1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS.792-793 OF 2014 NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY APPELLANT VERSUS CHIEF COMMISSIONER OF INCOME TAX & ORS. RESPONDENTS JUDGMENT ASHOK BHUSHAN, J. appellant by these appeals has challenged Division Bench judgment of Allahabad High Court dated 28.02.2011 dismissing writ petition filled by appellant challenging notices issued by Income Tax Authority under Section 142 of Income Tax Act, 1961 as well as judgment dated 04.11.2011 rejecting review application. 2. facts giving rise to these appeals are: appellant-New Okhla Industrial Development Authority (hereinafter referred to as Authority ) Signature Not Verified has Digitally signed by ASHWANI KUMAR Date: 2018.07.02 been constituted under Section 3 of U.P. 16:07:43 IST Reason: Industrial Area Development Act, 1976 (hereinafter 2 referred to as Act, 1976 ) by notification dated 17.04.1976. Act, 1976 was enacted by State Legislature to provide for constitution of Authority for development of certain areas in State into industrial and urban township and for matters connected therewith. Under Act, 1976 various functions have been entrusted to Authorities. Notices under Section 142 of Income Tax Act dated 28.07.1998 and 08.08.1998 were issued to appellant. appellant challenging said notices filed writ petition contending that appellant is local authority, hence, is exempted from payment of income tax under Section 10(20) and Section 10(20A) of Income Tax Act, 1961 (hereinafter referred to as I.T.Act, 1961). writ petition was allowed by Division Bench of Allahabad High Court on 14.02.2000 holding that appellant is local body. It was held that it is covered by exemption under Section 10(20A) of I.T.Act, 1961. Division Bench, however, did not go into question whether it is also exempt under Section 10(20). 3. By Constitution (74th Amendment) Act, 1992, Parliament had inserted Part IXA of Constitution providing for constitution of Municipalities. notification dated 24.12.2001 was issued by Governor 3 in exercise of power under proviso to clause (1) of Article 243Q of Constitution of India specifying appellant to be industrial township with effect from date of notification in Official Gazette. notice dated 29.08.2005 was issued by Assistant Commissioner of Income Tax to appellant for furnishing Income Tax Return for assessment year 2003-2004 and 2004-2005. Notice mentioned that after omission of Section 10(20A) w.e.f. 01.04.2003 Authority has become taxable. Notice under Section 142(1) was also enclosed for above purpose. 4. Notices were also issued to different Banks requiring different information. appellant vide its letter dated 20.09.2005 replied notice dated 29.08.2005 stating that it is local authority and exempt from Income Tax hence notice under Section 142 be withdrawn. Income Tax authorities also issued notice to different Banks to deduct TDS as required under Section 194A of Income Tax Act and remit same to Central Government Account. 5. appellant filed writ petition praying for quashing notice under Section 142 of Income Tax Act dated 29.08.2005. appellant also challenged notice dated 31.08.2005 issued under Section 131 to 4 Bankers of appellant. Notice dated 21.09.2005 under Section 194A was also sought to be quashed. writ petition was contested by Income Tax Department. High Court in writ petition decided only question whether New Okhla Industrial Development Authority (NOIDA) is local authority after 01.04.2003 within meaning of Section 10(20) of Income Tax Act, 1961 . Division Bench of High Court relying on two judgments of this Court in Agricultural Produce Market Committee, Narela, Delhi vs. Commissioner of Income Tax and another, (2008) 9 SCC 434 and Adityapur Industrial Area Development Authority vs. Union of India and others, (2006) 5 SCC 100, held that after 01.03.2003 NOIDA is not local authority within meaning of Section 10(20) of I.T.Act, 1961. writ petition was consequently dismissed. Although, appellant had prayed for quashing notices issued to its Bankers and notice under Section 194A but High Court did not advert to said issue. We do not find any necessity to advert to aforesaid issues, since, different concerned Banks have already filed civil appeals challenging judgment of High Court rendered in their writ petition which has been separately challenged by group of civil appeals being Civil Appeal arising 5 out of SLP(C) No.3168 of 2017-Commissioner of Income Tax(TDS), Kanpur vs. Canara Bank where we have considered and decided those issues by our judgment of this date. After dismissal of writ petition dated 28.02.2011 appellant filed review application which too was dismissed on 04.11.2011. Aggrieved by those two judgments Civil Appeal Nos.792-793 of 2014 have been filed by appellant. 6. We have heard Shri Balbir Singh, learned senior counsel appearing for appellant and Shri K Radhakrishnan, learned senior counsel appearing for Revenue. We have also heard various learned counsel appearing for different Banks. 7. Learned counsel for appellant submits that both judgments of this Court relied on by High Court for dismissing writ petition were not applicable and clearly distinguishable. He submits that judgment of this Court in Agricultural Produce Market Committee, Narela(supra) was case where this Court was concerned with status of Agricultural Produce Market Committee which was not akin to appellant in view of statutory provisions contained in Act, 1976, hence, reliance on such case was misplaced. 6 8. With regard to judgment of this Court in Adityapur Industrial Area Development Authority(surpa), it is submitted that this Court essentially has considered in above case regarding exemption under Article 289 of Constitution of India whereas appellant does not rely on Article 289. He further submits that Governor of U.P. has issued notification dated 24.12.2001 under proviso to Article 243Q(1)(a) which provision was not considered in above mentioned two cases, hence, present case is clearly distinguishable from aforesaid two judgments. It is submitted that Municipal Services are being provided by authority, hence, it is local authority entitled to benefit of Section 10(20) of I.T. Act, 1961. constitutional scheme envisages performance of municipal functions even by body which may not be elected and yet performs municipal functions. Article 243Q envisaged such authority and also having been recognised such authority by issuing notification, it is local authority and is entitled for benefit of exemption. There does not exist any elected municipality for industrial development area and it is appellant which is entrusted to discharge municipal functions as enumerated in 12th Schedule under Article 243P of Constitution. appellant was 7 not only creation of statute but has been statutorily charged to perform functions, including municipal functions. appellant is local body having local fund and its accounts are audited by Examiner of Local Fund accounts. appellant also has authorisation by law to levy tax in contradistinction to mere development authority. 