COMMISSIONER OF INCOME TAX (TDS), KANPUR vs. CANARA BANK

1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.6020  OF 2018 (ARISING OUT OF SLP (C) NO. 3168 OF 2017) COMMISSIONER OF INCOME TAX(TDS)       ... APPELLANTS KANPUR AND ANR. VERSUS CANARA BANK ... RESPONDENT WITH C.A.NO.6064 of 2018 @ SLP(C)No.9295/2017, C.A.NO.6056 of 2018 2018   @   SLP (C)No.3162/2017,   C.A.NO.6058   of 2018   @ SLP(C)No.9292/2017, C.A.NO.6055 of 2018 @ SLP(C)No.3163/2017, C.A.NO.6060 of 2018 @ SLP(C)No.9294/2017, C.A.NO.6057of 2018 @ SLP(C) No. 9288/2017, C.A.NO.6054 2018 @ SLP(C) No. 3169/2017, C.A.NO.6066 of 2018 @ SLP(C)No.9290/2017, C.A.NO.6065 2018 @ SLP(C) No.9296/2017, C.A.NO.6059 2018 @ SLP(C) No. 9293/2017, C.A.NO.6053   of   2018   @   SLP(C)   No.   3165/2017,   C.A.NO.6052   of 2018@SLP(C)No.9289/2017,C.A.NO.6051of   2018   @   SLP(C)   No. 3167/2017,   C.A.NO.   6063   of   2018   @   SLP(C)   No.   9291/2017, Digitally signed by ASHWANI KUMAR Date: 2018.07.07 11:52:30 IST Reason: Signature Not Verified

2 C.A.NO.6062 of 2018 @ SLP(C) No. 9297/2017,   C.A.NO.6061 of 2018 @ SLP(C)No.6728/2017, C.A.NO.6023 of 2018 @ SLP (C) No. 33260/2016,  C.A. No. 5378/2017,   C.A. No. 5374/2017, C.A.NO. 6021 of 2018 @ SLP(C) No. 33262/2016,  C.A.NO.6031 of 2018 @ SLP(C)No.34529/2016,   C.A.NO.6025of   2018   @   SLP(C)   No. 34520/2016,   C.A.NO.6022   of   2018   @   SLP(C)   No.   33261/2016, C.A.NO.6034 of 2018 @ SLP(C) No. 34532/2016, C.A.NO.6027 of 2018   @     SLP(C)   No.   34526/2016,   C.A.NO.6048   of  2018   @ SLP(C)No.36199/2016,C.A.NO.6026   of   2018   @   SLP(C)   No. 34522/2016,   C.A.NO.6028   of   2018   @   SLP(C)   No.   34525/2016, C.A.NO.6032 of 2018 @ SLP(C) No. 34530/2016, C.A.NO.6029 of 2018 @ SLP(C) No. 34528/2016, C.A.NO.6036 of 2018 @ SLP(C) No. 35082/2016,   C.A.NO.6024   of   2018   @   SLP(C)   No.   34521/2016, C.A.NO.6033 of 2018 @ SLP(C) No. 34531/2016, C.A.NO.6039 of 2018 @ SLP(C) No. 35083/2016, C.A.NO.6038 of 2018 @ SLP(C) No. 35435/2016,   C.A.NO.6037   of   2018   @   SLP(C)   No.   35084/2016, C.A.NO.6046 of 2018 @ SLP(C) No. 36198/2016, C.A.NO.6043 of 2018 @ SLP(C) No. 35439/2016, C.A.NO.6040 of 2018 @ SLP(C) No. 35437/2016,   C.A.NO.6030   of   2018   @   SLP(C)   No.   34527/2016, C.A.NO.6045 of 2018 @ SLP(C) No. 36158/2016, C.A.NO.6042 of 2018 @ SLP(C) No. 35438/2016,   C.A.NO.6041 if 2018 @ SLP(C) No. 35436/2016, C.A.NO..6047 of 2018 @ SLP(C) No. 36200/2016, C.A.NO.6049 of 2018 @ SLP(C) No. 37683/2016, C.A.NO.6044 of

3 2018 @ SLP(C) No. 35440/2016, C.A.NO. 6035 of 2018 @ SLP(C) No. 34533/2016, C.A.NO.6050 of 2018 @ SLP(C) No. 37681/2016, C.A.NO.6069   of   2018   @   SLP   NO.16438   of   2018   @   Diary   No(s). 9866/2017,   C.A.NO.6068   of   2018   @   SLP(C)   No.   8116/2018, C.A.NO.6067 of 2018 @ SLP(C) No. 26496/2017, C.A.NO.6070 of 2018 @ SLP NO.16439 of 2018 @ Diary No(s). 14969/2017. J U D G M E N T ASHOK BHUSHAN, J. Leave granted. 2. These appeals question the Division Bench judgment dated 04.04.2016   of   the   Allahabad   High   Court,   by   which   judgment Income Tax Appeals filed by the Revenue has been dismissed affirming the order of the Income Tax Appellate Tribunal.  The common   questions   of   facts   and   law   are   involved   in   these appeals and it is sufficient to refer the facts and pleadings in   Civil   Appeal   No....   2018   arising   out   of   SLP(C)   3168   of 2017,   Commissioner   of   Income   Tax(TDS),   Kanpur   and   Anr.   vs. Canara   Bank   wherein   the   judgment   of   the   High   Court   dated 04.04.2016 in ITA No. 64 of 2016 has been questioned.

