CALCUTTA STATE TRANSPORT CORPORATION versus COMMISSIONER OF INCOME-TAX, WEST BENGAL

Citation: [1996] 3 S.C.R. 50 · Decided: 29-02-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

A 
CALCUTIA STATE TRANSPORT CORPORATION 
v. 
COMMISSIONER OF INCOME-TAX, WEST BENGAL 
FEBRUARY 29, 1996 
B 
[S.P. JEEVAN REDDY AND K.S. PARIPOORANAN, JJ.] 
Income Tax Act, 1961 : 
Ss. 2(31)(vi), 10(20}-lncome of a local authority-Exemption from 
C tax-Calcutta State Transport Corporation--Held, not a local authority and 
cannot claim exemption. 
General Clauses Act, 1897: 
S.3(31)-'Local authority'-Calcutta State Transport Corporation-
D Held, not a local authority. 
Road Transport Corporation Act, 1950 : ss. 18, 19-Calcutta State 
Transport Corporation Held, not a 'local authority'. 
The claim of the assessee-Calcutta State Transport Corporation-
E that it was a local authority within the meaning of s.2(31)(vi) or the Income 
Tax Act, 1961 and as such its income was exempt under sub-section(20) of 
s.10 of the Act was rejected by the Income Tax authorities as well as by the 
Income Tax Appellate Tribunal. The High Court also decided the reference 
agianst the assessee. 
F 
In appeal to this Court it was contended for the assessee that since 
G 
it was entrusted by the Government with the control or management of a 
"local fund' it Was a local authority within the meaning of Clause (31) of 
s.3 of the General Clauses Act, 1897. 
Dismissing the appeal, this Court 
HELD : 1.1. The assessee-Corporation is not a 'local authority' and, 
therefore, not entitled to claim exemption of its income by 'virtue of 
sub-section(20) of s.10 of the Income Tax Act, 1961. [55-GJ 
Union of India & Others v. R.C. Jain & Ors., [1981) 2 SCC 308, relied 
H on. 
50 
CALCUTIASTATE TPT. CORPN. v. C.I.T. 
51 
1.2. The assessee is a Road Transport Corporation constituted to A 
render road transport services in the State and is, as envisaged by ss. 18 and 
19 of the Road Transport Corporations Act, meant mainly and only for the 
purpose of providing an efficient, adequate economical and properly coor-
dinated system ofroad transport services. It has no element of popular rep-
resentation in its constitution. It is more in the nature of a trading 
organisation. Merely because the assessee-Corporation has a fund or it is B 
constituted to provide a public service and to employ persons in that con-
nection, it cannot be said that its functions are similar to those of Municipal 
Council, District Board or Body of Port Commissioners. [S4-E-F] 
1.3. The assessee-Corporation stands no comparison with the D.D.A. C 
which has inter alia power to prepare a Master Plan specifying the zones 
and the use to which each zone can be put to, power to order demolition of 
buildings, where development has been commenced or completed in con-
travention.of the Master Plan, Zonal Plan or the permission, declaration of 
development areas and regulation of development in those areas and power 
to grant/refuse permission for development of land. Contravention of the D 
orders of D.D.A. is also punishable with imprisonment and fine. These are 
the indicia of government power - the power to affect persons and their rights 
'<· 
even where they do not choose to deal with it, the power of compulsion. A road 
transport organisation like the assessee has no such power. Unless one 
chooses to deal with it or avail its services - it cannot affect him or his rights; 
in this sense, it is like any other non-statutory Corporation. 
E 
. 
[S4-G-H; SS-A-BJ 
Union of India & Others v. Shri R.C. Jain & Others, (1981] 2 S.C.C. 308 
and Andhra Pradesh State Road Transporl Corporation v. 17ie Income-Tax 
OfficerandAnr., (1964] 7 S.C.R.17, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 592(NT) of 
1978. 
From the Judgement and Order dated 29.3.76 of the Calcutta High 
Court inl.T.R.No.644of1972. 
Tapas Ray, G.S. Chatterjee and Sukumar Basu for the Appellants. 
Dr.V. Gaurishankar, S. Rajappa, and S.N. Tcrdol for the Respon-
dents. 
The Judgement of the Court was delivered by 
51 
F 
G 
H 
A 
B 
c 
52 
SUPREME COURT REPORTS 
(1996] 3 S.C.R. 
B.P. JEEVAN REDDY, J. This appeal is preferred on the basis of a 
certificate of fitness granted by the Calcutta High Court under Section 261 
of the Income-tax Act. Two questions were referred for the opinion of the 
High Court under Section 256(1) of the Income Tax Act. They are : 
"(1) Whether, on the facts and in the circumstances of the case ' 
the Tribunal was right in holding that the assessee is not a 'local 
authority' as contemplated by Section 2(31)(vi) of the Income-tax 
Act, 1961? 
(2) Whether on the facts and in the circumsta

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