9. Learned counsel appearing for Revenue refuting submissions of appellant contends that in view of Explanation added to Section 10(20) of I.T.Act, 1961 by Finance Act, 2002, appellant is no longer covered by definition of local authority . definition of local authority as contained in Explanation is not inclusive definition but being exhaustive definition unless appellant is covered by any of clauses mentioned in Explanation it cannot claim exemption. It is further submitted that omission of Section 10(20A) by same Finance Act clearly indicates that those authorities which were treated as local authority prior to Finance Act is no longer entitled to avail benefit of exemption. It is evident from Constitution 74th Amendment Act, 1992 that Parliament has introduced certain minimum safeguards so that municipalities could act as vibrant democratic units of 8 self-government so as to not leave them to vagaries of laws being enacted by different State Legislatures. Parliament was focussed on making provisions of local self-government alone and not on aspect of municipal services and Legislation on municipalities operates in different legislative field as compared to Legislation on Industrial Development Authorities. After Constitution Amendment both U.P. Municipality Act, 1916 and U.P. Municipal Corporation Act, 1959 have been amended in light of constitutional provisions as contained in Part IXA of Constitution whereas no amendments have been made in Act, 1976 which clearly indicates that authority was never treated as municipality within meaning of Article 243Q. There are large number of factors which must be possessed by municipality under constitutional scheme which is absent in authority. 10. Hence, Constitution never recognised industrial township as referred to in proviso to Article 243Q as equivalent to municipality. Further, notification under proviso to Article 243Q dated 24.12.2001 itself indicates that no municipality has been constituted in area in which appellant operated. Authority clearly is not local authority. Finance Act, 2002 9 brought substantial changes in definition of local authority by defining local authority exclusively and by omitting Section 10(20A), benefits earlier enjoyed by various authorities which were treated local authorities were taken away. provisions of Section 10 sub-section (20) are clear and taking plain and literal meaning of provision, appellant is not entitled for exemption; High court has rightly dismissed writ petition filed by appellant. 11. Learned counsel appearing for Banks have also adopted submissions made by learned counsel for Revenue in support of their contention that appellant is local authority within meaning of Section 10 sub-section (20) of I.T. Tax, 1961. 12. Learned counsel for both parties have relied on various judgments of this Court which shall be referred to while considering submissions made by parties. 13. We have considered submissions made by learned counsel for parties and perused records. 14. only issue which needs to be considered in these appeals is as to whether appellant is local authority within meaning of Section 10(20) as amended by Finance Act, 2002 w.e.f. 01.04.2003. Before we proceed further, it is necessary to notice provisions of 10 Section 10(20) which existed prior to its amendment by Finance Act, 2002 and after amendment w.e.f. 01.04.2003: Section 10(20) prior to Section 10(20) after amendment by Finance amendment by Finance Act, 2002 Act, 2002 income of local income of local authority which is authority which is chargeable under head chargeable under head Income from house Income from house property , Capital gains property , Capital gains or Income from other or Income from other sources or from trade or sources or from trade or business carried on by it business carried on by it which accrues or arises from which accrues or arises from supply of commodity or supply of commodity or service [(not being water or service [(not being water or electricity) within its own electricity) within its own jurisdictional area or from jurisdictional area or from supply of water or supply of water or electricity within or electricity within or outside its own outside its own jurisdictional area; jurisdictional area; Explanation. For purposes of this clause, expression local authority means (i) Panchayat as referred to in clause (d) of article 243 of Constitution87; or (ii) Municipality as referred to in clause (e) of article 243P of Constitution88; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by Government with, control or management of Municipal or local fund; or (iv) Cantonment Board as 11 defined in section 389 of Cantonments Act, 1924 (2 of 1924); 10(20A) any income of authority constituted in Section 10(20A):Omitted by India by or under any law Finance Act, 2002 w.e.f. enacted either for 1.4.2002 purpose of dealing with and satisfying need for housing accommodation or for purpose of planning, development or improvement of cities, towns and villages, or for both; 15. constitutional provisions contained in Part IXA of Constitution of India as inserted by Constitution 74th Amendment Act, 1992 also need to be noted. Article 243P contains definitions. Article 243P(e) defines Municipality which is to following effect: 243P(e) Municipality means institution of self-government constituted under Article 243Q; 16. Article 243Q provides for Constitution of Municipalities which is to following effect: 243Q. Constitution of Municipalities.- (1) There shall be constituted in every State,- (a) Nagar Panchayat (by whatever name called) for transitional area, that is to say, area in transition from rural area to urban area; 12 (b) Municipal Council for smaller urban area; and (c) Municipal Corporation for larger urban area, in accordance with provisions of this Part: Provided that Municipality under this clause may not be constituted in such urban area or part thereof as Governor may, having regard to size of tile area and municipal services being provided or proposed to be provided by industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be industrial township. (2) In this article, transitional area, smaller urban area or larger urban area means such area as Governor may, having regard to population of area, density of population therein, revenue generated for local administration, percentage of employment in non agricultural activities, economic importance or such other factors as he may deem fit, specify by public notification for purposes of this Part. 17. Article 243R pertains to Composition of Municipalities which is to following effect: 243R. Composition of Municipalities.-(1) Save as provided in clause ( 2 ), all seats in Municipality shall be filled by persons chosen by direct election from territorial constituencies in Municipal area and for this purpose each Municipal area shall be divided into territorial constituencies to be known as wards. (2) Legislature of State may, by law, provide- (a)for representation in Municipality of- 13 (i) persons having special knowledge or experience in Municipal administration; (ii) members of House of People and members of Legislative Assembly of State representing constituencies which comprise wholly or partly Municipal area; (iii) members of Council of States and members of Legislative Council of State registered electors within tile Municipal area; (iv) Chairpersons of Committees constituted under clause ( 5 ) of article 243S: Provided that persons referred to in paragraph (i) shall not have right to vote in meetings of Municipality; (b) manner of election of Chairperson of Municipality. 