B. P. Jeevan Reddy, J. - (1.) This appeal is preferred on the basis of a certificate of fitness granted by the Calcutta High Court under Section 261 of the Income-tax Act. Two questions were referred for the opinion of the High Court under Section 256(1) of the Income-tax Act. They are:"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is not a 'local authority' as contemplated by Section 2(31) (vi) of the Income-tax Act, 1961 (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee is not entitled to an allowance for its contribution to the employees' provident fund, gratuity funds -
(2.) The High Court answered both the questions in the affirmative - i. e., against the assessee and in favour of the Revenue. In this appeal, however, Sri Tapas Ray, argued only one question, viz., Question No. 1.
(3.) The assessee, Calcutta State Transport Corporation, is a statutory Corporation established under the Road Transport Corporation Act, 1950. It was constituted under a notification dated June 10, 1960. Prior to the constitution of the assessee, Road Transport was managed by a department of the Government of West Bengal. For the first assessment year (1961-62) after its constitution, the assessee did not claim any exemption from tax. But for the next assessment year (1962-63), the assessee contended that since it is a "local authority" within the meaning of Section 2(31) (vi) (definition of 'person'), its income is exempt under and by virtue of clause (20) of Section 10. Clause (20) of Section 10 reads thus: "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 "Interest on securities," "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." ;