Full Judgment Text
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PETITIONER:
MUNICIPAL COMMISSIONER OF DUM DUMMUNICIPALITY AND ORS.ETC.
Vs.
RESPONDENT:
INDIAN TOURISM DEVELOPMENT CORPORATION AND ORS.ETC.
DATE OF JUDGMENT01/08/1995
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
AGRAWAL, S.C. (J)
CITATION:
1995 SCC (5) 251 JT 1995 (5) 610
1995 SCALE (4)611
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
B.P.JEEVAN REDDY.J.
Leave granted.
The question arising in this batch of appeals is
whether the properties vested in the International Airport
Authority of India under the provisions of International
Airports Authority Act, 1971 can yet be called the
properties of the Union within the meaning of Article 285 of
the Constitution of India and, therefore, exempt from all
taxes imposed by a State or by any authority within a State
- to be more precise by the municipality. The Delhi High
Court has answered the said question in the negative, i.e.,
in favour of the Delhi Municipal Corporation whereas the
Calcutta High Court has taken a contrary view. A learned
Single Judge of the Bombay High Court has also taken the
same view as the Calcutta High Court but the said judgment
is now the subject matter of a letters patent apper before
the Division Bench of the same court.
Article 285 comprises two clauses. Though clause (2) is
not attracted in these matters, we may yet set out the
entire article:
"285. Exemption of property of the
Union from State taxation.-- (1) The
property of the Union shall, save in so
far as Parliament may by law otherwise
provide, be exempt from all taxes
imposed by a State or by any authority
within a State.
(2) Nothing in clause (1) shall, until
Parliament by law otherwise provides,
prevent any authority within a State
from levying any tax on any property of
the Union to which such property was
immediately before the commencement of
this Constitution liable or treated as
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liable, so long as that tax continues to
be levied in that State."
According to clause (1), the properties of the Union of
India shall be exempt from all taxes imposed by a State or
by any other authority within a State except insofar as
Parliament may by law provide otherwise. A municipality or a
municipal corporation is certainly an authority within a
State. Therefore, the municipality is not competent to levy
any taxes upon the properties of the Union of India by
virtue of this article. But what the Municipal Corporations
of Delhi and Calcutta say is that the properties which they
are seeking to tax now are not the properties of the Union
but the properties of the International Airport Authority of
India (Authority) and that the properties of the Authority
do not enjoy the immunity in clause (1) of Artilce 285. For
a proper appreciation of the question, it is necessary to
examine the provisions of the International Airports
Authority of India Act, 1971 which created the said
Authority. But before we do that, it would perhaps be
appropriate to refer to the taxing provisions in the Delhi
Municipal Act and the Bengal Municipal Act and also mention
briefly how the disputes have arisen.
Section 113 of the Delhi Municipal Corporation Act
specifies the several kinds of taxes which the corporation
shall levy for the purpose of the Act. Property taxes is one
of the taxes mentioned in this section. Section 119 exempts
the properties of the Union from taxation. Sub-section (1)
of Section 119 is practically a repetition of Article 285.
It is not necessary to set out the provisions of this
section inasmuch as Article 285 prevails irrespective of the
wording of this section. Pursuant to the provisions of the
Delhi Municipal Corporation Act, the Muncipal Corporation
levied property taxes upon the land and properties comprised
in Indira Gandhi International Airport Terminal-II. The
construction of the said terminal was commenced in May,
1986. The corporation levied taxes with effect from April 1,
1986 upon the properties comprised in the said terminal.
When a notice of demand was served upon the Authority for
payment of the tax assessed by the corporation, the
Authority filed Writ Petition No.578 of 1987 in the Delhi
High Court challenging the demand. The main contention of
the authority was that the property of the Union of India
has been vested in it by the Act only for the purpose of its
management and administration and that the properties
continue to be owned by the Union and hence, exempt from
taxation under Article 285 of the Constitution. The writ
petition was dismissed by the Delhi High Court on January 8,
1991 which is the subject matter of Civil Appeal No. 6698 of
1995 (arising from Special Leave Petition (C) No.1176 of
1991).
The Authority has granted a licence in respect of a
portion of the land vesting in it in favour of Air India,
which is a corporation constituted under the provisions of
the Air Corporations Act, 1953. Air India has constructed
certain buildings upon such land The Delhi Municipal
Corporation levied property taxes upon the said buildings
and made a demand upon Air India, questioning which it filed
Writ Petition (C) No.3889 of 1975 in the Delhi High Court.
The contention in this writ petition is practically the same
as in the writ petition by the Authority. Air India’s
additional submission was that since the land upon which it
has constructed its buildings is vested in the Authority, no
taxes could have been levied upon Air India. Against the
dismissal of the writ petition, Air India has preferred
Civil Appeal No. 6699 of 1995 (arising from Special Leave
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Petition (C) No.7882 of 1993).
The Union of India has preferred an independent appeal
(arising from Special Leave Petition (C) No.5926 of 1991)
against the judgment of the Delhi High Court in Writ
Petition (C) No.578 of 1987.
