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Gujarat Industrial Development Corporation Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
Overruled ByGujarat Industrial Develop-ment Corporation etc. Vs. Commissioner of Income Tax
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 37 of 1976
Judge
Reported in(1985)45CTR(Guj)68; [1985]151ITR255(Guj)
ActsIncome Tax Act, 1961 - Sections 10(20A); Constitution of India - Article 289(1); Gujarat Industrial Development Act, 1962
AppellantGujarat Industrial Development Corporation
RespondentCommissioner of Income-tax
Advocates: J.M. Thakore and; K.C. Patel, Advs.
Cases ReferredAjay Hasia v. Kkalid Mujib Sehravardi
Excerpt:
(i) direct taxation - assessment - article 289 (1) of constitution of india and gujarat industrial development act, 1962 - whether income of gujarat development corporation exempt under article 289 (1) - no exclusion could be made on ground that corporation is a state as contemplated under article 289 (1) - state different from corporations which are created by laws - no person can sue state as corporation in itself not state but separate legal entity - decision of tribunal that income of assessee-corporation not exempt under provisions of section 10 (20a) correct and valid. (ii) exclusion of income - section 10 (20a) of income tax act, 1961 - section 10 (20a) stipulates that purpose for constituting authorities must be for planning and development of towns and cities - not sufficient if.....talati, j. 1. the question which is required to be decided in this reference is as to whether the income of the gujarat industrial developmentcorporation, ahmedabad, is exempt either under article 289(1) of the constitution of india or is exempt from payment of income-tax under the provisions of section 10(20a) of the i.t. act, 1961. these questions arose because the corporation, in the assessment years 1967-68, 1968-69 and 1969-70, filed three returns disclosing their income as nil, claiming to be exempt under section 10(20a) of the i.t. act, 1961, and also under article 289(1) of the constitution of india.2. the ito considered the matter and both the (grounds of) claim were rejected. the matter was carried in appeal and the aac came to the conclusion that the corporation was an agent of.....
Judgment:
Talati, J.

1. The question which is required to be decided in this reference is as to whether the income of the Gujarat Industrial DevelopmentCorporation, Ahmedabad, is exempt either under Article 289(1) of the Constitution of India or is exempt from payment of income-tax under the provisions of Section 10(20A) of the I.T. Act, 1961. These questions arose because the Corporation, in the assessment years 1967-68, 1968-69 and 1969-70, filed three returns disclosing their income as nil, claiming to be exempt under Section 10(20A) of the I.T. Act, 1961, and also under Article 289(1) of the Constitution of India.

2. The ITO considered the matter and both the (grounds of) claim were rejected. The matter was carried in appeal and the AAC came to the conclusion that the Corporation was an agent of the State Government and, therefore, in view of the provisions contained in Article 289(1) of the Constitution of India, the Corporation was entitled to exemption. It was further held that the assessee-Corporation was exempt also under Section 10(20A) of the I.T. Act, 1961. Thus, the assessee-Corporation's appeal was allowed. The Revenue preferred an appeal before the Income-tax Appellate Tribunal, and the view taken by the AAC of Income-tax was reversed, and the Income-tax Appellate Tribunal came to the conclusion that the income of the assessee-Corporation was not exempt under Article 289(1) of the Constitution of India, and it was also not exempt under the provisions of Section 10(20A) of the I.T. Act, 1961.

3. Thereafter, the following questions of law are referred for the opinion of this court:

'1. Whether the Tribunal was right is holding that the income of the assessee-Corporation was not exempt under Article 289(1) of the Constitution of India ?

2. Whether the Tribunal was right in holding that the income of the assessee-Corporation was not exempt from payment of income-tax under the provisions of Section 10(20A) of the Income-tax Act, 1961 ?'