4 3.   The New Okhla Industrial Development Authority  (NOIDA), hereinafter referred to as “Authority” has been constituted by Notification dated 17.04.1976 issued under Section 3 of the Uttar   Pradesh   Industrial   Area   Development   Act,   1976 hereinafter   referred   to   as   “1976   Act”.     The   Canara   Bank, respondent   No.   3   is   the   banker   of   the   Authority.   The respondent Bank made a payment of Rupees Twenty Crores Ten Lakhs as interest to Authority in form of FDs/Deposits for the financial   year   2005­06.   The   Canara   Bank,   however,   did   not deduct tax at source under Section 194A of the Income Tax Act, 1961 hereinafter referred to as “IT Act, 1961”. 4. Notices were issued by the appellant to Canara Bank asking for information pertaining to interest paid to the Authority on its deposits. Notices were also issued by the appellant to the Bank for showing cause for not deducting tax at source. A writ petition had been filed by the NOIDA being Writ Petition No.1338/2005 challenging the notices issued to the Authority as   well   as   its   bankers.     Assessment   proceeding   could   not proceed due to certain interim directions passed by the High Court   in   the   above   writ   petition.   The   writ   petition   was ultimately dismissed by the High Court on 28.02.2011 holding that the Authority is not a local authority within the meaning

5 of   Section   10(20)   of   IT   Act,   1961   and   its     income   is   not exempt from tax.   The Assessing Officer thereafter proceeded to   pass   an   order   under   Section   201(1)/201(1A)   read   with Section 194A of the IT Act, 1961 dated 28.02.2013. 5. Income   Tax   Authority   held   that   the   respondent   Bank   is assessee   in   default.   The   default   was   computed   and   demand notice as per Section 156 of the IT Act, 1961 was issued. Penalty proceeding was also separately initiated. The Canara Bank aggrieved by the order of the Assessing Officer dated 28.02.2013 filed an appeal before the Commissioner of Income Tax   (Appeals).   Before   the   Commissioner,   the   bank   relied   on Notification   dated   22.10.1970   issued   under   Section   194A(3) (iii)(f) of the IT Act, 1961. The   Appellate Authority vide its judgment dated 02.12.2013 allowed the appeal setting aside the order of the Assessing Officer.  The Revenue aggrieved by the judgment of the Appellate Authority filed an appeal before the Income Tax Appellate Tribunal.   The Tribunal also held that payment of interests by the banks to the State Industrial Development Authority does not require any deduction at source in terms of Section 194A(3)(iii)(f). 6. The Revenue aggrieved by the order of the Tribunal filed an appeal under Section 260A of the Act before the High Court.

6 The Division Bench of the High Court vide its judgment dated 04.04.2016 has dismissed the appeal. The Division Bench came to the following conclusions while dismissing the appeal: "We have, therefore, no manner of doubt from a reading   of   the   provisions   of   the   Industrial Area Development Act that the NOIDA has been constituted by the State Act and, therefore, entitled   to   exemption   of   payment   of   tax   at source under section 194­A(1) of the Act. The   decision   of   the   Division   Bench   of   this Court   in   New   Okhla   Industrial   Development Authority (supra), on which reliance has been placed by learned counsel for the appellants, would, therefore, not come to the aid of the appellants as it was restricted to the issue as to whether NOIDA would be a local authority or   not   and   did   not   deal   with   the   issue involved   in   this   appeal   as   to   whether   the NOIDA is a Corporation established by a State Act. We   therefore,   answer   the   question   of   law framed by us in negative and hold that NOIDA is a Corporation established by Uttar Pradesh Industrial Area Development Act, 1976. ” 7. Shri K. Radhakrishnan, learned senior advocate appearing for the appellants challenging the Division Bench judgment of the High Court contends that Authority is not entitled for the benefit of Notification dated 22.10.1970 issued under Section 194A   (3)(iii)(f).   It   is   submitted   that   under   the   above notification only a Corporation established by Central, State or Provincial Act is entitled for the benefit.  Authority is not   a   Corporation   established   by   the   State   Act   rather