Section 123 of the Bengal Municipal Act, 1932 empowers
the Commissioners to levy a rate on the annual value of the
holdings. Section 128 lays down the method of determining
the annual value. Tax can be levied both on land and
buildings. The Dum Dum Airport at Calcutta vests in the
Authority by virtue of the provisions of the Act. The
Authority granted a licence in respect of a portion of land
vesting in it in favour of the Indian Tourism Development
Corporation Limited (I.T.D.C.) whereupon the latter has
constructed a hotel known as "Hotel Airport Ashok". The Dum
Dum Municipality levied property taxes upon the said land
and the hotel building constructed thereon and made a demand
therefor on I.T.D.C. Questioning the demand, I.T.D.C.
approached the Calcutta High Court by way of a writ petition
contending that inasmuch as the land on which the hotel is
constructed is the property of the Union of India - which
had been vested in the Authority only for the purpose of
management of the airport - no taxes can be levied upon such
land nor can any taxes be levied upon buildings constructed
upon such land. The I.T.D.C. further contended that inasmuch
as the property tax levied under the West Bengal Municipal
Act, 1932 was a composite tax both upon the land and
building, no taxes can be levied upon the building if no
taxes can be levied upon the building if no taxes can be
levied upon the land. Both the said contentions have been
upheld by a learned Single Judge of the Calcutta High Court
whose decision has been affirmed on appeal by a Division
Bench. Civil Appeal No. 6696 of 1995 (arising from Special
Leave Petition (C) No.5337 of 1988) arises from the judgment
of the Division Bench.
We may now take up the provisions of the International
Airports Authority Act, 1971. The preamble to the says that
it is "an Act to provide for the constitution of an
authority for the management of certain aerodromes whereat
international air transport services are operated or are
intended to be operated and for matters connected
therewith". Sub-section (3) of Section 1 says that the Act
shall apply in the first instance to the aerodromes of
Bombay (Santa Cruz), Calcutta (Dum Dum). Delhi (Palam) and
Madras (Meenambakkam) and to such other aerodromes as the
Central Government may notify in that behalf. Section 2
defines certain expressions occurring in the Act. The
expression "Airport" is defined in clause (a) to mean, "an
aerodrome as defined in clause (2) of section 2 of the
Aircraft Act, 1934 (22 of 1934) and to which this Act
applies or is made applicable".* "Authority" is
------------------------------------------------------------
* The expression "aerodrome" is defined by clause (2) of
Section 2 of the Aircraft Act, 1934 in the following words:
"Aerodrome" means any definite or limited ground or water
area intended to be used, either wholly or in part, for the
land or departure of aircraft, and includes all builidings,
sheds, vessels, piers and other structures thereon or
appertaining thereto."
defined in clause (c) to mean, "International Airports
Authority of India constituted under section 3".
Section 3 provides for the constitution and
incorporation of the authority. It says that with effect
from the commencement of the Act, the Central Government
shall constitute an authority to be called the International
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Airports Authority of India. Sub-section (2) says, "the
authority shall be a body corporate by the name aforesaid
having perpetual succession and a common seal, with power,
subject to the provisions of this Act, to acquire, hold and
dispose of property both movable and immovable, and to
contract and shall by the said name sue and be sued". The
Authority comprises of certain number of members, all of
whom are appointed by the Central Government.
Chapter-III is entitled "Property and Contracts".
Section 12 in this chapter provides for "transfer of assets
and liability of Central Government to the Authority". Sub-
section (1) of Section 12 reads:
"12.(1) Save as otherwise provided
in sub-section (2), as from such date as
the Central Government may appoint by
notification in the Official Gazette in
relation to any airport,--
(a) all properties and other assets
vested in the Central Government for the
purposes of the airport and administered
by the Director-General of Civil
Aviation immediately before such day
shall vest in the Authority;
(b) all debts, obligations and
lialibities, all contracts entered into
and all matters and things engaged to be
done by, with, or for the Central
Government immediately before such day
for or in connection with the purposes
of the airport shall be deemed to have
been incurred, entered into and engaged
to be done by, with, or for the
Authority;
(c) all non-recurring expenditure
incurred by the Central Government for
or in connection with the purposes of
the airport up to such day and declared
to be capital expenditure by the Central
Government shall, subject to such terms
and conditions as may be determined by
the Central Government, be treated as
the capital provided by the Central
Government to the Authority;
(d) all sums of money due to the Central
Government in relation to the air port
immediately before such day shall be
deemed to be due to the Authority;
(e) all suits and other legal
proceedings instituted or which could
have been instituted by or against the
Central Government immediately before
such day for any matter in relation to
the airport may be continued to
instituted by or against the Authority;
(f) every employee holding any office
under the Central Government immediately
before such day solely or mainly for or
in connection with such affairs of the
airport as are relevant to the functions
of the Authority under this Act shall be
treated as on deputation with the
Authority but shall hold his office in
the Authority by the same tenure and
upon the same terms and conditions of
service as respects remuneration, leave,
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provident fund, retirement or other
terminal benefits as he would have held
such office, if the Authority had not
been constituted and shall continue to
do so until the Central Government,
either on its own motion or at until the
Authority, with the concurrence of the
Central Government, duly absorbs such
employee in its regular service,
whichever is earlier;
Provided that during the period of
deputation of any such employee with the
Authority, the Authority shall pay to
the Central Government, in respect of
every such employee, such contribution
towards his leave salary, pension and
gratuity as the Central Government may,
by order, determine:
Provided further that any such
employee, who has, in respect of the
proposal of the Authority to absorb him
in its regular service, intimated within
such time as may be specified in this
behalf by the Authority his intention of
not becoming a regular employee of the
Authority, shall not be absorbed by the
Authority in its regular service."