4. We may refer to Article 289(1) of the Constitution of India which reads as under:

' 289. Exemption of property and income of a State from Union taxation.--(1)The property and income of a State shall be exempt from Union taxation. '

5. Income-tax is a Union taxation. The question which is required to be determined is whether the income of this particular Corporation is the income of a State. Now, this Corporation is a creation of a statute, viz., the Gujarat Industrial Development Act, 1962. It is established for certain purposes and certain objects. When we examine question No. 2, we will refer in detail to various provisions of this particular Act. But, suffice it to say, for the present that it is a separate legal entity created under theAct, and its properties would vest in this particular Corporation. The Corporation will sue and would be sued in its, own name and a mere reading of the Act would show that it is not a State.

6. The learned Advocate-General, for canvassing this argument, referred to certain authorities ; the first being the case of Ramtanu Co-operative Housing Society Ltd. v. State of Maharashtra, AIR 1970 SC 1771. The provisions of the Maharashtra Industrial Development Act were considered in that case for the purpose of deciding as to whether that Act was a valid enactment and it was held that it was a valid enactment. It was argued that there was a procedural discrimination between the Maharashtra Industrial Development Act and the Land Acquisition Act and that argument was negatived. Incidentally, it was observed that, it was created under a statute and was not a trading corporation. It was examined with regard to the entries in the State list and the Union list and the Act was considered to be valid. The question as to whether the authority constituted under the Maharashtra Industrial Development Act, 1961, was or was not a State was never before the Supreme Court and it was not required to be considered and it was not considered. It was vehemently urged that this Corporation is not doing any trading activities. That has nothing to do with Article 289(1) of the Constitution of India.

7. Another case which was referred to was Andhra Pradesh State Road Transport Corporation v. ITO : [1964]52ITR524(SC) . The question which was considered there was as to whether the Andhra Pradesh State Road Transport Corporation was exempt from income-tax under Article 289 of the Constitution of India and that question was answered in the negative and one of the grounds stated was that the income derived by the Corporation from its trading activities cannot be said to be the income of the Andhra Pradesh State under Article 289 of the Constitution of India. This ruling does not lay down the proposition that if the Andhra Pradesh State Road Transport Corporation did not carry on any trading activities, it would automatically become the State as contemplated by Article 289 of the Constitution of India. Trading activities done by a Corporation or some other activities done by a Corporation apart, the question whether the Corporation was a State would depend upon for what purpose that Corporation was created by a statute and what are the objects and functions of that Corporation. It is never to be forgotten that a Corporation is created by a statute for different and distinct purposes and it is not a department of the State. It may be that the State may have some or other form of control over it, it may be by way of contribution to share capital, it may be control or supervision or audit but that would not mean that a particular Corporation over which the State has control would become the State.Otherwise many Corporations and many other bodies over which the State in one form or the other has got control, would automatically become the State even if they carry on any type of activities and their income would be required to be excluded under the Constitution of India. Such an interpretation could never be put.

8. Another case of similar nature was the case of Pepsu Road Transport Corporation v. ITO . It was also a Road Transport Corporation established by the State by an enactment to carry on the business of road transport on behalf of the State but a separate legal entity was created and its income was liable to be assessed under the Indian I.T. Act, 1922, as the income of an individual.

9. An effort was made to draw a line between Corporations which carry on trading activities and Corporations which do not carry on trading activities and it was submitted that a Corporation which does not carry on trading activities may be construed as a State. That can never be done. The State is something entirely different. The State enters into contracts with different parties in entirely different manner as provided by the Constitution. The State itself may carry on trading activities and for the trading activities which the State carries on, the State may be sued as in respect of other cause of action after notice under Section 80, of the CPC. Therefore, if the State carries on such trading activities, it does not cease to be the State and if the Corporation does not carry on trading activities, it does not become the State. Therefore, carrying on such trading activities or not has nothing to do for the purpose of deciding as to whether a particular entity is or is not a State.

10. We may also refer to the case of Vidarbha Housing Board v. ITO : [1973]92ITR430(Bom) , which was cited before us by the learned counsel, Shri B. R. Shah, for the respondent, because there the question was whether the income of Vidarbha Housing Board was exempt from income-tax under Article 289(1) of the Constitution of India. It was held as under (head-note) :

' It was clear, therefore, that the income and property of the board could not be regarded as the income and property of the State Government, with the result that the immunity claimed by the petitioner-board under Article 289(1) of the Constitution was clearly not available to the petitioner board.'

