ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION vs. THE INCOME-TAX OFFICER AND ANR.

CIVIL APPEAL No. 475/1963Supreme Court[1964] 7 S.C.R. 1705 March 1964Bench: 5 JudgesAuthor: P.B. GAJENDRAGADKAR, K.N. WANCHOO, J.C. SHAH, N. RAJAGOPALA AYYANGAR, S.M. SIKRI S.C.R. SUPREME COURT REPORTS ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION15 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the income derived by the Andhra Pradesh State Road Transport Corporation from its trading activity is not the income of the State. The Court reasoned that the Corporation, established under the Road Transport Corporations Act, 1950, possesses a distinct legal personality separate from the State or its shareholders. While Article 289(1) exempts the property and income of a State from Union taxation, and Article 289(2) allows Parliament to tax income from trade carried on by a State, the Corporation's income does not fall under either clause because it is not the State's income. Section 30 of the Act, which mandates entrusting a portion of the income to the State Government for road development, does not make it part of the State's general revenue; it is income impressed with an obligation for a specific purpose. The Court also rejected the argument of repugnancy between the two Acts, stating that Sections 29 and 30 of the Road Transport Corporations Act, 1950, merely provide for the administration and disposal of the Corporation's funds and are not inconsistent with the liability to pay tax imposed by the Income-Tax Act. The argument that specific provisions for tax liability in other Acts (like the State Financial Corporations Act) imply absence of such liability in this Act was also dismissed. The Court found no substance in the contention that the Corporation was a local authority. Therefore, the Corporation is liable to pay income tax.

What were the facts?

The Andhra Pradesh State Road Transport Corporation (appellant) received a notice under Section 22 of the Income-Tax Act, 1922, from the Income-Tax Officer (respondent No. 1). The appellant contended it was not an assessee under Section 3 of the Act and was exempt from income tax as a local authority. These contentions were rejected, leading to assessment orders for the years 1958-59 and 1959-60, with taxes of Rs. 13,60,963.86 and Rs. 34,44,430.48 respectively. The appellant filed writ petitions challenging these orders, claiming immunity under Article 289 of the Constitution. The High Court dismissed the petitions, holding the appellant was not a state-owned corporation and thus not exempt under Article 289(1). A certificate was granted for appeal to the Supreme Court.

What were the issues?

1. Whether the income derived by the Andhra Pradesh State Road Transport Corporation from its trading activity is the income of the State, thereby entitling it to exemption from Union taxation under Article 289(1) of the Constitution of India. 2. Whether there is a repugnancy between the Road Transport Corporations Act, 1950, and the Income-Tax Act, 1922, such that the former should prevail. Assessee's Arguments: The appellant argued that it was not an individual, HUF, firm, company, or association of persons, and thus not an assessee under Section 3 of the Income-Tax Act. It further contended that its net income ultimately goes to the State of Andhra Pradesh, making it immune from Union taxation under Article 289 of the Constitution. Additionally, it claimed to be a local authority exempt from income tax. The appellant also argued that Sections 29 and 30 of the Road Transport Corporations Act, 1950, indicated a repugnancy with the charging section of the Income-Tax Act, implying the Corporation was not intended to be taxed. Revenue's Arguments: The revenue contended that the Corporation had a separate legal personality distinct from the State, and its income was not the income of the State. The revenue did not record specific arguments on the other points raised by the appellant, but implicitly supported the High Court's rejection of the appellant's claims.

Which sections of the Income-tax Act were involved?

Section 22,Section 3,Section 30,Section 29

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7 S.C.R. SUPREME COURT REPORTS ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION v. THE INCOME-TAX OFFICER AND ANR. 17 [P. B. GAJENDRAGADKAR, C. J., K. N. WANCHOO, J.C. SHAH, N. RAJAGOPALA AYYANGAR ANDS. M. SIKRI JJ.] Income-tax-Income of State Road Transport Corporation whether income of the State-Whether exempt-Constitution of India, Art. 289-Income-tax Act, 1922 (11 of 1922), s.

22.

The Income-tax Officer (respondent No. 1) served a notice under s. 22 of the Income-tax Act on the appellant. Upon the receipt of the notice, the appellant appeared before the Income- tax Officer. The appellant pleaded before the Income-tax Officer that it did not fall under any of the five categories of assessees under s. 3 of the Income-tax Act. The appellant also raised the contention that it was a local authority exempt from income- tax. All these contentions were rejected by respondent No. 1 with the result that the impugned orders of assessment came to be passed. The appellant filed Writ Petitions before the High Court in which it challenged the impugned orders of assessment passed by respondent No.

1.

In its Writ Petitions, the appellant claimed an order, writ or other app

The order continues below.

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