Sub-section (3) says that "if any dispute or doubt
arises as to which of the properties, rights or liabilities
of the Central Government have been transferred to the
Authority or as to which of the employees serving under the
Central Government in consultation with the Authority and
the decision of the Central Government thereon shall be
final." Section 13 declares that any land required by the
authority for discharging its functions shall be deemed to
be needed for a public purpose and can be acquired as such
under the Land Acquisition Act, 1894. Section 14 says that
subject to the provisions of Section 15, the Authority shall
be competent to enter into and perform any contract
necessary for the discharge of its functions under the Act.
Section 15 prescribes the mode in which contracts on behalf
of the Authority shall be executed.
Chapter-IV sets out the functions of the Authority.
Sub-section (1) of Section 16 says that "subject to the
rules, if any, made by the Central Government in this
behalf, it shall be the function of the Authority to manage
the airports efficiently". Sub-section (2) casts a duty upon
the authority to provide at the airports such services and
facilities as are necessary and desirable for the efficient
operation of air transport services at such airports. The
proviso to sub-section, however, says that the function of
providing air navigation services at the airport shall,
however, continue to be discharged by the Central Government
until such date as the Central Government may specify. Sub-
section 3 elaborates the functions of the Authority. It
includes developing, constructing and maintaining run-ways,
taxiways, aprons, terminals and ancillary buildings at the
airports, to construct residential buildings and create
townships for its employees, establish and maintain hotels,
restaurants, and rest-rooms at or near the airports and so
on.
Chapter-V deals with finance, accounts and audit.
Section 19 in this chapter says that the authority shall
have its own fund and all receipts of the Authority shall be
credited thereto and all payments of the authority shall be
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made therefrom. Section 18 says that the Central Government
may provide any capital, over and above the capital provided
under Section 12(1)(c) that may be required by the authority
for discharge of its functions. The Central Government can
also "pay to the Authority, on such terms and conditions as
the Central Government may deternmene, by way of loans or
grants such sums of money as the Government may consider
necessary for the efficient discharge by the Authority of
its functions under this Act". [Section 18(b)]. Section 20
provides the manner in which surplus funds have to be
allocated by the Authority. According of this section, any
balance of its annual net profits remaining after meeting
its expenditure and after providing for reserves etc. shall
be paid over to the Central Government. Sections 21 to 24
contain certain regulatory provisions concerning the
finances of the authority.
Chapter-VI entitled "Miscellaneous" comprises Sections
25 to 41. Section 25 creates an obligation upon the
authority to prepare and submit to the Central Government,
at the end of each financial year, an annual report in the
prescribed form giving an account of its activities during
that financial year and shall also set out therein an
account of the activities which it proposes to undertake
during the next financial year. Such report has to be laid
before both Houses of Parliament as soon as it is submitted.
Section 31 provides specifically that "for the purposes of
the Income-tax Act, 1961 (43 of 1961) or any other enactment
for the time being in force relating to income-tax or any
other tax on income, profits or gains, the Authority shall
be deemed to be a company within the meaning of the Income-
tax Act, 1961 (43 of 1961) and shall be liable to tax
accordingly on its income, profits and gains." Sections 33
and 34 confer upon the Central Government certain powers
vis-a-vis the authority to which we must refer in alittle
more detail in view of the fact that they are strongly
relied upon before us in support of the proposition that the
properties vested by the Act in the Authority do yet
constitute and represent the properties of the Union. Sub-
section (1) of Section 33 says, "if at any time, the Central
Government is of opinion that in the public interest it is
necessary or expedient so to do, it may, by order, direct
the Authority to entrust the management of any airport with
effect from such date and to such person as may be specified
in the order and the Authority shall be bound to comply with
such direction; Provided that before an order is made under
this sub-section the Authority shall be given a reasonable
opportunity of being heard in the matter". Sub-section (3)
says that an order made under sub-section (1) of Section 33
shall, unless recinded sooner, be in operation for a period
of six months which can be extended for a further period or
periods not exceeding eighteen months. Sub-section (4) says
that during the operation of an order made under sub-section
(1) it shall be competent for the Central Government to
issue from time to time such directions to the authority as
are necessary to enable the authorised person to exercise
the powers and discharge the functions of the Authority
effectively. Sub-section (5) says that on the cesser of
operation of an order made under sub-section (1) in relation
to any airport, the authorised person shall cease to
exercise any powers and functions and the Authority shall
continue to exercise and perform such powers and functions
according to the Act. Sub-section (6) clarifies that on the
cessor of an order under sub-section (1), the authorised
person shall hand over all or any property remaining with
him to the Authority-Section 34 confers upon the Central
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Government the power to supersede the Authority in certain
situations and for a limited period. Sub-section (1) of
Section 34 reads thus:
"34.(1) If, at any time, the Central
Government is of opinion--
(a) that on account of a grave emergency
the Authority is unable to discharge the
functions and duties imposed on it by or
under the provisions of this Act; or
(b) that the Authority has persistently
made default in complying with any
direction issued by the Central
Government under this Act or in the
discharge of the functions and duties
imposed on it by or under the provisions
of this Act and as a result of which
default the financial position of the
Authority or the administration of any
airport has deteriorated; or
(c) that circumstances exist which
render it necessary in the public
interest so to do,
the Central Government may, by
notification in the Official Gazette,
supersede the Authority for such period,
not exceeding six months, as may be
specified in the notification;
Provided that before issuing a
notification under this sub-section for
the reasons mentioned in clause (b), the
Central Government shall give a
reasonable opportunity to the Authority
to show cause why it should not be
superseded and shall consider the
explanation and objections, if any, of
the Authority."
