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Commissioner Of Income Tax (Tds), … vs Canara Bank on 2 July, 2018




(ARISING OUT OF SLP (C) NO. 3168 OF 2017)





C.A.NO.6064 of 2018 @ SLP(C)No.9295/2017, C.A.NO.6056 of 2018

2018   @   SLP  (C)No.3162/2017,   C.A.NO.6058   of  2018   @

SLP(C)No.9292/2017, C.A.NO.6055 of  2018 @ SLP(C)No.3163/2017,

C.A.NO.6060 of 2018 @ SLP(C)No.9294/2017, C.A.NO.6057of 2018 @

SLP(C) No. 9288/2017, C.A.NO.6054 2018 @ SLP(C) No. 3169/2017,

C.A.NO.6066 of 2018 @ SLP(C)No.9290/2017, C.A.NO.6065 2018 @

SLP(C) No.9296/2017, C.A.NO.6059 2018 @ SLP(C) No. 9293/2017,

C.A.NO.6053   of   2018   @   SLP(C)   No.   3165/2017,   C.A.NO.6052   of
Signature Not Verified

Digitally signed by
Date: 2018.07.07

2018@SLP(C)No.9289/2017,C.A.NO.6051of   2018   @   SLP(C)   No.
11:52:30 IST

3167/2017,   C.A.NO.   6063   of   2018   @   SLP(C)   No.   9291/2017,

C.A.NO.6062  of   2018  @   SLP(C)   No.   9297/2017,     C.A.NO.6061   of

2018 @ SLP(C)No.6728/2017, C.A.NO.6023 of 2018 @ SLP (C) No.

33260/2016,  C.A. No. 5378/2017,   C.A. No. 5374/2017, C.A.NO.

6021 of 2018 @ SLP(C) No. 33262/2016,   C.A.NO.6031 of  2018 @

SLP(C)No.34529/2016,   C.A.NO.6025of   2018   @   SLP(C)   No.

34520/2016,   C.A.NO.6022   of   2018   @   SLP(C)   No.   33261/2016,

C.A.NO.6034   of   2018   @   SLP(C)   No.   34532/2016,   C.A.NO.6027   of

2018   @     SLP(C)   No.   34526/2016,   C.A.NO.6048   of  2018   @

SLP(C)No.36199/2016,C.A.NO.6026   of   2018   @   SLP(C)   No.

34522/2016,   C.A.NO.6028   of   2018   @   SLP(C)   No.   34525/2016,

C.A.NO.6032   of   2018   @   SLP(C)   No.   34530/2016,   C.A.NO.6029   of

2018 @ SLP(C) No. 34528/2016, C.A.NO.6036 of 2018 @ SLP(C) No.

35082/2016,   C.A.NO.6024   of   2018   @   SLP(C)   No.   34521/2016,

C.A.NO.6033   of   2018   @   SLP(C)   No.   34531/2016,   C.A.NO.6039   of

2018 @ SLP(C) No. 35083/2016, C.A.NO.6038 of 2018 @ SLP(C) No.

35435/2016,   C.A.NO.6037   of   2018   @   SLP(C)   No.   35084/2016,

C.A.NO.6046   of   2018   @   SLP(C)   No.   36198/2016,   C.A.NO.6043   of

2018 @ SLP(C) No. 35439/2016, C.A.NO.6040 of 2018 @ SLP(C) No.

35437/2016,   C.A.NO.6030   of   2018   @   SLP(C)   No.   34527/2016,

C.A.NO.6045   of   2018   @   SLP(C)   No.   36158/2016,   C.A.NO.6042   of

2018 @ SLP(C) No. 35438/2016,   C.A.NO.6041 if 2018 @ SLP(C)

No. 35436/2016, C.A.NO..6047 of 2018 @ SLP(C) No. 36200/2016,

C.A.NO.6049   of   2018   @   SLP(C)   No.   37683/2016,   C.A.NO.6044   of

2018 @ SLP(C) No. 35440/2016, C.A.NO. 6035 of 2018 @ SLP(C)

No. 34533/2016, C.A.NO.6050 of 2018 @ SLP(C) No. 37681/2016,

C.A.NO.6069   of   2018   @   SLP   NO.16438   of   2018   @   Diary   No(s).

9866/2017,   C.A.NO.6068   of   2018   @   SLP(C)   No.   8116/2018,

C.A.NO.6067   of   2018   @   SLP(C)   No.   26496/2017,   C.A.NO.6070   of

2018 @ SLP NO.16439 of 2018 @ Diary No(s). 14969/2017.



Leave granted.

2. These appeals question the Division Bench judgment dated

04.04.2016   of   the   Allahabad   High   Court,   by   which   judgment

Income   Tax   Appeals   filed   by   the   Revenue   has   been   dismissed

affirming the order of the Income Tax Appellate Tribunal.  The

common   questions   of   facts   and   law   are   involved   in   these

appeals and it is sufficient to refer the facts and pleadings

in   Civil   Appeal   No….   2018   arising   out   of   SLP(C)   3168   of

2017,   Commissioner   of   Income   Tax(TDS),   Kanpur   and   Anr.   vs.

