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

Citation: [1964] 7 S.C.R. 17 · Decided: 05-03-1964 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed

Cited by 7 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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 appropriate direction quashing the assess-
ment orders passed by respondent No. 1. The High Court dismiss.. 
ed these \vrit petitions. The High Court held that the appellant 
could not claim the- exemption under Art. 289(1) because it was 
not a state-owned Corporation. The High Court grante-d a certi-
ficate under Art. 133 of the Constitution and hence the appeal. 
Held: (i) Art. 289 of the Constitution cons'sts of three clauses. 
The first clause confers exemption from union taxation on the 
property and income of a State. 
Clause (2) then provides that the income from trade or busi-
ness carried on bv the Government of a State or on its behalf 
which would not have been taxable under cl. (1), can be taxed, 
provided a I aw is made by Parliament in that behalf. In other 
words cl. (2) is an exception to cl. (1 ). 
Clause (3) then empowers Parliament to declare by law 
that any trade or business would be taken out of the purview 
of cl. (2) and restored to the area covered by cl. (1) by declaring 
that the said trade or business is incidental to the ordinarv func-
tions of Government. In other words, cl. (3) is an exception to 
the exception prescribed by cl. (2). 
(ii) A trading activity carried on by the corporation (ap.J)el-
Iant) is not a trading activity carried on by the State department-
~lly, nor is it a trading activity carried on by a State through 
its agents appointe-d in that behalf because according to statute 
the Corporation has a personalitv of its own and this personality 
i• distinct from that of the State or other shareholders. 
· 
Ali the relevant provisions of the impugned Act also emphati-
cally bring out the separate personality of the Corporation. Sec-
tion 30 of the Act also does not suggest that the income of the 
1964 
March 5 
18 
SUPREl\IE COURT REPORTS 
[1964} 
1964 
Corporation is the income of the State. All that s. 30 requires is 
Andhra Pradesh that a part of that income may be entrusted to the State Gov-
State Road Tra"8porternment for a specific purpose of road development. Therefore, 
Oorporation 
the income derived by the appellant from its trading activity 
Th 1 v. 
T 
cannot be said to be the income of the State either under cl (1) 
o.ffic,;".':J.'An:" or cl. (2) of Art. 289. 
The American doctrine of the immunity of State agencies 
or instrumentalities from Federal taxation has no application 
to the present case. 
Akadasi Padhan v. State of Orissa [1963) Supp. 2 S.C.R. 691, 
distinguished. 
Mark Graves, John J. Merrill and John P. Hennessy v. People 
of the State of New York Upon the Relation of James B.O'ke~fe, 
83 Law. Ed. 927 and Clallan County v. United States of America, 
68 Law Ed. 328, no application. 
State of West Bengal v. Union of India [1964) 1 S.C.R. 371, 
relied on. 
M'Culloch v. Maryland, (1819) 4 Wheat 316, Bank of Toronto 
v. Lambe "(1887) 12 A.C. 575 and Webb v. Outrim [1907) A.C. 81, 
referred to. 
Tamlin v. Hansaford, (1950] K.B. 18, relied on. 
(iii) It is hardly necessary fur the Act to make a provision 
that tax, if chargeable would be paid. In fact, the Companies 
Act which deals with companies does not make such a specific 
provision, though no one can seriously suggest that there would 
be repugnancy between the provisions of the Companies Act and 
· the Income-tax Act. Ther

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