11. Having considered as to whether the assessee--Gujarat Industrial Development Corporation, Ahmedabad--is entitled or is not entitled to exclude its income from liability under the Indian I.T. Act, we are clearly of the opinion that from their total income, no exclusion could be made on the ground that it is a State as contemplated by Article 289(1) of the Constitution of India. The State is entirely different from the Corporations which are created by laws which are enacted either by Parliament or by State Legislatures for different and distinct purposes. They are separate entities in law. They sue and are sued in their own capacities and for any contractual liability of the Corporation, no person can sue the State because every Corporation in itself is not the State but a separate legal entity. Under these circumstances, our opinion on the first question would be in the affirmative, and we hold that the decision of the Tribunal is right. Therefore, this point is decided in favour of the Revenue and against the assessee.

12. So far as the second question is concerned, exclusion of income is claimed under Section 10(20A) of the Income-tax Act which runs as under :

' 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--

(20A) any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both.'

13. In order to examine this case, the learned Advocate-General wanted that the whole scheme of the Gujarat Industrial Development Act, 1962, is required to be examined and with the help of the counsel appearing in this matter, we have examined the scheme of the Gujarat Industrial Development Act, 1962. The preamble reads as under :

' An act to make special provision for securing the orderly establishment of industries in industrial areas and industrial estates in the State of Gujarat, and to assist generally in the organisation thereof, and for that purpose to establish an Industrial Development Corporation, and for purposes connected with the matters aforesaid. '

14. Section 2 defines several expressions contained in the Act and by Section 2(g) ' industrial area' is defined as under :

' 'industrial area' means any area declared to be an industrial area by the State Government by notification in the Official Gazette which is to be developed and where industries are to be accommodated. '

' Industrial estate ' is defined by Section 2(h) and it means ' any site selected by the State Government where the Corporation builds factories and other buildings and makes them available for any industries or class of industries.'

15. Section 3 deals with establishment of a Corporation and for that purpose notification is required to be issued and Section 3(2) states that the Corporation shall be a body corporate with perpetual succession and a commonseal, and may sue and be sued in its corporation name, and shall be competent to acquire, hold and dispose of property, both movable and immovable, and to contract, and do all things necessary for the purpose of the Act. Section 4 lays down as to who shall be the members of the Corporation and they are either official members or persons nominated by the State Electricity Board and the Gujarat Housing Board and also the members nominated by the State Government. Section 13 lays down the functions of the Corporation. It reads as under :

' 13. The functions of the Corporation shall be--(i) generally to promote and assist in the rapid and orderly establishment, growth and development of industries in the State of Gujarat, and

(ii) in particular and without prejudice to the generality of Clause (i) to--

(a) establish and manage industrial estates at places selected by the State Government;

(b) develop industrial areas selected by the State Government for the purpose and make them available for undertakings to establish themselves ;

(c) develop land on its own account or for the State Government for the purpose of facilitating the location of industries thereon;

(d) assist financially by loans industries to move their factories into such estates or areas ;

(e) undertake schemes or works, either jointly with other corporate bodies or institutions, or with Government or local authorities, or on an agency basis in furtherance of the purposes for which the Corporation is established and all matters connected therewith. '

16. Section 14 deals with general powers of the Corporation. Section 17 lays down that the State Government may from time to time issue to the Corporation such general or special directions of policy as it thinks necessary or expedient for the purpose of carrying out the purposes of the Act and the Corporation shall be bound to follow and act upon such directions. Section 19 deals with the funds of the Corporation and how they are required to be credited. Section 25 is in regard to the budget of the Corporation and Section 26 is in regard to the audit of the accounts of the Corporation. In fact, the above provisions, if considered for the purpose of deciding the first question which we have already answered, it would be more than clear that the Gujarat Industrial Development Corporation is not a State and Article 289(1) of the Constitution of India will have no application. Therefore, realising this difficulty, great emphasis was placed on Section 10, Clause (20A), which falls in Chapter III of the I.T. Act which begins with the heading 'INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME '. Now, if there isapplication of Section 10(20A), the income would not form part of the total income. Thus the income of the Corporation would be excluded at the time of computing the total income for the purpose of tax.