7 Authority   is   a   Corporation   which   is   established   under   1976 Act. He submitted that there is a vast difference between a body established by an Act and a body established under an Act.   The   provisions   of   Section   194A   have     to   be   strictly construed and benefit can be extended only when a body falls expressly within the benefit of exemption. In the exceptions carved out under Section 194A(3) there is homogeneity in the group.  The legislature when used a word with a limitation the same   has   to   be   read   in   the   entire   phrase   and   only   such corporations   are   entitled   for   the   exemption   which   are established  by  a   Central,   State   or   Provincial   Act.   It   is submitted that words have to be construed, in accordance with the   intention   and   use   of   the   word   as   per   the   Notification dated   22.10.1970,   normally   indicate   that   for   purposes   of claiming exemption the corporation has to be established by a Central, State or Provincial Act. The corporations established under an Act fall in a different category and are not entitled for exemption.  He has submitted that CIT Appeals, Income Tax Tribunal   as   well   as   High   Court   erred   in   not   correctly construing the Notification dated 22.10.1970 and had wrongly extended benefit under Section 194(3)(iii)(f). 8. Learned senior counsel appearing for the different banks have refuted the above submissions of learned senior counsel

8 for the appellants. It is submitted that Section 3 of 1976 Act provides   that   “the   State   Government   may   by   notification, constitute for the purpose of this Act, an authority to be called (Name of the area) Industrial Development Authority, for   any   Industrial   Development   Area”.   It   is   submitted   that Authority   is   established   under   the   1976   Act.   Referring   to provisions of State Bank of India Act, 1955, Life Insurance Corporation of India Act, 1956, it is submitted that statute provides for establishing of the corporation by virtue of a notification by the Central Government. It is submitted that in similar manners Authority has been established by issuing a notification,   hence,   Authority   has   to   be   treated   as established by the 1976 Act.  Alternatively, it is submitted that   the   legislature   has   used   the   words   “by   and   under” interchangeably which is clear from the provisions of Section 194A(3)(iii)(c) and Section 194A((3)(iii)(d). In the Section 194A(3)(iii),   itself   differentiation   in   “by   and   under”   has been done away, with that the Authority established by 1976 Act is clearly covered by the Notification dated 22.10.1970. The   Notification   dated   17.04.1976   establishing   Authority fulfills the mandate of “by” hence it is clearly entitled for the benefit of the Section 194A(3)(iii).

9 9. Learned counsel for the parties have placed reliance on various judgments of this Court, which shall be referred to while considering the submissions in detail. 10. We have considered the submissions of the learned counsel for the parties and perused the record. Present set of appeals relates to Section 194A of the IT Act, 1961. It is useful to extract provisions of 194A which is to the following effect: "194A.   Interest   other   than   “Interest   on securities”.­(1)   Any   person,   not   being   an individual or a Hindu undivided family, who is responsible   for   paying   to   a   resident   any income   by   way   of   interest   other   than   income [by way of interest on securities], shall at the   time   of   credit   of   such   income   to   the account of the payee or at the time of payment thereof   in   cash   or   by   issue   of   a   cheque   or draft   or   by   any   other   mode,   whichever   is earlier,   deduct   income­tax   thereon   at   the rates in force: [Provided   that   an   individual   or   a   Hindu undivided   family,   whose   total   sales,   gross receipts   or   turnover   from   the   business   or profession   carried   on   by   him   exceed   the monetary limits specified under clause (a) or clause   (b)   of   section   44AB   during   the financial   year   immediately   preceding   the financial   year   in   which   such   interest   is credited   or   paid,   shall   be   liable   to   deduct income­tax under this section.] [Explanation.­For   the   purposes   of   this section, where any income by way of interest as   aforesaid   is   credited   to   any   account,

10 whether   called   “Interest   payable   account”   or “Suspense   account”   or   by   any   other   name,   in the books of account of the person liable to pay   such   income,   such   crediting   shall   be deemed   to   be   credit   of   such   income   to   the account   of   the   payee   and   the   provisions   of this section shall apply accordingly.] (2)[***] (3)   The   provisions   of   sub­section   (1)   shall not apply ­ (i).... 5[***] (iii) to such income credited or paid to­ (a)   any   banking   company   to   which   the Banking Regulation Act, 1949 (10 of 1949), applies,   or   any   co­operative   society engaged   in   carrying   on   the   business   of banking   (including   a   co­operative   land mortgage bank), or (b) any financial corporation established by   or   under   a   Central,   State   or Provincial Act, or (c)   the   Life   Insurance   Corporation   of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d)  the  Unit   Trust   of   India  established under the Unit Trust of India Act, 1963 (52 of 1963), or (e)   any   company   or   co­operative   society carrying on the business of insurance, or (f) such other institution, association or body