18. Article 243S provides for Constitution and composition of Wards Committees, etc. Article 243T provides for reservation of seats of SC and ST for every Municipality and number of seats reserved. Article 243U provides for duration of Municipalities sub-clause(1)states that every Municipality, unless sooner dissolved under any law for time being in force, shall continue for five years from date appointed for its first meeting and no longer. 19. Article ZF provides for continuance of existing laws and Municipalities which is to following effect: 14 243ZF. Continuance of existing laws and Municipalities.- Notwithstanding anything in this Part, any provision of any law relating to Municipalities in force in State immediately before commencement of Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with provisions of this Part, shall continue to be in force until amended or repealed by competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier: Provided that all Municipalities existing immediately before such commencement shall continue till expiration of their duration, unless sooner dissolved by resolution passed to that effect by Legislative Assembly of that State or, in case of State having Legislative Council, by each House of Legislature of that State. 20. It is also relevant to notice certain provisions of Act, 1976, before we proceed further to examine issue. authority has been constituted by notification dated 17.04.1976 exercising power under Section 3 of Act, 1976. Section 3 provides for Constitution of Authority which is to following effect: 3.(1) State Government may, by notification, constitute for purposes of this Act, authority to be called (Name of area) Industrial Development Authority, for any industrial development area. (2) Authority shall be body corporate. (3) Authority shall consist of following: 15 (a) Secretary to Government, Uttar Pradesh, Member Industries Department or his Nominee not below Chairman rank of Joint Secretary-ex-official. Member Chairman (b) Secretary to Government, Uttar Pradesh, Member Public works Department or his nominee not below rank of Joint Secretary ex-official. Member (c) Secretary to Government, Uttar Pradesh, Local Member Self-Government or his nominee not below rank of joint Secretary-ex official. Member (d) Secretary to Government, Uttar Pradesh, Finance Member Department or his nominee not below rank of Joint Secretary-ex official. (e) Managing Director, U.P. State Industrial Development Member Corporation-ex official. (f) Five members to be nominated by State Government Member by notification. Member (g) Chief Executive Officer. Member Secretary (4) headquarters of Authority shall be at such place as may be notified by State Government. (5) procedure for conduct of meetings for Authority shall be such as may be prescribed. (6) No act or proceedings of Authority shall be invalid by reason of existence of any vacancy in or defect in constitution of Authority. 16 21. Section 6 provides for function of Authority which is to following effect: 6.(1) object of Authority shall be to secure planned development of industrial development area. (2) Without prejudice to generality of objects of Authority, Authority shall perform following functions : (b) to prepare plan for development of industrial development area; (c) to demarcate and develop sites for industrial, commercial and residential purpose according to plan; (d) to provide infrastructure for industrial, commercial and residential purposes; (e) to provide amenities; (f) to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial, commercial or residential purposes; (g) to regulate erection of buildings and setting up of industries: and (h) to lay down purpose for which particular site or plot of land shall be used, namely for industrial or commercial or residential purpose or any other specified purpose in such area. 22. Section 7 deals with power of Authority in respect of transfer of land. Section 8 deals with power to issue directions in respect of creation of building. Section 9 deals with ban on erection of building in 17 contravention of regulations. Section 10 deals with power to require proper maintenance of site or building. Section 11 empowers Authority to levy of tax. By Section 12 certain provisions of U.P. Urban Planning and Development Act, 1973 has been made applicable. Chapter VII deals Finance, Accounts and Audit. 23. We may also notice notification dated 24.12.2001 issued by Governor in exercise of powers under proviso to Clause (1) of Article 243Q. notification is as follows: NOTIFICATION No.6709/77-4-2001-56 Bha/99 In exercise of powers under proviso to Clause (1) of Article 243Q of Constitution of India, Governor, having regard to size of New Okhla Industrial Development Area, which has been declared as industrial development area by Government Notification No.4157-HI/XVIII-11, dated April 17, 1976 and municipal services being provided by New Okhla Industrial Development Authority in that area, is pleased to specify said New Okhla Industrial Development Area to be industrial township with effect from date of publication of this notification in official gazette. By order, Sd/- (Anoop Mishra) Secretary. 18 24. submissions made by parties can be dealt with in following two heads: A. status of Authority by virtue of notification dated 24.12.2001 issued under Clause (1) of Article 243Q. B. Whether appellant is local authority within meaning of Section 10 sub-section (20) as explained in Explanation added by Finance Act, 2002. (A) Part IXA of Constitution: 25. Statement of Objects and Reasons of Constitution 74th Amendment Act, 1992, briefly outlined object and purpose for which Constitution Amendment was brought in. It is useful to refer to Statement of Objects and Reasons of Constitution Amendment which is to following effect: STATEMENT OF OBJECTS AND REASONS In many States local bodies have become weak and ineffective on account of variety of reasons, including failure to hold regular elections, prolonged supersessions and inadequate devolution of powers and functions. As result, Urban Local Bodies are not able to perform effectively as vibrant democratic units of self-government. 2. Having regard to these inadequacies, it is considered necessary that provisions relating to Urban Local Bodies are incorporated in Constitution particularly for- (i) putting on firmer footing relationship between State Government and Urban Local Bodies with respect to- 19 (a) functions and taxation powers; and (b) arrangements for revenue sharing; (ii) Ensuring regular conduct of elections; (iii) ensuring timely elections in case of supersession; and (iv) providing adequate representation for weaker sections like Scheduled Castes, Scheduled Tribes and women. 