17. The objects of the statute were read before us and they are as under :

' Exemption from tax of State Housing Boards, Development Boards and similar other authorities.--Several States have set up statutory Housing Boards for the framing and execution of housing and other development schemes. These Boards are autonomous organisations and they play an important role in implementing the social housing programmes of Government for the common good. As these Boards are serving an important public purpose and do not exist for private profit, it is proposed to make a specific provision in the Income-tax Act exempting the income of such boards from tax altogether. The provision, as proposed, exempts from tax any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both.'

18. Now, it is an admitted position of law that so far as the first part of Section 10(20A) is concerned, it is not applicable to this particular case. We are called upon to decide as to whether the second part applies and the second part is again required to be reproduced which begins with the word 'or' and it reads as under ;

' for the purpose of planning, development or improvement of cities, towns and villages or for both.'

19. Now, therefore, what we have to determine is whether the Gujarat Industrial Development Corporation is a Corporation established for the purpose of planning, development or improvement of cities, towns and villages in the Gujarat State. The answer would determine the fate of this case. Several other provisions were read before us and they are Section 10(23BB), Section 10(23BBA), Section 10(26B) and Section 10(29). Now, these provisions are independent provisions and by those provisions exclusion from the total income is provided in respect of certain bodies. Before we give the final meaning to the section in question, we would consider decisions as the learned Advocate-General desired that certain authorities which were cited before us may be considered.

20. The first authority cited is the case of CIT v. Simpson and Co. : [1980]122ITR283(Mad) . There, the meaning of Section 84 of the I.T. Act, 1961, was considered. Particularly, the words which were required to be interpreted were ' six per cent, per annum '. While construing that provision what was observed was as under (headnote) :

' It is a well-settled principle of construction that in construing a provision for exemption or relief, it should be liberally construed. The reason behind this rule of interpretation is that the administrative authorities or the courts should not whittle down the plenitude of the exemption or relief granted by Parliament by laying stress on any ambiguity here or there.

Ordinarily, any statute would have to be construed on the language it employs. But in the case of a fiscal statute, the rule is that if there are two ways in which a provision could be construed, the construction most beneficial to the subject should be adopted. '

21. Second case is the case of CIT v. Gujarat Stale Warehousing Corporation : [1980]124ITR282(Guj) . There, the words which were required to be interpreted were 'authority for marketing'. Now, that exemption is provided by Section 10(29) which reads as under :

' 10. (29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. '

22. The plain meaning of that section would show that a State Warehousing Corporation was exempted. While interpreting the words ' authority for marketing ', what was observed in the above judgment was as under (p. 290):

' The storage function was explained as the marketing function involving holding and preserving goods between the time of production and their use. It was, therefore, pointed out that the marketing process consisted of processes of concentrating and dispersing all goods between the producers and consumers. In both these processes, storage and warehousing form important activities. Therefore, warehousing or storage was clearly an essential element of the process of marketing. '

23. It was also observed as under (p. 291):

' That is why, looking to the larger concept of modern marketing, when Parliament set up this statutory authority charging it with this vital function for the nation for proper development of our rural economy, this tax exception which was intended for this statutory authority could not by any process of construction be denied as that would be repugnant to the settled principles of construction of this benevolent measure whose whole object is to encourage such statutory authorities, which carry out the mandate charged on them by remaining within the sphere of marketing.'