[or

class

institutions,

11 associations or bodies] which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette;” 11. In the present case notification on which reliance has been placed by the respondent is Notification dated 22.10.1970 issued under Section 194A(3)(iii)(f), hence, it is necessary to refer to the entire Notification dated 22.10.1970 which is to the following effect: "Notification   No.   S.O.   3489   [No.   170 (F.No.12/164/68­ITCC/ITJ).], Dated 22.10.1970 In pursuance of sub­clause(f) of clause (iii) of   sub­section   (3)   of   section   194A   of   the Income Tax Act, 1961 (43 of 1961), the Central Government hereby notify the following for the purposes of the said sub­clause:­ (i)any   corporation   established   by   a   Central, State or Provincial Act; (ii) any company in which all the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a Corporation owned by that Bank; and (iii)   any   undertaking   or   body,   including   a society   registered   under   the   Societies Registration Act, 1860 (21 of 1860), financed wholly by the Government. ” 12.  Before   we   proceed   to   examine   rival   contentions   of   the parties,   it   is   necessary   to   ascertain   the   concept   of   a Corporation.  A Corporation is an artificial being which is a

12 legal person. It is a body/corporate established by an Act of Parliament   or   a   Royal   Charter.   It   possesses   properties   and rights   which   are   conferred   by   the   Charter   constituting   it expressly   or   incidentally.   Halsbury's   Laws   of   England   Fifth Edition, Vol. 24 defines the Corporation as follows: “301.

Corporations

and

unincorporated associations.  A corporation may be defined as a body of persons (in the case of a corporation aggregate)   or   an   office   (in   the   case   of   a corporation sole) which is recognised by the law as having a personality which is distinct from the separate personalities of the members of the body or the personality of the individual holder for the time being of the office in question. There   are   many   associations   and   bodies   of persons

which

are

not

corporations. Unincorporated   associations   do   not   have   legal personality, may not sue or be sued in their own name nor (unless their purposes are charitable) may   property   be   held   for   their   purposes otherwise than by virtue of a contract between the members for the time being. ” 13. “Corporation   aggregate”,   has   further   been   defined   by Halsbury's   Laws   of   England,   Fifth   Edition,   Vol.   24   to   the following effect: "312.   Meaning   of   'Corporation   aggregate'.   A corporation   aggregate   has   been   defined   as   a collection of individuals united into one body under a  special  denomination,   having   perpetual   succession under an artificial form, and vested by the policy of the   law   with   the   capacity   of   acting   in   several respects as an individual, particularly of taking and granting property, of contracting obligations and of

13 suing   and   being   sued,   of   enjoying   privileges   and immunities in common and of exercising a variety of political rights, more or less extensive, according to   the   design   of   its   institution,   or   the   powers conferred on it, either at the time of its creation or at any subsequent period of its existence. ” 14. This   Court   in  S.S.   Dhanoa   vs.   Municipal   Corporation, Delhi and Others (1981) 3 SCC 431 had elaborately considered the concept of Corporation. This Court referred and relied the definition of Corporation as given by  Chief Justice Marshall in   celebrated   case   of  Dartmouth   College   v.   Woodward,   NH   4 Wheat 518, 636:4 L Ed 629. It is useful to extract paragraph Nos. 8 and 9 of the judgment which are as follows: “8.   A   corporation   is   an   artificial   being created by law having a legal entity entirely separate and distinct from the individuals who compose   it   with   the   capacity   of   continuous existence   and   succession,   notwithstanding changes   in   its   membership.   In   addition,   it possesses the capacity as such legal entity of taking,   holding   and   conveying   property, entering into contracts, suing and being sued, and   exercising   such   other   powers   and privileges as may be conferred on it by the law of its creation just as a natural person may.   The   following   definition   of   corporation was   given   by   Chief   Justice   Marshall   in   the celebrated Dartmouth College case: A corporation is an artificial being, invisible, intangible, and existing only in contemplation of   law.   Being   the   mere   creature   of   law,   it possesses   only   those   properties   which   the charter of its creation confers upon it, either expressly   or   as   incidental   to   its   very existence. These are such as are supposed best

14 calculated to effect the object for which it was created.   Among   the   most   important   are immortality,   and,   if   the   expression   may   be allowed, individuality; properties, by which a perpetual   succession   of   many   persons   are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs, and to hold property, without the   perplexing   intricacies,   the   hazardous   and endless necessity, of perpetual conveyances for the   purpose   of   transmitting   it   from   hand   to hand. It is chiefly for the purpose of clothing bodies   of   men,   in   succession,   with   these qualities and capacities, that corporations were invented,   and   are   in   use.   By   these   means,   a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being. The   term   “corporation”   is,   therefore,   wide enough to include private corporations. But, in the context of clause Twelfth of Section 21 of the   Indian   Penal   Code,   the   expression ‘corporation’   must   be   given   a   narrow   legal connotation.” “9. Corporation, in its widest sense, may mean any association of individuals entitled to act as an individual. But that certainly is not the sense   in   which   it   is   used   here.   Corporation established by or under an Act of Legislature can only mean a body corporate which owes its existence, and not merely its corporate status, to the Act. For example, a Municipality, a Zilla Parishad or a Gram Panchayat owes its existence and   status   to   an   Act   of   Legislature.   On   the other   hand,   an   association   of   persons constituting themselves into a company under the Companies Act or a society under the Societies Registration Act owes its existence not to the Act   of   Legislature   but   to   acts   of   parties though,   it   may   owe   its   status   as   a   body corporate to an Act of Legislature.” 15. Before us, there is no issue that the Authority is not a