26. Kishansing Tomar Municipal Corporation Of City Of Ahmedabad Ad Others, 2006 (8) SCC 352, noticing object and purpose of Constitution 74 th Amendment Act, 1992 stated as following: 12. It may be noted that Part IX-A was inserted in Constitution by virtue of Constitution (Seventy-fourth) Amendment Act, 1992. object of introducing these provisions was that in many States local bodies were not working properly and timely elections were not being held and nominated bodies were continuing for long periods. Elections had been irregular and many times unnecessarily delayed or postponed and elected bodies had been superseded or suspended without adequate justification at whims and fancies of State authorities. These views were expressed by then Minister of State for Urban Development while introducing Constitution Amendment Bill before Parliament and thus new provisions were added in Constitution with view to restore rightful place in political governance for local bodies. It was considered necessary to provide constitutional status to such bodies and to ensure regular and fair conduct of elections. In Statement of Objects and Reasons in Constitution Amendment Bill relating to urban local bodies, it was stated: 20 27. constitutional provisions as contained in Part IXA delineate that Constitution itself provided for constitution of Municipalities, duration of Municipalities, powers of Authorities and responsibilities of Municipalities. Municipalities are created as vibrant democratic units of self-government. duration of Municipality was provided for five years contemplating regular election for electing representatives to represent Municipality. special features of Municipality as was contemplated by constitutional provisions contained in Part IXA cannot be said to be present in Authority as delineated by statutory scheme of Act, 1976. It is true that various municipal functions are also being performed by Authority as per Act, 1976 but mere facts that certain municipal functions were also performed by authority it cannot acquire essential features of Municipality which are contemplated by Part IXA of Constitution. main thrust of argument of learned counsel for appellant that High Court having not adverted to notification dated 24.12.2001 issued under proviso to Article 243Q(1) judgments relied on by High Court 21 for dismissing writ petition is not sustainable. We thus have to focus on proviso to Article 243Q(1). For purpose and object of industrial township referred to therein whether industrial township mentioned therein can be equated with Municipality as defined under Article 243P(e). Article 243P(e) provides that Municipality means institution of self-government constituted under Article 243Q. Whether appellant is institution of self-government constituted under Article 243Q is main question to be answered? Sub-clause (1) of Article 243Q provides that there shall be constituted in every State- Nagar Panchayat, Municipal Council and Municipal Corporation, in accordance with provisions of this Part. proviso to sub-clause (1) provides that: Provided that municipality under this clause may not be constituted in such urban area or part thereof as Governor may, having regard to size of area and municipal services being provided or proposed to be provided for industrial establishment in that area and such other factors as may he may deem fit, by public notification, specify to be industrial township. . 28. Thus, proviso does not contemplate constitution of industrial establishment as Municipality rather clarifies exception where Municipality under clause 22 (1) of Article 243Q may not be constituted in urban area. proviso is exception to constitution of Municipality as contemplated by sub-clause (1) of Article 243Q. No other interpretation of proviso conforms to constitution scheme. 29. Constitution Bench of this Court had noticed principles of statutory interpretation of proviso in S. Sundaram Pillai and others vs. V.R. Pattabiraman and others, 1985(1) SCC 591. following has been laid down by this Court in paragraphs 37 to 43: 37. In short, generally speaking, proviso is intended to limit enacted provision so as to except something which would have otherwise been within it or in some measure to modify enacting clause. Sometimes proviso may be embedded in main provision and becomes integral part of it so as to amount to substantive provision itself. 38. Apart from authorities referred to above, this Court has in long course of decisions explained and adumbrated various shades, aspects and elements of proviso. In State of Rajasthan v. Leela Jain,AIR 1965 SC 1296, following observations were made: So far as general principle of construction of proviso is concerned, it has been broadly stated that function of proviso is to limit main part of section and carve out something which but for proviso would have been within operative part. 23 39. In case of STO, Circle-I, Jabalpur v. Hanuman Prasad, AIR 1967 SC 565, Bhargava, J. observed thus: It is well-recognised that proviso is added to principal clause primarily with object of taking out of scope of that principal clause what is included in it and what legislature desires should be excluded. 40. In Commissioner of Commercial Taxes v. R.S. Jhaver, AIR 1968 SC 59, this Court made following observations: Generally speaking, it is true that proviso is exception to main part of section; but it is recognised that in exceptional cases proviso may be substantive provision itself. 41. In Dwarka Prasad v. Dwarka Das Saraf, AIR 1975 SC 1758 Krishna Iyer, J. speaking for Court observed thus: (SCC pp. 136-37, paras 16, 18) There is some validity in this submission but if, on fair construction, principal provision is clean proviso cannot expand or limit it. Sometimes proviso is engrafted by apprehensive draftsman to remove possible doubts, to make matters plain, to light up ambiguous edges. Here, such is case. * * * If rule of construction is that prima facie proviso should be limited in its operation to subject-matter of enacting clause, stand we have taken is sound. To expand enacting clause, inflated by proviso, sins against fundamental rule of construction that proviso must be considered in relation to 24 principal matter to which it stands as proviso. proviso ordinarily is but proviso, although golden rule is to read whole section, inclusive of proviso, in such manner that they mutually throw light on each other and result in harmonious construction. 42. In Hiralal Rattanlal v. State of U.P., 1973 (1)SCC 216, this Court made following observations: [SCC para 22, p. 224: SCC (Tax) p. 315] Ordinarily proviso to section is intended to take out part of main section for special treatment. It is not expected to enlarge scope of main section. But cases have arisen in which this Court has held that despite fact that provision is called proviso, it is really separate provision and so-called proviso has substantially altered main section. 43. We need not multiply authorities after authorities on this point because legal position seems to be clearly and manifestly well established. To sum up, proviso may serve four different purposes: (1) qualifying or excepting certain provisions from main enactment: (2) it may entirely change very concept of intendment of enactment by insisting on certain mandatory conditions to be fulfilled in order to make enactment workable: (3) it may be so embedded in Act itself as to become integral part of enactment and thus acquire 25 tenor and colour of substantive enactment itself; and (4) it may be used merely to act as optional addenda to enactment with sole object of explaining real intendment of statutory provision. 