Commissioner of Income Tax-I vs M/s. U.P. Jal Nigam

Hon''ble R.K. Agrawal, J.—Two learned Judges while deciding the Income Tax Appeal No. 128 of 2008 in which the following substantial question of law was involved.

Whether, on the facts and circumstances of the case, the assessee Corporation is " Local Authority" and entitled for benefit of exemption u/s 10(20) of the Income Tax Act 1961 ?

by separate orders have given their findings and conclusions Brother Mr. Justice Devi Prasad Singh has allowed the Revenue Appeal in toto, whereas Brother Justice Dr. Satish Chandra has disposed of the appeal by answering the aforementioned substantial question of law partly in favour of the Assessee and leaving it open regarding two other wings. The following question was formulated on the point of difference:

Whether, the U.P. Jal Nigam is ''local authority'', and is entitled for benefit of exemption u/s 10(20) of Income Tax Act 1961.

Hon''ble the Chief Justice vide order dated 15.11.2011 had been pleased to nominate this matter to this Bench.

Heard Mr. D.D. Chopra, learned Standing Counsel appearing for the Revenue, Shri Jai Deep Narain Mathur learned Senior Counsel assisted by Shri Mohit Agrawal Advocate on behalf of respondent Assessee and perused the separate opinions recorded by my learned Brothers.

I find that Brother Mr. Justice Devi Prasad Singh in paragraph 76 of His Lordship''s opinion has held as follows:-

After a close scrutiny of 1975 Act, the law settled by Hon''ble Supreme Court in the cases of Valjibhai Muljibhai Soneji (supra), R.C. Jain (Supra), Commissioner of Income Tax Vs U.P. Forest Corporation (supra), Agricultural Produce Market Committee, Narela, Delhi (supra) read with Part IX and IXA of the Constitution and Section 3(31) of General Clauses Act, the U.P. Jal Nigam does not seem to be the ''local authority'' u/s 10(20) of the Income Tax Act, 1961 even prior to Finance Act, 2002. The word, "''local authority'' has been defined in the Section 3(31) of the General Clauses Act 1897, an old Central Act, which has been interpreted by the Hon''ble Supreme Court by catena of judgments (supra).

Brother Justice Dr. Satish Chandra has also come to the same conclusion that Jal Nigam cannot be considered as local authority. The following paragraph at page 27 of his Lordship''s opinion is reproduced below for ready reference:-

After discussing the legal matrix pertaining to the "local authority", the position is that Jal Nigam-assessee cannot be considered as a "local authority". But fact remains that assessee has three wings and in the case of first wing i.e. Jal Nigam Wing, it is evident that it is providing the essential services namely water and sewerage. Hence, its activities can be considered under the definition of ''local authority'', specially, when the A.O. himself for the assessment year under consideration has mentioned in its order that the activities of Jal Nigam Wing are that of " local authority" whereas the activities of remaining two wings are not at all a " local authority". So, the tax authorities have suo-moto granted the exemption u/s 10(20) of the Income Tax Act only to the First Wing i.e. Jal Nigam Wing.

Needless to mention that this appeal is filed by the Department and the assessee is not in appeal. So, we cannot travel beyond the orders of the authorities below including the order impugn. Hence, the order passed by the A.O. in this regard is hereby upheld.

In my considered opinion as both the Brother Judges have come to the same conclusion that Jal Nigam is not a local authority, the question formulated for opinion as to whether U.P.,. Jal Nigam is Local Authority or not does not arise. Let the papers be placed before Hon''ble Division Bench for passing appropriate order.