15 Corporation. It is also not contended before us that Authority is not a statutory corporation. What is contended before us is that Authority having not been established by a Central, State or   Provincial  Act  is   not   covered   by   Notification   dated 22.10.1970 hence, not eligible for the benefit. The provision of   Section   194A   and   the   notification   issued   by   Central Government under 194A(3)(iii)(f) falls for consideration. We may   beneficially   notice   a   principle   of   statutory interpretation which needs to be applied while interpreting the above provisions of IT Act, 1961. This Court in  RBI  vs Peerless General Finance & Investment Co. Ltd., (1987) 1 SCC 424,  laid down the following in paragraph No. 33: “  33. Interpretation must depend on the text and   the   context.   They   are   the   bases   of interpretation. One may well say if the text is   the   texture,   context   is   what   gives   the colour.   Neither   can   be   ignored.   Both   are important.   That   interpretation   is   best   which makes   the   textual   interpretation   match   the contextual. A statute is best interpreted when we   know   why   it   was   enacted.   With   this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment,   with   the   glasses   of   the statute­maker,   provided   by   such   context,   its scheme,   the   sections,   clauses,   phrases   and words   may   take   colour   and   appear   different than when the statute is looked at without the glasses   provided   by   the   context.   With   these glasses we must look at the Act as a whole and

16 discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute   can   be   construed   in   isolation. Statutes   have   to   be   construed   so   that   every word   has   a   place   and   everything   is   in   its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the   reasons   for   it   that   the   Court   construed the expression “Prize Chit” in  Srinivasa  and we find no reason to depart from the Court’s construction.” 16. A Constitution Bench of this Court in  Sukhdev Singh and Others   vs.   Bhagatram   Sardar   Singh   Raghuvanshi   and   Another, (1975)   1   SCC   421  had   occasion   to   consider   the   nature   and character of Corporation including its early history.  Justice Mathew,   delivering   his   concurrent   opinion   noted   that Corporations in 17th, 18th and 19th Centuries were far more like the bodies  corporate we call “public authorities” today. In paragraph Nos. 83, 86 and 87 following has been laid down: “83. The chartered corporations of the 17th, 18th and 19th centuries were expected, perhaps required,   to   perform   stated   duties   to   the community   like   running   a   ferry,   founding   a colony   or   establishing   East   Indian   trade. Performance   of   these   functions   and   securing whatever   revenue   the   enterprise   made   to   the Crown were the primary reasons why a charter was granted. Corporations in early English law were   in   fact,   and   in   legal   cognizance,   a device   by   which   the   political   State   got something   done.   They   were   far   more   like   the bodies corporate we call “public authorities” today. Few in the 17th or 18th century would

17 have disputed that such a corporation was an agency of the State.” 86. The public corporation, therefore, became a   third   arm   of   the   Government.   In   Great Britain,   the   conduct   of   basic   industries through giant corporations is now a permanent feature of public life. 87.   A   public   corporation   is   a   legal   entity established normally by Parliament and always under legal authority, usually in the form of a   special   statute,   charged   with   the   duty   of carrying out specified governmental functions in   the   national   interest,   those   functions being   confined   to   a   comparatively   restricted field,   and   subjected   to   control   by   the Executive,   while   the   corporation   remains juristically   an   independent   entity   not directly   responsible   to   Parliament.   A   public corporation   is   not   generally   a   multipurpose authority   but   a   functional   organisation created   for   a   specific   purpose.   It   has generally   no   shares   or   shareholders.   Its responsibility generally is to Government. Its administration   is   in   the   hands   of   a   Board appointed   by   the   competent   Minister.   The employees of public corporation are not civil servants. It is, in fact, likely that in due course   a   special   type   of   training   for specialized   form   of   public   service   will   be developed and the status of the personnel of public corporation may more and more closely approximate to that of civil service without forming   part   of   it.   Insofar   as   public corporations fulfil public tasks on behalf of Government, they are public authorities and as such subject to control by Government.” 17. One more principle which was reiterated by this Court in above Constitution Bench judgment is that Corporations which