Sub-section (2) sets out the consequences and effects
of a notification published under sub-section (1) of Section
34. With effect from the date of such publication
superseding the Authority, all the members shall vacate
their offices with effect from their supersession and all
the powers, functions and duties of the Authority shall be
exercised and discharge by such person or persons as the
Central Government may direct. Clause (c) of sub-section (2)
says that with effect from the date of publication of
notification under sub-section (1) superseding the authority
"all property owned or controlled by the Authority shall,
until the Authority is re-constituted under sub-section (3),
vest in the Central Government". Section 35 says that the
Authority shall be bound by such directions as may be given
by the Central Government on questions of policy. The
proviso to sub-section (1), however, provides that before
giving any such direction, the Authority shall be given an
opportunity to express its views in the matter. Section 36
confers rule-making power upon the Central Government
whereas Section 37 confers the regulation-making power upon
the Authority.
For the sake of convenience, we shall refer to the
Authority and its licencees (Air India and I.T.D.C.) in the
ensuing discussion as appellants and the Municipal
Corporations of Delhi and the Dum Dum Municipality as
respondents, notwithstanding the fact that in Civil Appeal
No.6696 of 1995 (arising out of Special Leave Petition (C)
No.5337 of 1988) Dum Dum Municipality is the appellant.
The contention of the learned counsel for the
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appellants is to the following effect: the expression
"vesting" has several shades of meaning. It does not
necessarily mean the vesting of ownership. The character of
vesting has to be determined with reference to the relevant
provisions of the enactment. In the case of the
International Airports Authority Act, 1971, the vesting is
only for the purpose of management of the airports. In other
words, what is vested is only the management and operation
of the airports with a view to ensure better and efficient
operation of services at such airports. The properties which
were vesting in the Union of India and which are vested in
the Authority by and under Section 12 of the Act continue to
be the properties of the Union of India. They never became
the properties of the Authority. May be, the properties
acquired by the authority subsequent to its constitution
become its own properties but so far as the lands and
buildings which were in existence on the date of the
constitution of the Authority and which were vested in it,
they continue to be the properties of the Union of India. So
far as the land which has been given on licence to Air India
is concerned, Sri Nariman says, it is the land which
belonged to the Union of India and was vested in the
Authority under Section 12 of the Act on its constitution in
the year 1972. No taxes can, therefore, be levied upon such
land by the Delhi Municipal Corporation. If the land cannot
be taxed, the buildings thereon cannot also be taxed. So far
as ’Hotel Airport Ashok’ is concerned, the land upon which
it is located was given on licence to I.T.D.C. by the
Authority. It is equally the property of the Union of India
which vested in the Authority by virtue of Section 12.
Moreover, the Bengal Municipal Act, 1932 provides for levy
of an integrated and composite tax upon a holding - which
expression is defined to mean "land held under one title or
agreement and surrounded by one set of boundaries" by clause
(21) of Section 3. The land and the building thereon cannot
be dissociated from one another and hence, no tax can be
levied upon the building alone if no tax can be levied upon
the land. It is further submitted that the Government of
India has repeatedly decided, as contemplated by Section
12(3) of the Act, that the properties concerned herein are
the properties of the Union of India and thus exempt from
tax. This decision was communicated to the Municipal
Corporation of Delhi as well. The said decision, being a
statutory decision, is binding upon the Municipal
Corporation of Delhi. We find it difficult to agree with the
learned counsel for the appellants.
The power to carry on a business is an incident of
proprietory power. Even before the present Article 298 was
substituted by the Constitution Seventh Amendment Act, 1956,
this Court had taken the view that the State is entitled to
engage itself in all activities necessary for the promotion
of the social and economic welfare of the community and that
for doing so no specific legislation is necessary except
where the State proposes to encroach upon private rights in
order to enable it to carry on its business. [Rai Sahib Ram
Jawaya Kapur & Ors. v. State of Punjab (1955 (2)
S.C.R.225)]. With a view to put the matter beyond any doubt,
Article 298 was substituted altogether by the Seventh
Amendment Act. It reads:
"298. Power to carry on trade,
etc.--
The executive power of the Union and of
each State shall extend to the carrying
on of any trade or business and to the
acquisition, holding and disposal of
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property and the making of contracts for
any purpose:
Provided that--
(a) the said executive power of the
Union shall, in so far as such trade or
business or such purpose is not one with
respect to which Parliament may make
laws, be subject in each State to
legislation by the State; and
(b) the said executive power of
each State shall, in so far as such
trade or business or such purpose is not
one with respect to which the State
Legislature may make laws, be subject to
legislation by Parliament."
According to the statement of objects and reasons
appended to the Bill, the said amendment was brought in "to
make it clear that the Union government, as well as State
governments, are competent to carry on any commercial or
industrial under taking, whether or not it is related to a
matter within the legislative competence of the Union or as
the case may be of the State. Similarly, the holding,
acquisition and disposal of property and the making of
contracts by the Union or a State could be for any purpose
without constitutional impropriety".
