B. P. Singh, J. - (1.) Adityapur Industrial Area Development Authority - the appellant herein challenged, by a writ petition, the notice issued by the Deputy Commissioner of Income Tax, TDS Circle, Jamshedpur dated February 14, 2003 to the Manager of the Central Bank of India, Jamshedpur bringing to the notice of the Manager of the Bank that the Finance Act, 2002 had brought about changes in the Income-tax Act and while Section 10(20A) had been omitted, an Explanation was added to Section 10(20) of the Act. The provisions of the Income-tax Act, 1961 as they stood after the amendment obliged the Bank to deduct income-tax at source from the interest accrued on fixed deposit receipts of the appellant/Authority. The Manager of the Bank was required to comply with the provisions and deduct tax at source and report compliance. The High Court of Jharkhand at Ranchi in the aforesaid writ petition pronounced its judgment on May 8, 2003 dismissing the writ petition holding that in view of the amended provisions of the Income-tax Act, the notice was valid and legal. The appellant/ Authority has impugned the judgment and order of the High Court in this appeal by special leave.
(2.) The appellant/Authority has been constituted under the Bihar Industrial Areas Development Authority Act, 1974 to provide for planned development of industrial area, for promotion of industries and matters appurtenant thereto. The appellant/Authority is a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of properties, both moveable and immovable, to contract, and by the said name sue or be sued. The Authority consists of a Chairman, a Managing Director and five other Directors appointed by the State Government. The Authority is responsible for the planned development of the industrial area including preparation of the master plan of the area and promotion of industries in the area and other amenities incidental thereto. The Authority has its own establishment for which it is authorized to frame regulations with prior approval of the State Government. The State Government is authorized to entrust the Authority from time to time with any work connected with planned development, or maintenance of the industrial area and its amenities and matters connected thereto. Section 7 of the Act obliges the Authority to maintain its own fund to which shall be credited moneys received by the Authority from the State Government by way of grants, loans, advances or otherwise, all fees, rents, charges, levies and fines received by the Authority under the Act, all moneys received by the Authority from disposal of its moveable or immovable assets and all moneys received by the Authority by way of loan from financial and other institutions and debentures floated for the execution of a scheme or schemes of the Authority duly approved by the State Government. Unless the State Government otherwise, directs, all moneys received by the Authority shall be credited to its funds which shall be kept with the State Bank of India and/ or one or more of the Nationalized Banks and drawn as and when required by the Authority. Article 289 of the Constitution of India provides as follows:- "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. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. (3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business which Parliament may by law declare to be incidental to the ordinary functions of Government."
(3.) It is also necessary to notice the relevant provisions of the Income-tax Act, 1961. Chapter III of the Income-tax Act relates to incomes which do not form part of total income. The relevant part of Section 10 as it stood before its amendment by the Finance Act of 2002 read as follows:- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included:- . . . . . . . . . . . . . . . (20) the income of a local authority which is chargeable under the head "Income from house property", "Capital gains" or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area; (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." ;