24. The third case to which reference was made is the case of CIT v. Satellite Engineering Ltd. : [1978]113ITR208(Guj) . The observationswhich were read before us are to be found at page 215. It was also a case under Section 84 of the I.T. Act and the question was in regard to tax holiday to a newly established undertaking. What was observed is as under :

' It hardly needs to be stated that it is a recognised rule of interpretation of statutes that the expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute and which effectuate the object of the legislature. In interpreting a statute, the court cannot ignore its aim and object.'

25. Now, therefore, what is important is to find out the object behind the statute. Now that object is required to be gathered from the section itself which requires liberal interpretation and if two interpretations are possible, the one beneficial to the assessee is to be adopted. Two things are required to be remembered : (1) the object must be clearly borne in mind, and (2) violence should not be made to the language used in the section. Here, the object is for the purpose of planning, development or improvement of cities, towns and villages. As we read the objects and the relevant sections of the Gujarat Industrial Development Act, it is clear from the preamble itself that it is established for securing an orderly establishment of industries in industrial areas and industrial estates in the State of Gujarat. The question, therefore, is whether when a particular Corporation is established for the purpose of developing or establishing industries in any particular area, can any one say that it is for the purpose of planning, developing or improving a particular city, town or village or a particular area One may establish an industry in a given area. That area for the purpose of industry may develop. But it does not necessarily mean that that particular area develops by that industry alone. There may be advantages and disadvantages. On the one hand, because there are industrial activities in the area, some trade and commerce may grow, but that does not necessarily mean that it would develop that particular area. It may also create pollution and several other problems. Apart from that, the question which is required to be considered is as to whether the purpose of the Corporation or the object of the Corporation is to develop any city, any town or any particular area. The answer would be in the negative. Industrial activity is one of the facets of general development. Developing any city, any town, any village or any area would require roads, buildings, sanitation, parks, sports, educational institutions and several other amenities. It will be an integrated activity by which an area could develop. Therefore, any Corporation which is established for the purpose of developing a particular city, town, village or an area would mean a body set up with a larger purpose which could be achieved only if not only industry but several other requirements of that particular area are met bythat Corporation. A city or a town or an area could be well developed without any industry. There could be good trade and commerce. So many institutions, banks, museums and other institutions which might attract the people may develop and the town or area may develop even without a single industry. But we are not concerned as to whether by establishing any industry the area develops or not. The question before us is as to whether this particular Corporation is established for the purpose of planning, development or improvement of cities, towns and villages in Gujarat State. If it is not and it is established only for the purpose of one particular facet of development, it would not fall within Section 10(20A) of the Act. Now, therefore, it is more than clear from the preamble and from the whole reading of the Act that the whole Act is intended to establish a Corporation for the purpose of establishing industries in towns, villages and other places in the Gujarat State. It has no object whatsoever to plan, develop or improve any city, any town or any village in the Gujarat State. When this Corporation is not established for that purpose, trying to read liberally would not carry us anywhere. It is not capable of two meanings unless we make violence to the language of the section itself and add something which does not exist in that section which we cannot do. We may mention here that if that was the purpose which was intended, so many other exclusions of different Corporations was hardly necessary because this one would be sufficient for every situation. But, Parliament thought that they would exempt certain Corporations only and, therefore, they provided in such a way that Housing Corporations, Warehousing Corporations and other Corporations could be exempted while several other Corporations would not be exempt. Therefore, whenever Parliament wanted to exclude, they made a clear provision and whenever they did not want to exclude, they did not make a provision. This provision was inserted for the first time in the Finance Act, 1970, with retrospective effect from April 1, 1962, and, therefore, it will cover the concerned assessment years. But the question is whether this provision applies and the answer, for the reasons we have given, must be that this provision does not apply as the Corporation is not intended for the purpose of planning, development or improvement of cities, towns or villages. In this view of the matter, on question No. 2 again, the opinion is required to be given in the affirmative meaning thereby, it would be against the assessee and in favour of the Revenue.

