income and loss amongst the jonoeiros and shareholders is totally repugnant to the concept of local authority which does not distribute its income to some selected persons to the exclusion of the entire community.
43. We also find considerable force in the submission of the learned departmental representative that the assessee-communidades are not even authorities. As held by the Calcutta High Court in the case of Calcutta State Transport Corpn. (supra), we find that no direction can be issued by these assessee on its own as all its decision making is subjected to approval by the Government or State. On consideration of all the relevant facts and the Code, we have no hesitation in coming to the conclusion that the assessee cannot be considered to be local authority. We may mention here that the Supreme Court judgment in R.C.Jain's case (supra) itself sounds a word of caution about the danger of borrowing on expression in one enactment for interpreting another.
Their Lordships observed: ". . . 'It would be a new terror in the construction of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone'.
..."Municipal Corporation of Delhi v. Birla Cotton Spg. & Wvg. Mills [1968J 3 SCR 251, we have to take local bodies as subordinate branches of the Government only if in fact they are so. The issue cannot be judged merely by looking to some of the functions, to the exclusion of others. On this point, therefore, we reverse the finding of the Commissioner (Appeals).
44. Next comes the question of status. Though there might be some force in the contention of the department that in view of the decision of the Supreme Court in N.V. Shanmugham & Co.'s case (supra), it is possible to hold the status of an AOP, we find it more appropriate to consider the alternate contention of ShriSathe to adopt the status of BOI. We have examined the question whether we can allow the department to raise the contention regarding status, for the first time, we find that the ground raised by the department is purely a legal ground and does not require any fresh investigation of facts. Moreover, the assessment incidence of an AOP and BOI, are the same. In the case before the Bombay High Court--Associated Cement & Steel Agencies (supra), the two different status of firm and an AOP were governed by different assessment incidence. This situation is not prevailing here. We hold that the ratio of the Madras High Court in the case of N.P. Saraswathi Ammal (supra) squarely applies. In view of Section 246(1)(c) and Explanation (c), we are clearly of the view that correct status can be subject-matter of the appeal. On an examination of the facts and arguments, we find that the controversy is set at rest fully by the Madras High Court in the case of N.P. Saraswathi Ammal (supra). This case not only deals with the power of the Tribunal to adopt a proper status but also about the nature of the BOI. The essential element of BOI is that there should be a plurality of individuals and they must have a nexus to a source of income. The test laid down by the Gujarat High Court in the case of CIT v. Harivadan Tribhovandas  106 ITR 494 in defining BOI can also be said to be satisfied. The Gujarat High Court held that BOI means a conglomeration of individuals who carry on some activity with the object of earning income. In the case of Deccan Wine & General Stores v. CIT  106 ITR 111, the Andhra Pradesh High Court held that the expression BOI should receive a wide interpretation, but not wide enough to include combination of individuals who merely receive income jointly without anything further as in the case of co-heirs inherited shares or securities but certainly wide enough to include a combination of individuals who have a unity of interest but who are not actuated by common design and one or more of whose members produce or help to produce income for the benefit of all.
We are, therefore, of the opinion that more appropriate status in the present case would be that of a BOI instead of the status of an AOP as adopted by the ITO, we direct accordingly.
45. Since the Commissioner (Appeals) held that the proper status of the assessee was that of loeal authority and on that account the income of the assessee was exempt under Section 10(20), he did not think it necessary to adjudicate on the other grounds such as taxability of the capital gains, levy of interest under sections 139(8) and 217, etc. It was advisable, as pointed out by the Hon'ble Gujarat High Court in CIT v. Kartikey v. Sarabhai  131 ITR 43, to adjudicate on all interlocutory matters so as to avoid multiplicity of proceedings and consequent delays. We cannot, however, cut short one stage of appeal by deciding these issues ourselves. We are, therefore, constrained to remit the matter back to the Commissioner (Appeals) for deciding the grounds which he had left out of consideration.
46. In the result, the three appeals filed by the department in the case of Communidade de Mapusa are allowed for statistical purposes.