Even before the advent of the constitution, the State
had been carrying on several activities which were in the
nature of commercial/trading/manufacturing activity but with
the advent of the constitution introducing the concept of a
welfare State - or a socialist State, as the case may be -
both the State and Central Governments embarked upon an
extensive and systematic course of activity whereunder
several business ventures were commenced and in many cases
taken over. Within a few years, however, it was realised
that a business is to be carried on as a business and not in
the manner of governmental activity. Accordingly, the
Central and State Governments started creating corporations
for carrying on these activities. In the case of major
public utilities, statutory corporations were created under
different enactments. For example, Road Transport
Corporations under Road Transport Corporations Act,
Electricity Boards under the Electricity Supply Act, 1948,
Air India and Indian Airlines under the Airlines Corporation
Act, Life Insurance Corporation under the Life Insurance
Corporation Act and so on. In respect of several
undertakings, companies were registered under the Companies
Act. With a view to anable these statutory corporations and
companies to carry on the activity which was hitharto
carried on by the governments, the relevant properties
assets and liabilities were transferred to such new
corporations They were supposed to operate on business
lines, pay taxes and justify their creation and
constitution. These corporations, whether created under the
statute or registered under the Companies Act are distinct
juristic entities owning their own properties having their
own fund, capable of borrowing and lending monies and
entering into contracts like any other corporation. In many
cases the entire share capital of these corporations is
owned by the Government whether Central or State. In some
cases, the major share holding is of the Government with
some private share holding as well. In case of some
statutory corporations, the enactment creating them did not
provide for any share capital, though it was made a body
corporate with all the necessary and incidental powers that
go with such concept. The International Airports Authority
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is one such corporation created under the Act with no share
capital but which has its own properties, its own fund,
accounts, employees and capable of lending and borrowing and
entering into contracts. The properties held by it can be
categorised into two, viz., (1) those that were transferred
to it under Section 12 of the Act at the time of its
inception and (2) those that have been acquired by it
subsequent to its constitution. There is no dispute about
the second category of properties. Admittedly they are the
properties of the Authority and not the properties of the
Union. The only controversy is with respect to the first
kind of the properties.
It is true that the expressions "vest" and "vesting"
have different shades of meaning as pointed out by this
Court in Fruit and Veqetable Merchants Union v. Delhi
Improvement Trust (1957 S.C.R.1) and that the nature and
character of vesting has to be ascertained with reference to
the relevant provisions of the enactment. But the question
is what is the nature and character of vesting under the
International Airports Authority Act, 1971? Sri F.S.Nariman,
who led the arguments on behalf of the appellants laid great
stress upon the preamble to the Act and sub-section (1) of
Section 16. Learned Counsel contended that according to the
preamble, the Act was made "to provide for the constitution
of an Authority for the management of certain aerodromes
whereat International air transport services are operated or
are intended to be operated and for matters connected
therewith", which aspect is affirmed in sub-section (1) of
Section 16 which says that "it shall be the function of the
Authority to manage the airports efficiently". On the basis
of the said provisions learned counsel contends that the
vesting of properties in the Authority is only for the
purpose of managing those properties and that the ownership
of those properties was not vested in the Authority. We are,
however, of the opinion that the nature and character of
vesting should not be determined with reference to the
preamble and sub-section (1) of Section 16 alone but on a
totality, i.e., on a conspectus of the provisions of the
Act. Section 3(2) says that the authority shall be a body
corporate having perpetual succession and a common seal with
power to acquire, hold and dispose of property both movable
and immpvable, and entitled to enter into contracts. It can
sue and is liable to be sued in its own name. Section 12,
which is the vesting provision does not contain any words of
limitation. It vests all properties and other assets vested
in the Central Government for the purposes of the airport
and administered by the Director General of Civil Aviation
immediately before the constitution of the authority in the
Authority. All debts, obligations and liabilities incurred,
all contracts entered into and all other matters connected
with the said properties are also made over to the
Authority. Any sums of money due to the Central Government
in relation to the airports immediately before such
constitution are deemed as amounts due to the authority.
Similarly, in respect of all suits and other legal
proceedings, the Authority comes in the place of Central
Government. The concerned employees are treated as on
deputation with the Authority. Section 13 says that any land
required by the authority shall be deemed to be needed for
public purpose and acquired as such according to law. The
Authority is empowered to enter into contracts by itself.
The Authority has its own fund into which any subventions
made by Central Government are deposited. The Central
Government can also advance loans to the Authority on such
terms and conditions as it may determine. The surplus income
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remaining after meeting of the necessary expenditure and
after providing for reserves and other requirements, is to
be paid over to the Central Government. Section 23 says that
the Authority can borrow money from any sources by issue of
bonds, debentures and such other instruments as it may deem
fit. It has its own accounts which are audited by the
Comptroller and Auditor General of India. It has to prepare
and publish an annual report every year. Section 31 provides
expressly that the Authority shall be deemed to be a company
for the purposes of the Income Tax Act, 1961 and its income,
profits and gains shall be liable to tax according to the
said Act. This is a significant provision as we shall point
out in a little while. These several provisions make it
clear that the Authority is a distinct juristic entity,
having its own properties, fund and employees, and that it
is capable of borrowing from any source including from
Government of India. The Act expressly makes the Authority
liable to pay income tax like any other company and its
income arises mainly from the properties vested in it. This
fact coupled with the fact that there are no words of
restriction in Section 12 does establish conclusively that
the properties vested in it under Section 12 - properties
which were hitherto owned by the Union of India - cease to
be the properties of the Union of India and that the said
vesting is neither restricted not temporary. The vesting is
no doubt for ensuring better management of airports but the
said purpose underlying the creation of the Authority cannot
be read as a restriction or as a ground for curtailing the
meaning of vesting.