18 are   instrumentalities   of   the   Government   are   subject   to   the limitation as contained in the Constitution. The Corporations which were under consideration in the above case, namely, Life Insurance   Corporation   of   India,   Oil   and   Natural   Gas Commission,  Industrial   Finance   Corporation  were   held   to   be constituted   within   the   meaning   of   Article   12   of   the Constitution. Two categories of Corporations have been noticed i.e.   statutory   corporations   and   non­statutory   corporations. Whereas, the statutory corporations owe their existence from “by or under” statute, non­statutory bodies and corporations are not created by or under statute rather are governed by a statute. “ ESTABLISHED BY A CENTRAL, STATE OR PROVINCIAL ACT” 18. The appellant on the one hand submits that the Authority has   not   been   established  by   1976   Act  rather   it   has   been established  under the 1976 Act, hence it is not covered by Notification dated 22.10.1970 whereas the respondent submits that Authority has been established by the 1976 Act hence, it fulfills the condition as enumerated under Notification dated 2.10.1970. Alternatively, it is submitted that words “by and under” have been interchangeably used in the IT Act, 1961 and there is no difference, even if, the Authority is established

19 under the 1976 Act. 19. Section 194A(3)(iii) clauses (b), (c) and (d) refer to expression “established”. In sub clause (b) expression used is “established by or under a Central, State or Provincial Act”, in sub clause (c) the expression used is “established under the   Life   Insurance   Corporation   Act”   and   in   sub   clause   (d) expression used is “established under the Unit Trust of India Act”.   The   Section   thus   uses   both   the   expressions   “by   or under”. The expression established by or under an Act have come for consideration before this Court on several occasions. In this context, it shall be useful to refer to few judgments of   this   Court.   In  Sukhdev   Singh   (supra),   the   Court   had occasion to consider the status of company incorporated under the Companies Act. The Court held that Company incorporated is not a Company created by the Companies Act. In paragraph No. 25 following was held: “25……A   company   incorporated   under   the Companies Act is not created by the Companies Act   but   comes   into   existence   in   accordance with the provisions of the Act. It is not a statutory   body   because   it   is   not   created   by the   statute.   It   is   a   body   created   in accordance   with   the   provisions   of   the statute.” 20. Mathew  J.,   writing   concurrent   opinion   while   discussing

20 the public corporation held that such corporations are created by   State.   In  Executive   Committee   of   Vaish   Degree   College, Shamli and Others vs. Lakshmi Narain and Others, (1976) 2 SCC 58,   the   question   for   consideration   fell   as   to   whether   the Executive Committee of a degree college is a statutory body. Contention before the Court was that the Executive Committee was the statutory body since it was affiliated to the Agra University   which   was   established   by   the   statute.     The Executive Committee was further covered by the statute framed by the Agra University. In the above context, this Court held that   there   is   a   clear   distinction   between   a   body   which   is created by the Statute and a body which having been come into existence is governed in accordance with the provisions of the statute. In paragraph No. 10 following was held: “10..........It   is,   therefore,   clear   that there is a well marked distinction between a body   which   is   created   by   the   statute   and   a body which after having come into existence is governed in accordance with the provisions of the statute. In other words the position seems to be that the institution concerned must owe its very existence to a statute which would be the fountainhead of its powers. The question in such cases to be asked is, if there is no statute would the institution have any legal existence. If the answer is in the negative, then undoubtedly it is a statutory body, but if the institution has a separate existence of its own without any reference to the statute concerned   but   is   merely   governed   by   the statutory provisions it cannot be said to be a

21 statutory body..........” 21. Again in S.S.Dhanoa (supra), this Court had occasion to consider a Registered Society which was a body/corporate.  The question   was   as   to   whether   the   State   Body   /corporate   is   a Corporation within the meaning of Clause Twelfth of Section 21 of the IPC (Indian Penal Code). This Court again held that expression   Corporation   means   a   Corporation   created   by   the legislature. In paragraph No. 7 following was held: “7………In

our

opinion,

the

expression ‘corporation’   must,   in   the   context,   mean   a corporation created by the legislature and not a body or society brought into existence by an act of a group of individuals. A cooperative society   is,   therefore,   not   a   corporation established by or under an Act of the Central or State Legislature.” 22. Further   noticing   the   distinction   between   Corporation established by or under Act or body created by or under Act, following was held in paragraph No. 10: “10.   There   is   a   distinction   between   a corporation established by or under an Act and a   body   incorporated   under   an   Act.   The distinction was brought out by this Court in Sukhdev   Singh v. Bhagatram   Sardar   Singh Raghuvanshi. It was observed: [SCC p. 435: SCC (L&S) p. 115, para 25] “A   company   incorporated   under   the Companies   Act   is   not   created   by   the Companies Act but comes into existence in accordance   with   the   provisions   of   the

