THE COMMISSIONER OF INCOME TAX, LUCKNOW versus U.P. FOREST CORPORATION

Citation: [1998] 2 S.C.R. 22 · Decided: 02-03-1998 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

A 
THE COMMISSIONER OF INCOME TAX, LUCKNOW 
v. 
U.P. FOREST CORPORATION 
MARCH 2, 1998 
B 
[B.N. KIRPAL AND A.P. MISRA, JJ.] 
Income Tax Act, 1961 : 
Section 10(20)-U.P Forest Corporation-Claiming to be a 'local 
· C authority' and seeking exemption from tax-Held-UP Forest Corporation 
is not a local authority-Members of Corporation are not elected by 
inhabitants of area-It is not entrusted with duties entrusted usually to 
Municipal bodies-It does not have power to levy taxes, charge or fee-
Question whether Corporation can be regarded as 1J charitable institution 
should be investigated and examined by a proper forum under the Act-U.P 
D Forest Corporation Act, 1974-s. 3(3). 
General Clauses Act, 1897: 
Section 3(31)-'Local Authority '-Held-Merely because the UP Forest 
Corporation Act states that the Fund of the U.P Forest Corporation shall be 
a 'local fund' does not make it so under Section 3(31) of the Act, which is 
E a Central Act-U.P Forest Corporation Act, 1974. 
Constitution of India, 1950 : 
t 
Article 226-Exercise of writ jurisdiction by High Court-Assessee 
instead of seeking reference uls 256 of Income Tax Act moved High Court by 
F way of writ petition-Held-High Court ought not to have entertained writ 
petitions when alternate remedy was available to assessee-Nor the question 
whether the U.P forest Corporation is a charitable institution not raised 
before assessing authorities should have been examined by it for the first 
time-Assessing authority directed to consider this issue. 
G 
Interpretation of statutes : 
Principle of esjusdem genesis-Applicability of 
U.P. Forest Corporation the assessee, was constituted under the U.P. 
Forest Corporation Act, 1974 for better preservation, supervision and 
development of forest produce within the state. It took over the woI'k fonnerly 
H done by forest contractors and its income was from exploitation of forest 
22 
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C.l.T. v. U.P. FOREST CORPN. 
23 
produce and sales thereof. · 
A 
The assessee, during assessment proceedings for the years 1977-78 
1980-81 and 1984-85 claimed that it was a local authority and therefore its 
income was exempt from tax under section 10(20) of the Income Tax Act, 
1961. The assessing officer however, rejected the claim and taxed it as an 
'artificial jurisdictional person' in respect of the years 1977-78 and 1980- B 
81 and as a 'co.mpany' for the year 1984-85. 
1n appeal, the Commissioner of Income Tax (Appeals) held that the 
assesee was a local authority and hence, its inco!l'e was exempt from taL 
This order was however, set aside by the Tribunal Instead of seeking a C 
reference u/s 256 of the Income Tax Act against the order of the Tribunal, 
· the assessec moved the High Court by way of writ petitions which were 
allowed, holding that the assessee was a local authority and therefore, its 
income was exempt from taL The High Court also upheld the contention of 
. 
. 
the assessee that it was a charitable institution and hence, in any case, its 
income was exempt from tax under section 11(1) of the Income Tax Act.· 
D 
1n the appeals filed by the Revenue before this Court, it was contended 
on behalf of the appellant that the High Court ought not to have exercised 
its jurisdiction under Article 226 of the Constitution since the respondent 
had not exhausted its remedies under_ the Act; and that the decision of the 
High Court on merits was contrary to the law laid down by this Court. On E 
the other hand, the assessee contended that the ass~ssee Corporation had 
been set up to discharge governmental functions and was a local authority 
u/s 3(31) of the Ge11eral Oauses Act and satisfied the criteria of loc:il 
authority its laid down by this court in the c~se of UO I v. RC Jain, [1981) 
2 SCR 854; and that 3(3) of the UP Forest Corporation Act provides that the F 
corporation shall be a local authority for all purposes and Section 17 states 
that the corporation fund shall be regarded as a local fund. 
Allowing the appeals, this Court 
BE1:J> : 1.L The High Court was not correct in concluding that the G 
respondent was a 'local authority' ·and entitled to exemption from payment . 
of income tax under Section 10(20) of the income tax Act, 1961. The 
Respondent Corporation is not a local authority within the meaning of that 
expression contained in section 3(31) of the General Clauses Act. [33-E) 
1.2. A 'local authority' as defined under section 3(31) of the General H 
. , __ , 
SUPREME COURT. REPORTS 
(1998] 2.S.C.R 
A

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