High Court Of Allahabad
Krishi Utpadan Mandi Samiti, Bulandshahr vs. Union Of India & Anr.
Sections 10(20)
Asst. Year 2003-2004
M. Katju & Vinod Chandra Misra, JJ.
Civil Misc. Writ Petn. No. 434 of 2004
5th April, 2004
Counsel Appeared
B.D. Mandhyan, for the Petitioners : A.N. Mahajan & Shambhu Chopra, for the Respondents
JUDGMENT
M. Katju, J. :
These two writ petitions raise a common question of law and are hence being disposed of by a common judgment.
2. The petitioner is the Krishi Utpadan Mandi Samiti, Bulandshahr, which has been constituted under the UP Krishi Utpadan Mandi Adhiniyam, 1964. The petitioner has challenged the impugned orders dt. 4th March, 2004 and 15th Oct., 2003 requiring it to furnish income-tax returns for the asst. yr. 2003-04 and also to show-cause why penalty be not imposed for not furnishing the returns in time. The short contention of the learned counsel for the petitioner is that the petitioner is a local authority and is hence exempt from income-tax under s. 10(20) of the IT Act. Sri B.D. Mandhyan, learned counsel for the petitioner, has submitted that earlier for the asst. yr. 1978-79 an assessment order was passed against the petitioner by the ITO, A Ward, Bulandshahr, on 25th May, 1982 against which an appeal was filed before the CIT(A), Meerut, who by order dt. 6th Sept., 1982 allowed the appeal and held that the petitioner is a local authority and hence exempt from income-tax. True copy of the order dt. 6th Sept., 1982 is Annex. 3 to the writ petition. Learned counsel for the petitioner has relied on the definition of ‘local authority’ in s. 3(31) of the General Clauses Act, and the definitions in some other Acts. In our opinion, there is no merit in this petition. It may be mentioned that although earlier the expression ‘local authority’ was not defined in the IT Act, subsequently by Finance Act of 2002 it has been defined in the Explanation to s. 10(20) of the IT Act as follows: “Explanation: For the purposes of this clause, the expression “local authority” means……… (i) Panchayat as referred to in cl. (d) of Art. 243 of the Constitution; or (ii) Municipality as referred to in cl. (e) of Art. 243P of the Constitution; or (iii) Municipal Committee and District Board’ legally entitled to, or entrusted by the Government with the control or management of a municipal or local fund; or (iv) Cantonment Board as defined in s. 3 of the Cantonments Act, 1924 (2 of 1924);” Sec. 10(29) on which also the petitioner relied has been abolished by the Finance Act, 2002. A bare perusal of the Explanation of s. 10(20) shows that now only four entities are local authorities for the purpose of s. 10(20), namely, (i) Panchayat, (ii) Municipality; (iii) Municipal Committee and District Board; (iv) Cantonment Board. Krishi Utpadan Mandi Samiti is not one of the entities mentioned in the Explanation to s. 10(20). It may be noted that the Explanation to s. 10(20) uses the word ‘means’ and not the word ‘includes’. Hence, it is not possible for this Court to extend the definition of ‘local authority’ as contained in the Explanation to s. 10(20), vide P. Kasilingam vs. P.S.G. College AIR 1995 SC 1395 (para 19). It is also not possible to refer to the definitions in other Acts, as the IT Act now specifically defines ‘local authority’. It is well settled that in tax matters the literal rule of interpretation applies and it is not open to the Court to extend the language of a provision in the Act by relying on equity, inference, etc.—It is the first principle of interpretation that a statute should be read in its ordinary, natural and grammatical sense as observed by the Supreme Court of India: “In construing a statutory provision the first and foremost rule of construction is the literary construction. All that the Court has to see at the very outset is what does the provision say. If the provision is unambiguous and if from the provision the legislative intent is clear, the Court need not call into aid the other rules of construction of statutes. The other rules of construction are called into aid only when the legislative intent is not clear” vide Hiralal Ratanlal vs. STO 1974 UPTC 115 (SC) : AIR 1973 SC 1034. This principle is applied with particular emphasis while interpreting taxing statutes vide ITO vs. Nadar AIR 1968 SC 623, and the fundamental principle of interpreting taxing statutes is the principle of strict construction. In this respect taxing statutes are to be interpreted differently from beneficial legislation (e.g., labour laws) vide S.K. Verma vs. Industrial Tribunal AIR 1981 SC 422, or the Constitution vide State Trading Corporation vs. CTO AIR 1963 SC 1811, where the principle of liberal interpretation applies.
11. The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt, J. in his classic statement in Cape Brady Syndicate vs. IRC (1921) 1 KB 64: “In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
12. Learned counsel for the petitioner has submitted that such a view, which we are taking, will cause hardship to the petitioner. It is a well-settled principle of interpretation of taxing statutes that there is no equity in tax, and hence considerations of hardship are irrelevant.