30. Applying rules of interpretation as laid down by this Court, it is clear that proviso is exception to constitutional provisions which provide that there shall be constituted in every State Nagar Panchayat, Municipal Council and Municipal Corporation. Exception is covered by proviso that where industrial township is providing municipal services Governor having regard to size of area and municipal services either being provided or proposed to be provided by industrial establishment specify it to be industrial township. words industrial township have been used in contradiction of Nagar Panchayat, Municipal Council and Municipal Corporation. object of issuance of notification is to relieve mandatory requirement of constitution of Municipality in State in circumstances as mentioned in proviso but exemption from constituting Municipality does not lead to mean that industrial establishment which is providing municipal services to industrial township is same as 26 Municipality as defined in Article 243P(e). We have already noticed that Article 243P(e) defines Municipality as institution of self-government constituted under Article 243Q, word constituted used under Article 243P(e) read with Article 243Q clearly refers to constitution in every State Nagar Panchayat, Municipal Council or Municipal Corporation. Further, words in proviso Municipality under this clause may not be constituted clearly means that words may not be constituted used in proviso are clearly in contradistinction with word constituted as used in Article 243P(e) and Article 243Q. Thus, notification under proviso to Article 243Q(1) is not akin to constitution of Municipality. We, thus, are clear in our mind that industrial township as specified under notification dated 24.12.2001 is not akin to Municipality as contemplated under Article 243Q. 31. At this juncture, we may also notice two judgments as relied on by High Court and three more judgments where Article 243Q came for consideration. first judgment which needs to be noticed is Adityapur Industrial Area Development Authority (supra). Adityapur Industrial Development Authority was constituted under Bihar Industrial Area Development 27 Authority Act, 1974. In paragraph 2 of judgment constitution of authority was noticed which is to following effect: 2. appellant Authority has been constituted under Bihar Industrial Area Development Authority Act, 1974 to provide for planned development of industrial area, for promotion of industries and matters appurtenant thereto. appellant Authority is body corporate having perpetual succession and common seal with power to acquire, hold and dispose of properties, both movable and immovable, to contract, and by said name sue or be sued. Authority consists of Chairman, Managing Director and five other Directors appointed by State Government. Authority is responsible for planned development of industrial area including preparation of master plan of area and promotion of industries in area and other amenities incidental thereto. Authority has its own establishment for which it is authorised to frame regulations with prior approval of State Government. State Government is authorised to entrust Authority from time to time with any work connected with planned development, or maintenance of industrial area and its amenities and matters connected thereto. Section 7 of Act obliges Authority to maintain its own fund to which shall be credited moneys received by Authority from State Government by way of grants, loans, advances or otherwise, all fees, rents, charges, levies and fines received by Authority under Act, all moneys received by Authority from disposal of its movable or immovable assets and all moneys received by Authority by way of loan from financial and other institutions and debentures floated for execution of scheme or schemes of Authority duly approved by State Government. Unless State Government directs 28 otherwise, all moneys received by Authority shall be credited to its funds which shall be kept with State Bank of India and/or one or more of nationalised banks and drawn as and when required by Authority. 32. On question as to whether Adityapur Industrial Area Development Authority was covered within meaning of local authority as per Section 10(20) as amended by Finance Act, 2002, High Court held that appellant authority could not have claimed benefit under provisions after 01.04.2003. In paragraphs 6 and 7 following was held: 6. It would thus be seen that income of local authority chargeable under head Income from house property , Capital gains or Income from other sources or from trade or business carried on by it was earlier excluded in computing total income of Authority of previous year. However, in view of amendment, with effect from 1-4-2003 Explanation local authority was defined to include only authorities enumerated in Explanation, which does not include authority such as appellant. At same time Section 10(20-A) which related to income of authority constituted in India by or under any law enacted for purpose of dealing with and satisfying need for housing accommodation or for purpose of planning, development or improvement of cities, towns and villages, which before amendment was not included in computing total income, was omitted. Consequently, benefit conferred by sub-section (20-A) on such authority was taken away. 29 7. High Court by its impugned judgment and order held that in view of fact that Section 10(20-A) was omitted and Explanation was added to Section 10(20) enumerating local authorities contemplated by Section 10(20), appellant Authority could not claim any benefit under those provisions after 1-4-2003. It further held that exemption under Article 289(1) was also not available to appellant Authority as it was distinct legal entity, and its income could not be said to be income of State so as to be exempt from Union taxation. said decision of High Court is impugned in this appeal. 33. One of submissions which was raised before this Court was that exemption under Article 289(1), was also available to appellant-Authority. said submission was considered and negativated. Apart from rejecting claim under Article 289(1), this court noticing Section 10(20) has held in paragraph 13: 13. Applying above test to facts of present case it is clear that benefit, conferred by Section 10(20-A) of Income Tax Act, 1961 on assessee herein, has been expressly taken away. Moreover, Explanation added to Section 10(20) enumerates local authorities which do not cover assessee herein. Therefore, we do not find any merit in submission advanced on behalf of assessee. 34. In present case although exemption under Article 289 was not claimed or contended but above judgment 30 cannot be said to be not relevant to present case since, Court has also dwelled upon Section 10(20) as amended w.e.f. 01.04.2003. We, thus, do not accept submission of appellant that above case was not relevant for present case and was wrongly relied on by High Court. 