P.K. Balasubramanyan, C.J. - (1.) WHEN this writ petition came up for admission on the adjourned date, it was submitted by the counsel for the parties that the pleadings are complete and the writ petition itself may be heard and finally disposed of. Accordingly, we have heard the writ petition in full and the judgment is being pronounced thereon.
(2.) THE petitioner is the Adityapur Industrial Area Development Authority, a body corporate under the Bihar Industrial Area Development Authority Act, 1974 having perpetual succession and a common seal. THE petitioner challenges Annexure-P/1 issued by the Deputy Commissioner of Income Tax, T.D.S. Circle, Jamshedpur to the Central Bank of India, the Petitioner's Banker. Admittedly, interest as due to the petitioner from Central Bank of India on the fixed deposits of the petitioner in the Bank. In view of the amendment brought to Section 10(20) of the income Tax Act by the Finance Act 2002 explaining which are the local authorities whose incomes are not chargeable to tax under the Act and the deletion of Section (20A) providing for exclusion of the income of an authority constituted under any law enacted for the purpose of meeting the need for housing accommodation and for the purpose of planning, development or improvement of the cities, towns and villages, the Deputy Commissioner of Income Tax. T.D.S. Circle, Jamshedpur informed the Manager of the Central Bank of India that the bank was bound to deduct tax at source from the interest accrued on the fixed deposit of the petitioner-authority for the concerned period. It is this notice that is sought to be challenged by the petitioner on the ground that the income of the petitioner-authority is not liable to be assessed under the Indian Income Tax Act in view of Article 289(1) of the Constitution of India and consequently, the notice (Annexure P/1) was liable to be quashed. We may mention here that the petitioner-authority has not questioned the stand of the authority under the Income Tax Act that the income of the petitioner-authority was not liable to exclusion in terms of Section 10(20) of the Income Tax Act, as amended. Nor has the petitioner-authority questioned the deletion of Sub-section (20-A) of Section 10 of the Income Tax Act or questioned the stand of the department that in view of the deletion the petitioner- authority was not entitled to the exclusion of its income. Learned counsel for the petitioner pitched his case only on the exemption contained in Article 289(1) of the Constitution of India. The said provision reads "the property and income of a State shall be exempt from union taxation." According to counsel, since the petitioner-authority was created under the Bihar Industrial Development Authority Act, 1974, the property owned by the petitioner was the property of the State Government and the income derived by it, was the income of the State Government. It was contended that Article 289(2) of the Constitution had no application and consequently the authority under the Income Tax Act could not assess the income of the petitioner-authority under the Act in view of the exemption of the income of a State contained in Article 289(1) of the Constitution. This stand of the petitioner-authority was met by the respondents by pointing out that the income of the authority created under the Bihar Industrial Areas Development Authority Act was not income of the State or the property of the State and hence Article 289(1) of the Constitution had no application. Neither counsel brought to our notice any direct authority on the question. The nearest authority we could come across was the decision in Gujarat Industrial Development Corporation v. Commissioner of Income Tax, 1997 227 ITR(SC) 414 . The said appeal arose from the decision of the Gujarat High Court, reported in , [1985]151ITR255(Guj) . Two questions were formulated for being answered in that decision. One was that the income of the Development Corporation was not liable to be taxed under the Income Tax Act in view of Article 289(1) of the Constitution. The second was whether the income was liable to be excluded under Section 10(20A) of the Income Tax Act. The Gujarat High Court held that the income was not liable to be excluded under Article 289(1) of the Constitution. It also held that the income was not liable to be excluded under Section 10(20A) of the Income Tax Act. Before the Supreme Court, the assessee, the Development Corporation, did not press its claim under Article 289(1) of the Constitution. It only pressed its claim for exclusion under Section 10(20A) of the Income Tax Act before its deletion by the Finance Act of 2002. The Supreme Court reversing the decision of the Gujarat High Court held that Section 10(20A) of the Income Tax Act was wide enough to cover incomes of Corporations like the Gujarat Industrial Development Corporation, But what is to be noted here is that the claim based on the exemption under Article 289(1) of the Constitution was not pursued before the Supreme Court.
(3.) ON Article 289(1) of the Constitution of India the Gujarat High Court held that the State is different from Corporations which are created by laws enacted then by Parliament or by State Legislatures for different and distinct purposes. They are separate entities in law. They sue and they are sued in their own capacities and for any contractual lability of the Corporation no person can sue the State, because every Corporation in itself is not State but a separate legal entity. The decision of the Bombay High Court in Vidarbha Housing Board v. I.T.O., 1973 92 ITR 430(Bom) holding that income of the Housing Board could not be regarded as the income of the State Government and consequently immunity under Article 289(1) of the Constitution was not available to the Board was noticed. We also find a few decisions of the Supreme Court arising under Article 285 of the Constitution of India exempting the properties of the union from all taxes imposed by a State or any authority within the State. Obviously, while Article 285 of the Constitution exempted the property of union from State taxation, Article 289 of the Constitution exempted the property of the State from union taxation. To that extent, the provisions are similar and the claim for exemption should stand on the same footing. It is seen that in Food Corporation of India v. Municipal Committee, 1999 2 AIR(SC) 573 and Food Corporation of India v. Sub-Collector, Narsapur, 1999 AIR SC 2521 , the Supreme Court held that the property of the Food Corporation of India, a Corporation established under the Food Corporations Act, was not the property of the Union and was not exempted from State tax in view of Article 285(1) of the Constitution. In Board of Trustees For the Visakhapatnam Port Trust v. State of Andhra Pradesh, 1999 AIR(SC) 2552 , the Supreme Court held that property belonging to a Port Trust is not the property of the Union within the meaning of Article 285(1) of the Constitution. In Municipal Commissioner of Dumdum Municipality v. Indian Tourism Development Corporation, 1995 5 SCC 251 , property of the Air Port Authority was held to be not that of the Union. In Central Warehousing Corporation v. Municipal Corporation , 1994 3 Sup SCC 316, the property of Warehousing Corporation was held to be not the property of the union within the meaning of Article 285(1) of the Constitution. In Western Coalfields Ltd. v. Special Area Development Authority, Korba, 1982 AIR(SC) 697, it was held that the property of a Company incorporated under Section 617 of the Companies Act, 1956 in which the entire shares were held by the Union Government, was not the property of the Union in terms of the Article 285(1) of the Constitution. This line of decisions, in our view, show that the properties of a statutory corporation or a Government owned Company or other authority established by the Government are not the properties of the Government for the purpose of Article 285 or Article 289 of the Constitution of India.;