13. In CIT vs. G. Hyatt AIR 1971 SC 725, the question was whether under s. 17(3) of the IT Act, 1961, the interest on the assessee’s own contribution to an unrecognised provident fund could be treated as salary. The Supreme Court of India held that the language of s. 17(3) was plain and unambiguous, and hence the said amount was not salary but income from other sources and hence taxable under s. 56.
14. In Plester & Co. Ltd. vs. Addl. Commr. of Sales tax AIR 1978 SC 897, the question was whether sales outside Delhi would also be included in taxable income. The Supreme Court held that the section used the word ‘resale’ simpliciter, and hence it referred to all resales and could not be limited to re-sales within Delhi alone. Thus, the Supreme Court went by the plain language of the statute, and did not speculate on the intention of the legislature.
15. In Hemraj Gordhandas vs. H.H. Dave, Asstt. Collector (1978) 2 ELT 350, the Supreme Court of India considered the language of a notification under the Central Excise Tariff and held that all that was required for claiming an exemption was that the cotton fabric must be produced on power looms owned by the co-operative society. There was no further requirement in the language of the notification that the cotton fabric must be produced by the society for itself. The Supreme Court refused to go into the question of the intention behind the exemption since the language of the notification was clear.
16. In Assessing Authority vs. East India Cotton Mfg. Co. Ltd. 1981 UPTC 1319 (SC) : (1981) 48 STC 239 (SC) the concessional rate under the Punjab sales-tax was payable if certain raw materials were used in the manufacture of goods for sale. The contention of the assessee was that the word used in the Act was ‘for sale’ and not ‘for sale by him’ and hence the goods sold by a third party were also covered by the provision. This contention was accepted by the Supreme Court, which followed the literal rule of interpretation.
17. In CWT vs. Ellis Bridge Gymkhana (1997) 143 CTR (SC) 138 : AIR 1998 SC 120, the Supreme Court held that the word ‘individual’ in the charging section could not be stretched to include an AOP. The Court held that the charging section had to be construed strictly, and if a person could not be brought within the ambit of the charging section by clear words, he could not be taxed at all.
18. In A.V. Fernandez vs. State of Kerala AIR 1957 SC 657 the Supreme Court of India stated the principle as follows: ‘If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.”
19. It is said that tax and equity are strangers vide Partington vs. Attorney General (1869) LR 4 HL
100. This view was best expressed by Lord Cairns as follows: “If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind. On the other hand if the Court seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.”
20. Hence even if prior to Finance Act, 2002, this Court could have treated the petitioner as a local authority relying on the General Clauses Act, it cannot do so now after the above enactment, since now ‘local authority’ has been defined in the IT Act itself.
21. Sri B.D. Mandhyan, learned counsel for the petitioner, then submitted that Art. 4 of the Constitution has been violated because some other statutory bodies are treated as local authorities under the Explanation to s. 10(20).
22. In our opinion there is no merit in this submission also. It may be mentioned that in tax matters the Government has a greater latitude to tax one category and not to tax other categories vide Anant Mills vs. State of Gujarat AIR 1975 SC 1234, R.K. Garg vs. Union of India (1981) 25 CTR (SC) 406 : 1982 UPTC 355 (SC), Malwa Bus Service vs. State of Punjab 1983 (3) SCC 237, ITO vs. N.T.R. Rymbai 1976 CTR (SC) 154 : AIR 1976 SC 670, Amalgamated Tea Estate vs. State of Kerala 1975 UPTC 89, etc. A taxing statute is not open to attack on the ground that it taxes some persons or objects and not others vide, East India Tobacco Co. vs. State of AP AIR 1962 SC 1773. The State has a wide discretion in selecting the objects or persons that it will tax, and in order to tax something it is not bound to tax everything vide Orient Weaving Mills vs. Union of India AIR 1963 SC 98, State of MP vs. Bhopal Sugar Industries AIR 1974 SC 1179. It can pick and choose objects, areas, persons, rates of tax, etc. vide V.V.R. Verma vs. Union of India AIR 1969 SC 1094, Gopal Narain vs. State of UP AIR 1964 SC 370, Khyerbari Tea Co. Ltd. vs. State of Assam AIR 1964 SC 925, T.G. Venkatrama vs. State of Madras AIR 1970 SC 508, etc.
23. The above decisions have been followed by the decision of this Court in Lallooji & Sons vs. State of UP & Ors. 2003 UPTC 900.
24. For the reasons given above we find no merit in these petitions and they are dismissed.
[Citation : 267 ITR 460]