35. second judgment which is relied on by High court is Agricultural Produce Market Committee, Narela (supra). Agricultural Produce Market Committee was constituted under Delhi Agricultural Produce Marketing (Regulation) Act, 1998. question arose as to whether Agricultural Market Committee is local authority under Explanation to Section 10(20) of Income Tax Act, 1961. In above context it was noticed that all Agricultural Market Committees at different places were enjoying exemption from income tax under Section 10(20) prior to its amendment by Finance Act, 2002 w.e.f. 01.04.2003. definition of local authority under Section 3(31) of General Clauses Act, 1897 is as follows: local authority shall mean municipal committee, district board, body or port Commissioners or other authority legally entitled to, or entrusted by Government with, control or management of municipal or local fund; 31 36. In above case this Court noticed in extenso provisions of Delhi Agricultural Produce Marketing (Regulation) Act, 1998 and provisions of Section 10(20) of Income Tax Act, 1961. Definition of local authority as contained in Explanation to Section 10(20) and Section 3(31) of General Clauses Act was also noticed and discussed. This Court held that definition of local authority in General Clauses Act under Section 3(31) is no longer applicable after amendment of Section 10(20) by Finance Act, 2002. Following was laid down by this Court in paragraphs 31 and 32: 31. Certain glaring features can be deciphered from above comparative chart. Under Section 3(31) of General Clauses Act, 1897, local authority was defined to mean Municipal Committee, District Board, Body of Port Commissioners or other authority legally entitled to control or management of municipal or local fund . words other authority in Section 3(31) of 1897 Act have been omitted by Parliament in Explanation/definition clause inserted in Section 10(20) of 1961 Act vide Finance Act, 2002. Therefore, in our view, it would not be correct to say that entire definition of word local authority is bodily lifted from Section 3(31) of 1897 Act and incorporated, by Parliament, in said Explanation to Section 10(20) of 1961 Act. This deliberate omission is important. 32 32. It may be noted that various High Courts had taken view prior to Finance Act, 2002 that AMC(s) is local authority . That was because there was no definition of word local authority in 1961 Act. Those judgments proceeded primarily on functional tests as laid down in judgment of this Court vide para 2 in R.C. Jain. We quote hereinbelow para 2 which reads as under: (SCC pp. 311-12) 2. Let us, therefore, concentrate and confine our attention and enquiry to definition of local authority in Section 3(31) of General Clauses Act. proper and careful scrutiny of language of Section 3(31) suggests that authority, in order to be local authority, must be of like nature and character as Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of distinctive attributes and characteristics of Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by Government with, control and management of municipal or local fund. What then are distinctive attributes and characteristics, all or many of which Municipal Committee, District Board or Body of Port Commissioners shares with any other local authority? First, 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 defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by inhabitants of area. Next, they must enjoy certain degree of autonomy, with freedom to decide for themselves questions of policy affecting area administered by them. autonomy may not be complete and degree of dependence may vary considerably but, appreciable measure of autonomy there must 33 be. Next, they must be entrusted by statute with such governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to inhabitants of locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services, etc. etc. Broadly we may say that they may be entrusted with performance of civic duties and functions which would otherwise be governmental duties and functions. Finally, they must have power to raise funds for furtherance of their activities and fulfilment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of fund must vest in authority. 37. Court further held that Explanation under Section 10(20) provides exhaustive definition and tests laid down by this Court in earlier case i.e. Union of India and others vs. R.C. Jain and others, 1981 (2) SCC 308, are no longer applicable. In paragraph 35 following was stated: 35. One more aspect needs to be mentioned. In R.C. Jain test of like nature was adopted as words other authority came after words Municipal Committee, District Board, Body of Port Commissioners . Therefore, words other authority in Section 3(31) took colour from earlier words, namely, Municipal Committee, District Board or Body of Port Commissioners . This is how functional test is evolved in R.C. Jain2. However, as 34 stated earlier, Parliament in its legislative wisdom has omitted words other authority from said Explanation to Section 10(20) of 1961 Act. said Explanation to Section 10(20) provides definition to word local authority . It is exhaustive definition. It is not inclusive definition. words other authority do not find place in said Explanation. Even, according to appellant(s), AMC(s) is neither Municipal Committee nor District Board nor Municipal Committee nor panchayat. Therefore, in our view functional test and test of incorporation as laid down in R.C. Jain2 is no more applicable to Explanation to Section 10(20) of 1961 Act. Therefore, in our view judgment of this Court in R.C. Jain2 followed by judgments of various High Courts on status and character of AMC(s) is no more applicable to provisions of Section 10(20) after insertion of Explanation/definition clause to that sub-section vide Finance Act, 2002. 38. This Court held that Agricultural Marketing Committee is also not covered by words Municipal Committee, District Board, Body of Port Commissioners as used in Explanation of Section 10(20). 39. In this context, we also refer to judgment of this Court in Saij Gram Panchayat vs. State of Gujarat others, 1999 (2) SCC 366. This Court had occasion to consider in above case Gujarat Industrial Development Act, 1962, provisions of Article 243Q and Gujarat Municipalities Act, 1963. 35 40. This Court held that Gujarat Industrial Development Act operates in totally different sphere from Parts IX and IXA of Constitution and Gujarat Panchayats Act, 1961. In paragraph 16 of judgment following was held: Gujarat Industrial Development Act operates in totally different sphere from Parts IX and IX-A of Constitution as well as Gujarat Panchayats Act, 1961 and Gujarat Municipalities Act, 1962 latter being provisions dealing with local self-government, while former being Act for industrial development and orderly establishment and organisation of industries in State. 41. It is, however, true that in above case this Court was not concerned with issue which has arisen in present case and Court was concerned with different controversy. 42. We, thus, conclude that authority constituted under Act, 1976 with regard to which notification under proviso to Article 243Q(1) dated 24.12.2001 has also been issued is not akin to Municipality constituted under Article 243Q(1). B. Section 10(20) as amended by Finance Act, 2002 43. We have already noticed that by Finance Act, 2002 Explanation has been added to Section 10(20) of 36 I.T. Act, 1961 and Section 10(20A) has been omitted. Prior to Finance Act, 2002 there being no definition of local authority under I.T. Act, provisions of Section 3(31) of General Clauses Act, 1897 were pressed into service while interpreting extent and meaning of local authority. Explanation having now contained exhaustive definition of local authority, definition of local authority as contained in Section 3(31) of General Clauses Act, 1892 is no more applicable. Section 3 of General Clauses Act begins with words In this Act, and in all Central Acts and Regulations made after commencement of this Act, unless there is anything repugnant in subject or context,-.... definition given of local authority under Section 3(31) does not now govern field in view of express omission of expression all other authority . This Court has already in Agricultural Produce Market Committee, Narela (supra), held that definition under Section 3(31) of General Clauses Act is now no more applicable to interpret local authority under Section 10(20) of I.T. Act. Before we proceed further it shall be useful to notice certain well settled principles of statutory interpretation of fiscal 37 statutes. This Court in A.V. Fernandez vs. State of Kerala, AIR 1957 SC 657 laid following: (29) It is no doubt true that in construing fiscal statutes and in determining liability of subject to tax one must have regard to strict letter of law and n ot merely to spirit of statute or substance of law. If Revenue satisfies Court that case falls strictly within provisions of law, subject can be taxed. If on other hand, case is not covered within four corners of provisions of taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into intentions of legislature and by considering what was substance of matter. We must of necessity, therefore, have regard to actual provisions of Act and rules made thereunder before we can come to conclusion that appellant was liable to assessment as contended by Sales Tax Authorities. 