26. We may mention that a comprehensive legislation was passed by the Gujarat State Legislature and that Act was the Gujarat Town Planning and Urban Development Act, 1976, and that Act is meant for planning, development and improvement of cities, towns and villages. Section 9 deals with development plans and the contents of the draft development plan are provided by Section 12 which is required to be reproduced. It reads as under :

'12. (1) A draft development plan shall generally indicate the manner in which the use of land in the area covered by it shall be regulated and also indicate the manner in which the development therein shall be carried out.

(2) In particular, it shall provide, so far as may be necessary, for all or any of the following matters, namely :

(a) proposal for designating the use of the land for residential, industrial, commercial, agricultural and recreational purposes ;

(b) proposals for the reservation of land for public purposes, such as school, colleges and other educational institutions, medical and public health institutions, markets, social welfare and cultural institutions, theatres and places for public entertainment, public assembly, museums and, galleries, religious buildings, play-grounds, stadiums, open spaces, dairies and for such other purposes as may, from time to time, be specified by the State Government;

(c) proposals for designation of areas for zoological gardens, green belts, natural reserves and sanctuaries;

(d) transport and communications such as roads, highways, pathways, railways, waterways, canals and airport, including their extension and development;

(e) proposals for water supply, drainage, sewage disposal, other public utility amenities and services including supply of electricity and gas ;

(f) reservation of land for community facilities and services ;

(g) proposals for designation of sites for service industries, industrial estates and any other industrial development on an extensive scale ;

(h) preservation, conservation and development of areas of natural scenary and landscape ;

(i) preservation of features, structures or places of historical, natural, architectural or scientific interest and of educational value ;

(j) proposals for flood control and prevention of river pollution ;

(k) proposals for the reservation of land for the purpose of Union, any State, local authority or any other authority or body established by or under any law for the time being in force ;

(l) the filling up or reclamation of low lying, swampy or unhealthy areas or levelling up of land ;

(m) provision for controlling and regulating the use and development of land within the development area, including imposition of conditions and restrictions in regard to the open space to be maintained for buildings, the percentage of building area for a plot, the location, number, size, height, number of storeys and character of buildings and density ofbuilt up area allowed in specified area, the use and purposes to which a building or specified areas of land may, or may not, be appropriated, the sub-divisions of plots, the discontinuance of objectionable uses of land in any area in any specified periods, parking spaces, loading and unloading space for any building and the sizes of projections and advertisement signs and hoardings and other matters as may be considered necessary for carrying out the objects of this Act ;

(n) provision for preventing or removing pollution of water or air caused by the discharge of waste or other means as a result of the use of land ;

(o) such other proposals for public or other purposes as may from time to time be approved by the area development authority or as may be directed by the State Government in this behalf.'

27. That section gives all facets of planning and development and the Corporation or the authority which could be created for the purposes of carrying out such activities would be an authority which might fall under Section 10(20A) of the I.T. Act.

28. As both the questions are answered as above, now the matter will go back to the Income-tax Appellate Tribunal so that the Tribunal may be able to dispose of the matter in accordance with law.

P.S. Poti, C.J.

29. While agreeing with the approach to, and the conclusions on, the questions referred to this court by my learned brother S.L. Tolati J., I would like to add a few words of my own.

30. Article 289(1) of the Constitution of India exempts the property and income of the State from Union taxation. The controversy raised by one of the two questions referred is the scope of the term 'State' in this article. The authorities constituted by enactments, performing some of the functions which normally would be the functions of the Government, have been considered as ' State ' for certain purposes. They would fall within the scope of the term ' State ' for the limited purpose of Part III of the Constitution, and not for any other purpose.

31. The minority judgment of Justice Mathew in Sukhdev's case [1975] 45 Comp Cas 285; 47 FJR 214; : (1975)ILLJ399SC , was the foundation for later decisions which expressed the broader view as to the scope of the term 'State' in Article 12 of the Constitution of India. The narrower test laid down in Rajasthan Electricity Board's case, : (1968)ILLJ257SC , and adopted by the majority in Sukhdev's case was not followed in Airport case (Ramana Dayaram Shetty v. International Airport Authority of India), : (1979)IILLJ217SC . The line of reasoning adopted by Justice Mathew in Sukhdev's case was adopted by Justice Bhagwati for himself, Justice Tulzapurkar and Justice Pathak in Airport case. As point-ed out by Seervai in his book ' Constitutional Law of India ', Third edition, Vol. 1, page 223, the subsequent decision in Hasia's case marks the culmination of the process which Mathew J. initiated as to examination of the meaning of the term ' other authorities ' in Article 12. Justice Bhagwati formulated in that case the tests relevant for determining whether a Corporation was an agency or instrumentality of the government. It may not be necessary to refer to them for the purpose of this case.