So far as Section 33 is concerned, it is a temporary
measure - a regulatory manner - which has to be taken
whenever it is found necessary in public interest. If the
Central Government is of the opinion that in public
interest, it is necessary or expedient so to do, it can
direct the Authority to entrust the management of any
airport to the person or persons appointed by it who shall
manage the same for the limited period specified in the
section subject to and under the orders of the Central
Government. At the end of such period, the management of the
airport reverts back to the Authority. Similarly, Section 34
provides for supersession of the authority in certain
situations, viz., in a grave emergency where the authority
is unable to discharge its functions or duties or where the
authority has persistently made default in complying with
any direction issued by the Central Government as a result
of which the financial position of the authority or the
administration of the authority has deteriorated or where
the circumstances exist which renders it in the public
interest so to do. This is another instance of control
vested in the Central Government to ensure proper and
efficient functioning of the Authority. The Authority can be
superseded only for a period not exceeding six months which
can, however, be extended for a further period of six months
- but not beyond. These are the usual regulatory provisions
found in such enactments and in enactments dealing with
cooperative societies and panchayat raj institutions.
Great emphasis was laid upon clause (c) of sub-section
(2) of Section 34 which provides that on supersession of the
Authority under sub-section (1) "all property owned or
controlled by the Authority shall, until the Authority is
re-constituted under sub-section (3), vest in the Central
Government". This provision, according to the learned
counsel, points out the ephemeral nature of "vesting" of
properties of the Union of India in the Authority and is
inconsistent with the theory of absolute vesting propounded
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by the respondents. We are not impressed. It may be seen
that once an Authority is superseded under Section 34(1),
there is, in law, no Authority. In such a situation,
provision has to be made with respect to the properties
hitherto vesting in the Authority and clause (C) of sub-
section (2) is precisely the provision providing for it.
Evidently, the Parliament did not wish to vest the
properties in the person or persons appointed to manage the
affairs of the Authority for a limited period. It is for
that reason that the said clause says that during the period
of supersession such properties vest in the Central
Government which get revested in the Authority once it is
re-constituted. Indeed, it is suggested by Sri Chatterji,
learned counsel appearing for the Dum Dum Municipality that
if the properties did never vest in the Authority and had
always remained the properties of the Union of India, there
was no occasion for clause (c) to say that the properties
owned or controlled by the Authority vest in the Union for
the said limited period. We need not, however, express any
opinion on this submission.
It was then argued by the learned counsel for the
appellants that Section 34(2) (C) is really consistent with
and bears out their theory rather than the case of the
respondents. It is pointed out that Section 34(2)(C) use
both the expressions "owned" and "controlled", which means
respectively the properties owned by it (i.e.,
acquired/constructed by it after its constitution) and those
under its control (i.e., the properties which are owned by
the Union of India and placed under the management of the
Authority under the provisions of the Act). It is submitted
that the Parliament used both the expressions to denote both
kinds of properties. We cannot agree. Probably, the learned
counsel are reading too much into these two words. In any
event, Section 34(2)(C) does not use the expression
"managed", as it ought to, if the intention attributed to
Parliament by the learned counsel is correct. It uses a
different expression "controlled by". It seems to refer to
those properties which may not be owned by the Authority but
are under its control on the date of supersession. From the
said two words in Section 34(2)(C), no inference can be
drawn which militates against the entire scheme of the Act.
A circumstance common to both Sections 33 and 34, which
establishes the distinct identity of the Authority is the
requirement that before taking action under either of the
sections, notice has to be given to the Authority to show
cause and it has to be heard.
There is yet another difficulty in the way of accepting
the appellant’s submission. The submission logically means
that only those properties which are vested by the Central
Government in the Authority on the date of its constitution
alone will continue to be the properties of the Union. But
so far as the properties which have been acquired or
constructed after that date by the Authority would be its
own properties. It may happen that the properties which have
been vested in the authority at its inception have been re-
built, improved, expanded and developed beyond recognition.
How is one to draw the line and where? Such a distinction
would not only be artificial but difficult to operate in
practice. The annual report published by the Authority from
year to year discloses how the Authority has understood the
vesting. A copy of the annual report 1988-89 is placed
before us which shows that the Authority claims to be the
owner of all the properties without making any distinction
between those that were vested in it at its inception and
those which have been acquired and/or constructed later. It
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has also claimed depreciation on all the properties under
Section 32 of the Income Tax Act which can be claimed only
by the owner of the properties. We are not suggesting that
the understanding of the Authority is conclusive on the
question. Far from it. The issue has really to be decided on
the basis of the provisions of the Act. We referred to the
said aspect only to show how the Authority and Union of
India have understood the legal position and acted upon it
over a period of more than two decades.
We may now deal with the submission based upon certain
letters of Government of India asserting that all the
properties of the Authority are the properties of the Union.
The appellants seek to read these letters as constituting a
decision within the meaning of Section 12(3). Section 12(3)
has been set out in full hereinabove. We may now set out one
of the letters relied upon, viz., letter dated January 2,
1981 from the Deputy Secretary to the Government of India to
the Chief Secretary, Government of Maharashtra, Bombay which
reads:
"No.W-24011/14/80-AA
Date:02.01.81.
To,
The Chief Secretary,
Government of Maharashtra,
Mantralaya, Bombay.
Sub : i. Non-agriculture assessment
on the lands at Bombay
airport under the control
of the IAAI.
ii. Payment of Municipal
taxes to the Bombay
Municipal Corporation by
the IAAI.
