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PETITIONER: FOOD CORPORATION OF INDIA

       Vs.

RESPONDENT: MUNICIPAL COMMITTEE, JALALABAD AND ANOTHER

DATE OF JUDGMENT:       27/07/1999

BENCH: D.P.Wadhwa, M.B.Shah

JUDGMENT:

D.P. Wadhwa, J.

     Food Corporation of India (’Corporation’ for short) is aggrieved  by  the judgment dated December 13, 1994  of  the Division  Bench  of  the  Punjab   and  Haryana  High  Court dismissing  its  writ  petition  challenging  the  order  of assessment  of its properties under the Punjab Municipal Act by   the  second  respondent,   the   Municipal   Committee, Jalalabad, District Ferozpur in the State of Punjab.

     It  is  contended  before us that the  Corporation  is exempt  from taxation under Article 285 of the  Constitution and that valuation and assessment of the properties has been completed  without  taking  into account the  provisions  of Section  3 of the Punjab Municipal Act under which house tax is  to  be arrived at on the basis of the "annual value"  on which the properties can be let.

     High  Court  has held that assessment of the  property tax was based on agreed fair rent as stated by the Municipal Committee.   There  is no challenge to this averment by  the Corporation.   It  is, therefore, difficult for us  to  hold that the agreed rent is not the fair rent and that there has been  any violation of the provisions regarding fixation  of annual value.  This contention of the Corporation must fail.

     The  appellant Corporation is constituted by the  Food Corporation  Act, 1964 (for short the ’Act’).  Under Section 3  of this Act, the Corporation shall be body corporate with that  name,  having perpetual succession and a  common  seal with  power,  subject  to  the provisions  of  the  Act,  to acquire,  hold  and dispose of property and to contract  and may,  by that name, sue and be sued.  If we refer to Section 42  of  the  Act, the Corporation is a  company  within  the meaning of the Income-tax Act, 1961 and liable to tax on its income,  profits  and  gains.  However,  under  Section  43, provision  of  law  relating to winding up of  companies  or corporations  do not apply to the Corporation and it  cannot be  placed  in  liquidation  save by order  of  the  Central Government.  It is, thus, apparent that the Corporation is a distinct entity from the Union of India.

     It  is  submitted  before us that the  Corporation  is nevertheless  a statutory corporation incorporated by an Act

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of parliament and runs entirely on the subsidies provided by the  Central  Government and in fact it has taken  over  the role  earlier  performed by the Directorate of Food  in  the Government  of India and further that the Corporation has no profit   motives.    Lastly,  it  is  submitted   that   the Corporation  is  obliged to  follow  directions/instructions issued  by the Central Government from time to time and  its management  is also provided by the Central Government.   It was,  thus, submitted that for all intent and purposes,  the Corporation  is  nothing but an extended arm of the  Central Government and it is thus exempt from taxation under Article 285 of the Constitution.

     Article 285 of the Constitution is set out as under :

     "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 provides, 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 provided, 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 liable, so long  as that tax continues to be levied in that State."

     The  question  that  arises  before  us  is:   If  the property  of  the  Corporation is property of the  Union  of India  and, thus, exempt from taxation imposed by the  State or  any authority within a State.  Authority in the  present case would include local authority.  A Constitution Bench of this  court in Electronics Corporation of India Ltd.  & Ors. vs.   Secretary,  Revenue Department, Government  of  Andhra Pradesh  [(1999)  4 SCC 458 = 1999 (3) SCALE 123]  has  held that  a  Government  company is distinct  from  the  Central Government  and  cannot claim exemption from taxation  under Article   285  of  the  Constitution.    The  case  of   the Corporation cannot be any different.  The Act under which it is  constituted  specifically makes the Corporation  a  body corporate having the attributes of a company.

     In  State of Punjab & Ors.  vs.  Raja Ram & Ors.  [AIR 1981  SC 1694 = (1981) 2 SCC 66] the question raised was  if acquisition of land under the Land Acquisition Act, 1894 for the  Food Corporation of India was valid as it was said that Corporation is not a company to which the provisions of that Act would apply.

     Before its amendment in 1984, Section 3(e) of the Land Acquisition Act defined the expression ’company’ as under:

     "the  expression "company" means a company  registered under  the Indian Companies Act, 1882 or under the (English) Companies  Act,  1862 to 1890 or incorporated by an  Act  of parliament  of the United Kingdom or by an Indian Law, or by Royal  Charter  or  Letters patent and  included  a  society registered  under the Societies Registration Act 1860, and a registered  society  within the meaning of the  Co-operative Societies  Act,  1912  or  any other  law  relating  to  co- operative  societies  for  the time being in  force  in  any State."

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     The  expression  ’corporation’  had not  been  defined earlier which now finds place in clause (cc) of Section 3 of the  Land  Acquisition  Act.  Clause (e) which  defined  the expression  ’company’ has also thus been amended.   However, we  are concerned with the old definition of ’company’.   In this  case  land  was acquired for the Corporation  and  the question  was  if the Corporation was a company  within  the meaning  of Section 3(e) (old) of the Land Acquisition  Act. This  Court after referring to Section 3 of the Act observed that  sub-section  (2) thereof clothes the Corporation  with the  attributes  of a company and it cannot,  therefore,  be contended  that the Corporation is not a company within  the meaning  of the definition of that term appearing in  clause (e)  of  Section 3 of the Land Acquisition Act.  This  Court also  did  not  accept the argument that  Corporation  is  a Government Department.  It said :

     "A  Government  department has to be  an  organisation which  is not only completely controlled and financed by the Government  but has also no identity of its own.  The  money earned  by  such a department goes to the exchequer  of  the Government  and losses incurred by the department are losses of  the Government.  The Corporation, on the other hand,  is an  autonomous  body  capable  of  acquiring,  holding   and disposing  of property and having the power to contract.  It may  also sue or be sued by its own name and the  Government does  not  figure in any litigation to which it is a  party. It  is  true that its original share capital is provided  by the  Central  Government (S.5 of the F.C.  Act) and that  11 out of 12 members of its Board of Directors are appointed by that  Government  (S.7  of  the F.C.  Act)  but  then  these factors  may at the most lead to the conclusion (about which we  express  no  final opinion) that the Corporation  is  an agency or instrumentality of the Central Government."

     The Court further said that even if the Corporation is an agency or instrumentality of the Central Government, that did  not  lead  to the inference that the Corporation  is  a Government department.  The reason is that Act has given the Corporation   an  individuality  apart   from  that  of  the Government.

     Thus  we hold that the Corporation is not exempt  from taxation under Article 285 of the Constitution.

     The appeal fails and dismissed with costs.