44. This Court in Rajasthan Rajya Sahakari Spinning and Ginning Mills Federation Limited vs. Deputy Commissioner of Income Tax, Jaipur, 2014(11) SCC 672 again reiterated that there has to be strict interpretation of taxing statutes and further fact that one class of legal entities are given some benefit which is specifically stated in Act does not mean that legal entities not referred to in Act would also get same benefit. Following was laid down in paragraph 23: 38 23. We are also of view that in all tax matters one has to interpret taxation statute strictly. Simply because one class of legal entities are given some benefit which is specifically stated in Act does not mean that legal entities not referred to in Act would also get same benefit. As stated by this Court on several occasions, there is no equity in matters of taxation. One cannot read into section which has not been specifically provided for and therefore, we do not agree with submissions of learned counsel appearing for appellant and we are not prepared to read something in section which has not been provided for. judgments referred to hereinabove support view which we have expressed here. 45. It shall be useful to refer to Explanatory Notes on Finance Act, 2002. Explanatory Notes both on Section 10(20) and Section 10(20A) are relevant and contained in paragraph 12.2 to 12.4 and 13.1 to 13.4. Paragraphs 12.2. to 12.4 under heading: Income of certain Local Authorities to become taxable are to following effect: 12.2 Through Finance Act, 2002, this exemption has been restricted to Panchayats and Municipalities as referred to in Articles 243(d) and 243(p)(e) of Constitution of India respectively. Municipal Committees and District Boards, legally entitled to or entrusted by Government with control or management of Municipal or local fund and Cantonment Boards as defined under section 3 of Cantonments Act, 1924. 39 12.3 exemption under clause (20) of section 10 would, therefore, not be available to Agricultural Marketing Societies and Agricultural Marketing Boards, etc., despite fact that they may be deemed to be treated as local authorities under any other Central or State Legislation. Exemption under this clause would not be available to port trusts also. 12.4 This amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to assessment year 2003 2004 and subsequent assessment years. 46. Further paragraphs 13.1 to 13.4 of Explanatory Notes contained heading: Income of certain Housing Boards etc. to become taxable on deletion of Clause (20A), are as stated below: 13.1 Under existing provisions contained in clause (20A) of section 10, income of Housing Boards or other statutory authorities set up for purpose of dealing with or satisfying need for housing accommodations or for purpose of planning, development or improvement of cities, towns and villages is exempt from payment of income tax. 13.2 Through Finance Act, 2002 clause (20A) of section 10 has been deleted so as to withdraw exemption available to abovementioned bodies. income of Housing Boards of States and of Development Authorities would, therefore, also become taxable. 40 13.3 Under section 80G, donation made to housing authorities, etc. referred to in clause (20A) of section 10 is eligible for 50% deduction from total income in hands of donors. Since clause (20A) of section 10 has been deleted, donation to housing authorities etc. would not be eligible for deduction in hands of donors and this may result in drying up of donations. To continue incentive to donation made to housing authorities etc., section 80G has been amended so as to provide that 50% of sum paid by assessee to authority constituted in India by or under any law enacted either for purpose of dealing with and satisfying need for housing accommodation or for purpose of planning, development or improvement of cities, towns and villages, or for both, shall be deducted from total income of such assessee. 13.4 These amendments will take effect from lst April, 2003 and will, accordingly, apply in relation to assessment year 2003 2004 and subsequent assessment years. 47. explanatory note clearly indicates that by Finance Act, 2002 exemption under Section 10(20) has been restricted to Panchayats and Municipalities as referred to in Articles 243P(d) and 243P(e). Further by deletion of Clause (20A), income of Housing Boards of States and of Development Authorities became taxable. 41 48. On writ petition filed by appellant before Allahabad High Court where notices issued in year 1998 under Section 142 of Income Tax Act was challenged vide its judgment dated 14.02.2000 High Court held that appellant s case comes squarely under Section 10(20A) of Income Tax Act, hence, appellant was liable to be exempted under said Act, although, High Court did not express any opinion on question whether appellant was exempted under Section 10(20) in that judgment. 49. After omission of Section 10(20A) only provision under which Body or Authority can claim exemption is Section 10(20). Local authority having been exhaustively defined in Explanation to Section 10(20) entity has to fall under Section 10(20) to claim exemption. It is also useful to notice that this Court laid down in State of Gujarat and others vs. ESSAR Oil Limited and another, 2012 (3) SCC 522, that person invoking exception or exemption provision to relieve him of tax liability must establish clearly that he is covered by said provision. It is useful to extract paragraph 88 which is to following effect: 88. This Court in Novopan case, 1994 Supp (3) SCC 606, held that principle that in case 42 of ambiguity, taxing statute should be construed in favour of assessee, does not apply to construction of exception or exempting provision, as same have to be construed strictly. Further this Court also held that person invoking exception or exemption provision to relieve him of tax liability must establish clearly that he is covered by said provision and in case of doubt or ambiguity, benefit of it must go to State. 