Sir,
I am directed to say that the
International Airport Authority of
India, a public sector under taking
under this Ministry, has informed the
Ministry that Additional Collector,
Bombay Sub-urban District and the Bombay
Municipal Corporation respectively are
making non-agricultural assessment and
levying Municipal taxes on the lands
under the control of IAAI at Bombay
Airport. Sometimes ago, this Ministry
received a letter from the Additional
Collector, Bombay Sub-urban District
stating that the IAAI is subject to non-
agricultural assessment for the lands
under its control at Bombay Airport (No.
C/Desk/2/8A/826 dt.03.05.1980).
2. This matter was referred to the
Union Ministry of Law, Justice & Company
Affairs for legal opinion. A copy of the
legal opinion received is enclosed. It
may be seen from the legal opinion
received that the property vested with
the IAAI continues to be the property of
the Government of India and is exempt
from state taxation.
3. In view of this, it is requested
that suitable instructions be issued to
the Additional District Collector,
Bombay Sub-urban district and the
Commissioner, Bombay Municipal
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Corporation not to levy any State tax on
the lands under the control of IAAI at
Bombay.
Yours faithfully,
Sd/-
(Gopal Chaturvedi)
Dy.Secretary to the Govt.of India"
The appellants also rely upon a
certificate issued by the Government of India
addressed to the Managing Director, Hotel
Corporation of India, which may also be set
out:
"GOVERNMENT OF INDIA
MINISTRY OF CIVIL AVIATION &
TOURISM
(Department of Civil
Aviation)
SARDAR PATEL
BHAWAN,
PARLIAMENT
STREET,
NEW DELHI.
Dated 21.8.89
AV.18050/67/89-AA
To
The Managing Director,
Hotel Corporation of India,
5th Floor,
Centaur Hotel, Bombay Airport,
Bombay.
Sub: Assessment of property tax.
*
Sir,
I am directed to refer to letter
No. PRM/202 dated 3rd August, 1989 on
the above noted subject and to certify
that Air India is a statutory
Corporation established under the Air
Corporation Act, 1953 by the Government
of India and the Hotel Corporation of
India is a wholly owned subsidiary of
Air India. Since both Air India and the
Hotel Corporation of India are public
sector undertakings, the properties of
these Corporations are basically vested
with the Government of India.
Yours faithfully,
Sd/-
( R.N. Bhargava )
Under Secretary to the Govt. of India"
In our opinion, these letters and/or the certificate do
not represent a decision within the meaning of Section 12
(3) since that sub-section seems to contemplate a dispute
between the Union of India and the Authority. No such
dispute ever existed. Secondly it cannot bind any of the
Municipal Corporations concerned herein for the reason that
they were not heard before rendering the said decision. Yet
another feature of these letters and certificate is that
they do not draw a distinction between properties
transferred by the Union of India to the Authority and the
properties acquired and/are controlled by the Authority
after its constitution. According to the Central Government,
all the properties of the Authority are really the
properties of the Union - a stand which is not taken by the
appellants even.
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Now, coming to Section 31 of the Act, it states
expressly that the Authority shall be a company within the
meaning of Income Tax Act, 1961 and shall be liable to tax
upon its income, profits and gains. Now, if the properties
vested in the Authority by Section 12 continue to be the
properties of the Union, the income arising therefrom should
also be the income of the Union and not the income of the
authority. The dichotomy in the argument of the appellants
is understandable. When Section 31 says that the income,
profits and gains of the authority shall be liable to tax
under the Income Tax Act, it means clearly that it shall be
assessed according to the provisions of that Act which
includes Section 32 providing for depreciation on the assets
from which the income arises. As a matter of fact, the
Authority has been claiming and obtaining the benefit of
Section 32 of the Income Tax Act, which it could have
claimed only if it were the owner of those assets. Having
done that over a period of more than twenty years, the
Authority cannot now turn round - when it is sought to be
taxed under the relevant Municipal Corporation Act - and say
that those properties do not belong to it. The shifting
stands adopted by the Authority to suit its convenience are
too self-evident to call for any emphasis.
The decision of the Constitution Bench of this Court in
Andhra Pradesh State Road Transport Corporation v. The
Income Tax Officer (1964 (7) S.C.R.17) - a case arising
under Article 289 of the Constitution - may be referred to
at this stage. The Andhra Pradesh State Road Transport
Corporation was constituted under the Road Transport
Corporations Act, 1950 with effect from January 11, 1958.
Prior to that date, road transport was a department of the
Government of Andhra Pradesh and was being run by it. During
the period prior to January 11, 1958, the income from the
road transport was exempt from tax as the income of the
State Government but once the corporation was formed, the
Income Tax Department took the view that the income earned
by the corporation is liable to tax. Notices were
accordingly served upon the corporation, which questioned
the same by way of a writ petition in the Andhra Pradesh
High Court. It contended that having regard to the
provisions of the Road Transport Corporations Act and in
particular Section 30 which provides that the net income of
the Corporation should go to the State of Andhra Pradesh, it
must be held that the income of the corporation was really
the income of the State Government. This argument was
rejected on an examination of the provisions of the Road
Transport Corporations Act which are broadly in accord with
the provisions of the International Airports Authority Act,
1971. In coming to the said conclusion, the Constitution
Bench laid emphasis upon the fact that the corporation has a
separate fund of its own, that it can borrow funds from any
source including from the State Government and Central
Government and that it can enter into contracts and own
property. It held that the mere fact that the corporation is
owned by the State Government or that in all material
Particulars, its activities are controlled by the State, are
of no consequence. Of course, the share capital of the
corporation in that case was held by the State Government
and Central Government together and that it also
contemplated raising of capital by issue of shares to other
parties whereas in the case of the Authority there is no
such provision. But the said feature, in our opinion, does
in no way whittle down the relevance of the said decision to
the facts of the case before us, for the reason that the
said fact is not at the core of the decision.