47. This takes us to the facts of the appeal in IT Appeal No. 734 (Pune) of 1981 in the case of Communidade de Nerul. Shri Sathe brought to our notice that the original assessment in this case was made on 6-1-1975. In this order, the ITO had assessed income from interest and capital gains on acquisition of land. Income from interest from banks was Rs. 11,188 whereas capital gain computed by the ITO was Rs. 4,54,745 subject to deduction under Section 80T of the Act. The ITO had held that the capital gains was assessable as the land was not cultivated. The total income assessed was Rs. 2,58,550. The matter was thereafter taken in appeal before the AAC. The AAC passed his order on 25-3-1975. The AAC observed that the ITO was wrong in assessing the income from capital gain on acquisition of land by the Government without going into the issue in depth. He felt that several points were required to be gone into before a conclusion could be drawn whether the land was agricultural or not. After the set aside by the AAC, the present assessment was framed. According to Shri Sathe, neither in the original assessment nor in the AAC's order there is any mention made about any dispute regarding the status of the assessee. The assessee had filed the return on 9-1-1974 in the status of an AOP and no exemption was claimed on the ground of status though the capital gain was claimed to be exempt being the gain arising from transfer, of agricultural land. According to Shri Sathe, when in the original proceedings the question of status was not the subject-matter of dispute, the same cannot arise in making the fresh assessment. It is the fresh assessment on the directions of the AAC which is the subject-matter of appeal before us. In this assessment also, the question of status was never raised. The assessment was subjected to proceedings under Section 144B of the Act and in these proceedings also, the status was never challenged. The statement of facts and the grounds of appeal before the Commissioner (Appeals) woul d show that the assessee was never disputing the status. Shri Sathe contended that it was not open to the Commissioner (Appeals) to adjudicate on the status of the assessee. The Commissioner (Appeals) has abruptly referred to the question of status and then referring to his predecessor's order in the case of Communidade de Mapusa held that the proper status of the assessee could not be that of local authority or an AOP. Shri Sathe, therefore, raised before us three additional grounds. The first and second grounds relate to the competency of the Commissioner (Appeals) to entertain the grounds of appeal claiming exemption of the entire income as a local authority. The third additional ground is an alternative ground in which it has been pleaded that even assuming it was open for the Commissioner (Appeals) to admit such ground for the first time, he should have followed the procedure laid down under Section 250(5) of the Act read with Rule 46A of the Income-tax Rules, 1962 by giving proper opportunity to the ITO. In short, the plea is that the matter should go back to the Commissioner (Appeals) for fresh consideration of the issues. Shri Robinson, the learned representative of the assessee ve hemently opposed the admission of these additional grounds of appeal.
48. On enquiries with Shri Sathe, we found that in the grounds before the AAC in appeal against the original assessment, the assessee did challenge the status. On this, Shri Sathe's reply was that the AAC had impliedly held against the assessee when he set aside the appeal and the proper remedy for the assessee was to come in appeal before the Tribunal. In view of this, he pleaded that in any case, in the set aside assessment, the issue of status could not be reopened.
49. We have considered the rival submissions. We do not think it necessary to pronounce on the technical aspects raised by the department in this behalf as we consider it a purely academic exercise.
We have, on consideration of the relevant issues, already decided the matter of status in the case of Communidade de Mapusa. In fact, when we took up the appeal, we allowed Shri Robinson to argue the matter on merits also. Sending the matter back to the Commissioner (Appeals) would be an exercise in futility only adding unnecessarily to the cost of both the parties. In view of the circumstances mentioned above, we find that the additional grounds raised by the department are too technical to be accepted. We, therefore, reject the additional grounds raising preliminary objection to the jurisdiction of the Commissioner (Appeals). As far as the merits of the question are concerned, we have already held that the communidades in general, on consideration of the Code cannot be considered to be a local authority. The assessee, therefore, fails in its contention that exemption under Section 10(20) is available to it. We also direct that the proper status of the assessee would be that of BOI and we reverse the order of the Commissioner (Appeals) accordingly.
50. In the cross-objections filed, the assessee has pleaded that the learned Commissioner (Appeals) erred in not considering all the grounds especially regarding exemption of capital gains on the ground that it arose on transfer of agricultural land. We find that the ground raised in the cross-objection is proper and acceptable. We, therefore, allow the cross objection and remit the matter back to the Commissioner (Appeals) so that he can decide the matters raised by the assessee before him which were not earlier considered.
51. In the result, both the appeal by the department and cross-objection by the assessee are allowed.