22 Act.” There   is   thus   a   well­marked   distinction between a body created by a statute and a body which,   after   coming   into   existence,   is governed in accordance with the provisions of a statute..........” 23. Another   judgment   which   had   occasion   to   consider   the expression established by or under the Act is a judgment of this  Court  in  Dalco  Engineering  Private  Limited  vs.  Satish Prabhakar Padhye and Others (2010) 4 SCC 378.  The Court had occasion   to   examine   the   provision   of   Section   2k,   of   the Persons with Disabilities (Equal Opportunities, Protection of Rights   and   Full   Participation)   Act,   1995,   specifically expression “establishment” means a Corporation established by or under Central, Provincial or State Act.   This Court held that the phrase established by or under the Act is a standard term   used   in   several   enactments   to   denote   a   statutory corporation established or brought into existence by or under the statute. On Company it was held that the company is not established   under   the   Companies   Act   and   an   incorporated company does not “owe” its existence to the Companies Act. In paragraph No. 20 following has been laid down: “20.   A   “company”   is   not   “established”   under the   Companies   Act.   An   incorporated   company does not “owe” its existence to the Companies Act. An incorporated company is formed by the

23 act of any seven or more persons (or two or more persons for a private company) associated for any lawful purpose subscribing their names to   a   memorandum   of   association   and   by complying   with   the   requirements   of   the Companies   Act   in   respect   of   registration. Therefore,   a   “company”   is   incorporated   and registered   under   the   Companies   Act   and   not established   under   the   Companies   Act.   Per contra,   the   Companies   Act   itself   establishes the   National   Company   Law   Tribunal   and   the National   Company   Law   Appellate   Tribunal,   and these   two   statutory   authorities   owe   their existence to the Companies Act.” 24. This Court further elaborating the expression held that when the expression used is “established by or under the Act”, the emphasize should be on the word “established” in addition to the words “by or under”.  It is useful to refer to what has been said in paragraph Nos. 21 and 22 of the judgment which is to the following effect: “21.   Where   the   definition   of   “establishment” uses the term “a corporation  established  by or under an Act”, the emphasis should be on the word “established” in addition to the words “by or   under”.   The   word   “established”   refers   to coming   into   existence   by   virtue   of   an enactment.   It   does   not   refer   to   a   company, which,   when   it   comes   into   existence,   is governed in accordance with the provisions of the   Companies   Act.   But   then,   what   is   the difference   between   “established  by  a   Central Act” and “established under a Central Act”? 22.   The   difference   is   best   explained   by   some illustrations. A corporation is established by an   Act,   where   the   Act   itself   establishes   the

24 corporation. For example, Section 3 of the State Bank of India Act, 1955 provides that a bank to be   called   State   Bank   of   India   shall   be constituted to carry on the business of banking. Section 3 of the Life Insurance Corporation Act, 1956 provides that 3.  Establishment   and   incorporation   of   Life Insurance Corporation of India.—(1) With effect from such date as the Central Government may, by notification in the Official Gazette, appoint, there shall be established a Corporation called the Life Insurance Corporation of India. State   Bank   of   India   and   Life   Insurance Corporation   of   India   are   two   examples   of corporations established by “a Central Act”.” 25. This Court has also referred to provisions of The State Financial   Corporations   Act,   1951   which   provides   for establishment of various financial corporations under the Act. It is useful to refer to definition of financial corporation as contained in Section 2(b) which is to the following effect: “2(b) Financial Corporation means a Financial Corporation   established   under   Section   3   and includes   a   Joint   Financial   Corporation established under Section 3A;” 26. Section   3   deals   with   establishment   of   State   Financial Corporation which provides as follows: “3.

Establishment

State

Financial Corporations.: (1) The State Government may, by notification in the Official Gazette, establish a   Financial   Corporation   for   the   State   under

25 such   name   as   may   be   specified   in   the notification. (2) The Financial Corporation shall be a body corporate by the name notified under sub­section (1),   having   perpetual   succession   and   a   common seal, with power, subject to the provisions of this   Act,   to   [acquire,   hold   and   dispose   of] property and shall by the said name sue and be sued. ” 27. This   Court   clearly   in   above   case,  Dalco   Engineering (supra)  has   held   that   such   Financial   Corporations   are established by an Act or under an Act. In paragraph No. 23 of the judgment following has been held: “23. We may next refer to The State Financial Corporations   Act,   1951   which   provides   for establishment of various financial corporations under that Act. Section 3 of that Act relates to establishment   of   State   Financial   Corporations and provides that “the State Government may, by notification in the Official Gazette, establish a financial corporation for the State under such name as may be specified in the notification” and such financial corporation shall be a body corporate by the name notified. Thus, a State Financial   Corporation   is   established   under   a Central Act. Therefore, when the words “by and under   an   Act”   are   preceded   by   the   words “established”, it is clear that the reference is to a corporation established, that it is brought into existence, by an Act or under an Act. In short,   the   term   refers   to   a   statutory corporation as contrasted from a non­statutory corporation incorporated or registered under the Companies Act.” 28. Now, we revert back to the provisions of 1976, Act. The