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There is yet another circumstance which goes to support
our conclusion. The Parliament has since enacted the
Airports Authority of India Act, 1994 (Act 55 of 1994) in
supersession of the 1971 Act. We are told that the 1994 Act
has come into force on and from April 1, 1995. Section 3 of
the Act constitutes an authority called "Airports Authority
of India". Sub-section (1) of Section 13 says that on and
from the appointed day, the under takings of the
International Airports Authority (i.e., the authority
constituted under Section 3 of the 1971 Act) shall be
transferred to and vest in the Authority constituted under
Section 3 of the 1994 Act. Sub-section (2) of Section 13
makes it clear that the undertaking of the International
Airports Authority.... which is tranferred to and which
vests in the Authority under sub-section (1) shall be deemed
to include all assets, rights, powers, authorities and
privileges and all property, movable and immovable, real or
personal, corporeal or incorporeal, present or contingent,
of whatever nature and wheresoever situate, including lands,
buildings, machinery, equipments, works, workshops, cash
balances, capital reserves, reserve funds, investments,
tenancies, leases and book debts and all other rights and
interests arising out of such property as were immediately
before the appointment day in the ownership, possession or
power of the International Airports Authority......in
relation to its undertaking whether within or outside
India.....". No distinction of the nature urged by the
learned counsel for the appellants is recognised by sub-
section (2) of Section 13 of the 1994 Act.
Reference may be made in this connection to the
decision of this Court in Western Coalfields Limited v.
Special Area Development Authority (1982 (1) S.C.C.125).
Certain government companies incorporated under the
Companies Act, the entire share capital whereof was
held/owned by the Government of India claimed exemption from
State taxation under Article 285(1) of the Constitution. The
said plea was rejected by this court holding that merely
because the entire share capital is owned by the Government
of India it cannot be held that companies themselves are
owned by the Government of India. It was observed that the
companies which are incorporated under the Companies Act
have a corporate personality on their own distinct from that
of the Government of India and that the lands and buildings
are vested in and owned by the companies whereas the
Government of India only owns the share capital. Reliance
was placed upon certain decisions of this Court including
the decision in Andhra Pradesh State Road Transport
Corporation. We are of the opinion that the said principle
applies equally in the case of a statutory corporation. The
statutory corporation is constituted by or under a statute
as against the companies (including government companies)
which are registered under and governmed by Indian Companies
Act, 1956.
For all the above reasons, we are of the opinion that
the International Airports Authority of India is a statutory
corporation distinct from the Central Government and that
the properties vested in it by Section 12 of the Act cannot
be said to have been vested in it only for proper
management. After the date of vesting, the properties so
vested are no longer the properties of the Union of India
for the purpose of and within the meaning of Article 285.
The vesting of the said properties in the Authority is with
the object of ensuring better management and more efficient
operation of the airports covered by the Act. Indeed that is
the object behind the very creation of the Authority. But
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that does not mean that it is a case of limited vesting for
the purpose of better management. The Authority cannot,
therefore, invoke the immunity created by Article 285(1) of
the Constitution. The levy of property taxes by the relevant
Municipal bodies is unexceptionable.
In view of our conclusion in the preceding para, it is
unnecessary to go into the other question raised, viz.,
whether the municipality can levy tax upon the building
where it cannot levy tax upon the land upon which the
building stands.
The Calcutta high Court has expressed a view that not
all the land in the possession of the I.T.D.C.(pursuant to
the licence granted to it by the Authority) is within the
limits of the Dum Dum Municipality. Since this finding
appears to be not based on any definite material, we leave
this question open for decision by the appropriate
authorities at the appropriate stage. In any such
proceedings, the finding of the High Court aforesaid shall
not operate as res judicata.
For the above reasons, Civil Appeal Nos. 6698-6700 of
1995 (arising out of S.L.P.(C) Nos.1176 of 1991, 7882 of
1993 and 5926 of 1991) are dismissed and Civil Appeal No.
6696 of 1995 (arising out of S.L.P.(C) No.5337 of 1988) is
allowed. No costs.
CIVIL APPEAL NO.6701 OF 1995
(ARISING OUT OF S.L.P.(C) NO.7914 OF 1995)
Leave granted.
This appeal is preferred against the interlocutory
order dated March 24, 1995 pending writ appeal. As stated
hereinabove, the learned Single Judge had allowed the writ
petition filed by the Authority and held that the Bombay
Municipal Corporation cannot levy any property taxes upon
the property held by the Authority. The Municipal
Corporation preferred an appeal against the said order
wherein the Division Bench directed the Authority to pay a
part of the demand pending disposal of the appeal. It is
that order which is questioned in this appeal by the
Authority. Having regard to our decision in the matters
relating to Delhi and Calcutta, this appeal is liable to be
dismissed. It is accordingly dismissed herewith. It is
evident that the writ appeal pending in the Bombay High
Court is liable to be allowed in the light of this judgment.
It is open to the Bombay Municipal Corporation to bring this
judgment to the notice of the High Court and have the appeal
disposed of no costs