32. In dealing with the question, at page 496 of the judgment in Ajay Hasia v. Kkalid Mujib Sehravardi, : (1981)ILLJ103SC , Bhagwati J. said (p. 496):

' It is also necessary to add that merely because a juristic entity may bean 'authority' and, therefore, 'State' within the meaning of Article 12, it may not be elevated to the position of 'State' for the purpose of articles 209, 310 and 311 which find a place in Part XIV. The definition of 'State' in Article 12 which includes an 'authority' within the territory of India or under the control of the Government of India is not (?) limited in its application only to Part III and by virtue of Article 36 to Part IV, it does not extend to the other provisions of the Constitution and, hence, a juristic entity which may be ' State ' for the purpose of Parts III and IV would not be so for the purpose of Part XIV or any other provision of the Constitution.'

33. Article 289(1) is in Part XII of the Constitution of India and another Article in that Part, viz., Article 299, deals with contracts made by the Union or the State in exercise of the executive power. Article 300 relating to suits and proceedings in the name of the Union of India or the Government of a State indicates that those provisions relate only to the State.

34. The formation of a separate legal entity such as a Corporation or a Government owned company may enable Government functions to be assigned to those bodies which may work with a certain amount of autonomy and free from too many bureaucratic restrictions. Such bodies are by their very constitution independent legal entities capable of holding property and capable of suing and being sued. The State is not answerable for their liabilities except to the extent such responsibility may be taken over by any statute or agreement nor would the State be entitled to their assets except to the extent provided by any statutory provisions. Naturally the taxation of such Corporations as the one before us would be as an entity distinct from the State. Therefore, I agree with the conclusion reached by my learned brother Talati J.

35. On the second question which has been elaborately considered by my learned brother Talati J., I would only indicate that the objects and thereasons of the Gujarat Industrial Development Act, 1962, indicate that the development of industrial area and estates is the main plank in the industrial policy of the State of Gujarat and the pace of industrial development, particularly in the underdeveloped regions, requires to be quickened appreciably so as to achieve progressive decentralization of industries. Constituting Corporations by statutes and investing them with powers of autonomy would facilitate expeditious development under the schemes framed for that purpose. The preamble of the Gujarat Industrial Development Act indicates that it is intended to make special provision for securing the orderly establishment of industries in industrial areas and industrial estates in the State of Gujarat. This Act does not purport to be an enactment intended to plan or develop or improve cities, towns or villages. The plain meaning of Section 10(20A) of the I.T. Act is that the purpose of constituting the authorities must be for planning, development or improvement of cities, towns or villages. It is not sufficient if its functions contribute to development or improvement. What is the avowed object of the enactment is material, as rightly referred by my learned brother Talati J. Even assuming that industrial development also would develop a city, town or village, if the Act is not intended for that purpose, but intended for the purpose of industrial development of certain areas which call for such development and generally the development of industries, it would not fall within Section 10(20A) of the I.T. Act, The Gujarat Town Planning and Urban Development Act is an enactment which fits the bill as it establishes a body with the objective of development of town planning schemes in the State of Gujarat.

36. A copy of this judgment shall be sent under the seal of this court and the signature of the Registrar to the Income-tax Appellate Tribunal, Ahmedabad Bench ' C '.

37. The counsel for the assessee prays for a certificate to file appeal to the Supreme Court. Under Section 261 of the I.T. Act, the case is fit for appeal to the Supreme Court. Certificate is granted.


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