50. For interpreting explanation this Court in s. Sundaram Pillai and others vs. V.r. Pattabiraman and others, 1985 (1) SCC 591, laid down in paragraphs 47 and 53 as follows: 47. Swarup in Legislation and Interpretation very aptly sums up scope and effect of Explanation thus: Sometimes Explanation is appended to stress upon particular thing which ordinarily would not appear clearly from provisions of section. proper function of Explanation is to make plain or elucidate what is enacted in substantive provision and not to add or subtract from it. Thus Explanation does not either restrict or extend enacting part; it does not enlarge or narrow down scope of original section that it is supposed to explain.... Explanation must be interpreted according to its own tenor; that it is meant to explain and not vice versa. (pp. 297-98) 53. Thus, from conspectus of authorities referred to above, it is manifest 43 that object of Explanation to statutory provision is (a) to explain meaning and intendment of Act itself, (b) where there is any obscurity or vagueness in main enactment, to clarify same so as to make it consistent with dominant object which it seems to subserve, (c) to provide additional support to dominant object of Act in order to make it meaningful and purposeful, (d) Explanation cannot in any way interfere with or change enactment or any part thereof but where some gap is left which is relevant for purpose of Explanation, in order to suppress mischief and advance object of Act it can help or assist Court in interpreting true purport and intendment of enactment, and (e) it cannot, however, take away statutory right with which any person under statute has been clothed or set at naught working of Act by becoming hindrance in interpretation of same. 51. This Court in Adityapur Industrial Area Development Authority (supra) after considering Section 10(20) as amended by Finance Act, 2002 and consequences of deletion of Section 10(20A) has laid down following in paragraph 13: 13. Applying above test to facts of present case it is clear that benefit, conferred by Section 10(20-A) of Income Tax Act, 1961 on assessee herein, has been expressly taken away. Moreover, Explanation added to Section 10(20) 44 enumerates local authorities which do not cover assessee herein. Therefore, we do not find any merit in submission advanced on behalf of assessee. 52. It is also relevant to notice that this Court in Gujarat Industrial Development Corporation vs. Commissioner of Income Tax, 1997 (7) SCC 17, after considering provisions of Section 10(20A) of I.T. Act held that Gujarat Industrial Development Corporation is entitled for exemption under Section 10(20A). Gujarat Industrial Development Corporation was held to be entitled for exemption under Section 10(20A) at time when provision was in existence in statute book and after its deletion from statute book exemption is no more available. Now, reverting back to Section 10(20) as amended by Finance Act, 2002, same has also come for consideration before different High Courts. Division Bench of Allahabad High court in Krishi Utpadan Mandi Samiti vs. Union of India and another, (2004) 267 ITR 460 stated following: bare perusal of Explanation of Section 10(20) shows that now only four entities are local authorities for purpose of Section 10(20), namely, (i) Panchayat, (ii) Municipality; (iii) Municipal Committee and District Board; (iv) Cantonment Board Krishi Utpadan Mandi Samiti is not one of entities mentioned in Explanation to Section 10(20). 45 It may be noted that Explanation to Section 10(20) uses word 'means' and not word 'includes'. Hence, it is not possible for this Court to extend definition of 'local authority' as contained in Explanation to Section 10(20), vide P. Kasilingam v. P.S.G. College of Technology, AIR 1995 SC 1395 (para 19). It is also not possible to refer to definitions in other Acts, as IT Act now specifically defines 'local authority'. It is well settled that in tax matters literal rule of interpretation applies and it is not open to Court to extend language of provision in Act by relying on equity, inference, etc. It is first principle of interpretation that statute should be read in its ordinary, natural and grammatical sense as observed by Supreme Court of India: "In construing statutory provision first and foremost rule of construction is literary construction. All that Court has to see at very outset is what does provision say. If provision is unambiguous and if from provision legislative intent is clear, Court need not call into aid other rules of construction of statutes. other rules of construction are called into aid only when legislative intent is not clear" vide Hiralal Ratanlal v. STO, AIR 1973 SC 1034; 53. Division Bench of Delhi High Court also in Agricultural Produce Market Committee vs. Commissioner of Income-tax, (2006)156 ITR 286 had occasion to consider 46 Section 10(20) as amended w.e.f. 01.04.2003 where High court in paragraph 8 has stated following: 8. most striking feature of Explanation is that same provides exhaustive meaning to expression "local authority". word "means" used in Explanation leaves no scope for addition of any other entity as 'local authority' to those enlisted in Explanation. In other words, even if entity constitutes 'local authority' for purposes of General Clauses Act, 1897 or for purposes of any other enactment for that matter, it would not be so construed for purposes of section 10(20) of Act unless it answers description of one of those entities enumerated in Explanation. Mrs. Ahlawat did not make any attempt to bring her case under clauses (i), (ii) and (iv) of Explanation and in our opinion rightly so because appellant committee cannot by any process of reasoning be construed as Panchayat as referred to in clause (d) of Art. 243 of Constitution of India, municipality in terms of clause (e) of Art. 243P of Constitution of India or Cantonment Board as defined under section 3 of Cantonments Act, 1924. What she argued was that looking to nature of functions enjoined upon appellant committee, it must be deemed to be municipal committee within meaning of that expression in clause (iii) of Explanation. We regret our inability to accept that submission. We say so for two distinct reasons. Firstly because expression "municipal committee" appears in taxing statute and must, Therefore, be construed strictly. It is fairly well-settled by long line of decisions rendered by Supreme Court that while interpreting taxing statute, one has simply to look to what is clearly stated therein. There is, in fiscal statutes, no room for any intendment nor is there any equity about levy sanctioned under same. following passage from Cape Brandy Syndicate v. IRC 1921 (1) KB 64 has been 47 approved by Apex Court in decisions rendered by their Lordships. "in taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied, One can only look fairly at language used." 54. We fully endorse views taken by High Court in above two judgments. 55. Now, reverting back to Explanation to Section 10(20), these are entities which mean local authority. submission of appellant is that appellant is covered by Clause (ii) of Explanation i.e. Municipality as referred to in clause (e) of Article 243P of Constitution . We, while discussing above provisions, have already held that appellant is not covered by word/expression of Municipality in clause (e) of Article 243P. Thus, appellant is not clearly included in sub-clause (ii) of Explanation. It is not even case of appellant that appellant is covered by Section 10(20) except clause (ii). 56. Thus, we are of considered opinion that appellant is not covered by definition of local authority as contained in Explanation to Section 10(20). 48 57. In view of what has been stated above, we dismiss these appeals. .J. ( A.K. SIKRI ) J. ( ASHOK BHUSHAN ) NEW DELHI, JULY 02, 2018. New Okhla Industrial Development Authority v. Chief Commissioner of Income-tax & Or