26 very preamble of that Act reads “an Act to provide for the Constitution of an Authority for the development of certain areas in the State into industrial and urban township and for masses connected through with”. 29. Thus,   the   Act   itself   provides   for   constitution   of   an authority. Section 2(b) of the 1976 Act defines Authority as authority constituted under Section 3 of the Act. Section 3 which is very relevant for the present case is as follows: “3.   (1)   The   State   Government   may,   by notification,   constitute   for   the   purposes   of this Act, An authority to be called (Name of the area) Industrial Development Authority, for any industrial development area. (2) The Authority shall be a body corporate. (3) The Authority shall consist of the following :– (a) The Secretary to the            Member Government, Uttar Pradesh, Industries Department Chairman or his Nominee not below the rank of Joint Secretary­ex­official. (b) The Secretary to the Member Government, Uttar Pradesh, Public works Department or his nominee not below the rank of Joint Secretary ex­official. (c) The Secretary to the Member Government, Uttar Pradesh,

27 Local Self­Government or his nominee not below the rank of joint Secretary­ex official. (d) The Secretary to the Government, Uttar Pradesh, Member Finance Member Department or his nominee not below the rank of Joint Secretary­ex official. (e) The Managing Director, U.P. State Industrial Member Development Corporation­ex official. (f) Five members to be nominated     Member by the State Government by notification.

(g) Chief Executive Officer.  Member   Secretary (4) The headquarters of the Authority shall be at such place as may be notified by the State Government. (5)   The   procedure   for   the   conduct   of   the meetings   for   the   Authority   shall   be   such   as may be prescribed. (6)   No   act   or   proceedings   of   the   Authority shall be invalid by reason of the existence of any vacancy in or defect in the constitution of the Authority.” 30. When we compare the provisions of Section 3 of 1976 Act with those of The State Financial Corporations Act, 1951, it is   clear   that   the   establishment   of   Corporation   in   both   the enactments is by a notification by State Government.   In the

28 present   case,   notification   has   been   issued   in   exercise   of power of Section 3, the Authority has been constituted. It is useful to extract paragraph No. 2 of the Notification dated 12.04.1976: “2. The Governor is hereby further pleased, in exercise of the powers under Section 3 of the said   Act,   to   constitute,   in   respect   of   the above­mentioned Industrial Development Area, for the purposes of the said Act, an Authority to be called     the   ‘New   Okhla   Industrial   Development Authority’, consisting of the following, namely, (i) Secretary to the Government, Uttar Pradesh, Industries Department, Member Chairman Ex officio (Under Clause(a)) (ii) Secretary to the Government, Uttar

Pradesh, Public Works Department, Member Ex Officio (Under Clause(b)) (iii) Secretary to the Government, Uttar Pradesh,  Local self­Government, Member Department Ex officio (Under Clause (c)) (iv) Secretary to the Government, Uttar Pradesh, Finance Department, Member Ex officio (Under Clause (d)) (v) Managing Director, UP State Industrial Development Corporation Member Ltd. Ex. Officio (Under Clause (e)) (vi) Chairman, UP State Member Electricity Board,

29 (Nominated under Clause (f)) Ex­officio (vii) Chief Engineer, UP Jal Nigam Board, Member Ex­officio     (Nominated under Clause (f)) (viii) Chief Engineer, Irrigation       Member Department UP, Ex­officio (Nominated under(f)) (ix) Chief Town and Country Member Planner, UP, (Nominated under Clause(f)) Ex­officio (x) District Magistrate, Bulandshahr, Member Ex­officio   (Nominated under Clause(f)) (xi) Chief Executive Officer Member Secretary (Under Clause (g))” 31. This Court having already laid down in  Dalco  Engineering (supra) that establishment of various financial corporations under State Financial Corporation Act, 1951 is establishment of a Corporation by an Act or under an Act. We are of the view that the above ratio fully covers the present case and we have no doubt that the Authority have been established by the 1976 Act   and   it   is   clearly   covered   by   the   Notification   dated 22.10.1970. It is further relevant to note that composition of

30 the Authority is statutorily provided by Section 3 of 1976 Act itself,   hence,   there   is   no   denying   that   Authority   has   been constituted by Act itself. 32. In view of what has been said above, we are of the view that High Court did not commit any error in dismissing the appeal filed by the Revenue. In result, all the appeals are dismissed. ..........................J. ( A.K. SIKRI ) ..........................J. ( ASHOK BHUSHAN ) NEW DELHI, JULY 02, 2018.