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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