Canara   Bank   wherein   the   judgment   of   the   High   Court   dated

04.04.2016 in ITA No. 64 of 2016 has been questioned.

3.   The New Okhla Industrial Development Authority   (NOIDA),

hereinafter referred to as “Authority” has been constituted by

Notification   dated   17.04.1976   issued   under   Section   3   of   the

Uttar   Pradesh   Industrial   Area   Development   Act,   1976

hereinafter   referred   to   as   “1976   Act”.     The   Canara   Bank,

respondent   No.   3   is   the   banker   of   the   Authority.   The

respondent   Bank   made   a   payment   of   Rupees   Twenty   Crores   Ten

Lakhs as interest to Authority in form of FDs/Deposits for the

financial   year   2005­06.   The   Canara   Bank,   however,   did   not

deduct tax at source under Section 194A of the Income Tax Act,

1961 hereinafter referred to as “IT Act, 1961”.

4. Notices were issued by the appellant to Canara Bank asking

for information pertaining to interest paid to the Authority

on its deposits. Notices were also issued by the appellant to

the Bank for showing cause for not deducting tax at source. A

writ petition had been filed by the NOIDA being Writ Petition

No.1338/2005 challenging the notices issued to the Authority

as   well   as   its   bankers.     Assessment   proceeding   could   not

proceed due to certain interim directions passed by the High

Court   in   the   above   writ   petition.   The   writ   petition   was

ultimately dismissed by the High Court on 28.02.2011 holding

that the Authority is not a local authority within the meaning

of   Section   10(20)   of   IT   Act,   1961   and   its     income   is   not

exempt from tax.   The Assessing Officer thereafter proceeded

to   pass   an   order   under   Section   201(1)/201(1A)   read   with

Section 194A of the IT Act, 1961 dated 28.02.2013.

5. Income   Tax   Authority   held   that   the   respondent   Bank   is

assessee   in   default.   The   default   was   computed   and   demand

notice   as   per   Section   156   of   the   IT   Act,   1961   was   issued.

Penalty proceeding was also separately initiated. The Canara

Bank   aggrieved   by   the   order   of   the   Assessing   Officer   dated

28.02.2013 filed an appeal before the Commissioner of Income

Tax   (Appeals).   Before   the   Commissioner,   the   bank   relied   on

Notification   dated   22.10.1970   issued   under   Section   194A(3)

(iii)(f) of the IT Act, 1961. The   Appellate Authority vide

its judgment dated 02.12.2013 allowed the appeal setting aside

the order of the Assessing Officer.  The Revenue aggrieved by

the judgment of the Appellate Authority filed an appeal before

the   Income   Tax   Appellate   Tribunal.     The   Tribunal   also   held

that payment of interests by the banks to the State Industrial

Development Authority does not require any deduction at source

in terms of Section 194A(3)(iii)(f).

6. The Revenue aggrieved by the order of the Tribunal filed

an appeal under Section 260A of the Act before the High Court.

The Division Bench of the High Court vide its judgment dated

04.04.2016 has dismissed the appeal. The Division Bench came

to the following conclusions while dismissing the appeal: 

“We have, therefore, no manner of doubt from a
reading   of   the   provisions   of   the   Industrial
Area   Development   Act   that   the   NOIDA   has   been
constituted   by   the   State   Act   and,   therefore,
entitled   to   exemption   of   payment   of   tax   at
source under section 194­A(1) of the Act.

The   decision   of   the   Division   Bench   of   this
Court   in   New   Okhla   Industrial   Development
Authority (supra), on which reliance has been
placed by learned counsel for the appellants,
would,  therefore, not come to the aid of  the
appellants   as   it   was   restricted   to   the   issue
as to whether NOIDA would be a local authority
or   not   and   did   not   deal   with   the   issue
involved   in   this   appeal   as   to   whether   the
NOIDA is a Corporation established by a State

We   therefore,   answer   the   question   of   law
framed  by us in negative and  hold that NOIDA
is a Corporation established by Uttar Pradesh
Industrial Area Development Act, 1976. ”

7. Shri K. Radhakrishnan, learned senior advocate appearing

for the appellants challenging the Division Bench judgment of

the High Court contends that Authority is not entitled for the

benefit of Notification dated 22.10.1970 issued under Section

194A   (3)(iii)(f).   It   is   submitted   that   under   the   above

notification only a Corporation established by Central, State

or Provincial Act  is entitled for the benefit.   Authority is

not   a   Corporation   established   by   the   State   Act   rather

Authority   is   a   Corporation   which   is   established   under   1976

Act. He submitted that there is a vast difference between a

body   established   by   an   Act   and   a   body   established   under   an

Act.   The   provisions   of   Section   194A   have     to   be   strictly

construed and benefit can be extended only when a body falls

expressly within the benefit of exemption. In the exceptions

carved out under Section 194A(3) there is homogeneity in the

group.  The legislature when used a word with a limitation the

same   has   to   be   read   in   the   entire   phrase   and   only   such

corporations   are   entitled   for   the   exemption   which   are

established  by  a   Central,   State   or   Provincial   Act.   It   is

submitted that words have to be construed, in accordance with

the   intention   and   use   of   the   word   as   per   the   Notification

dated   22.10.1970,   normally   indicate   that   for   purposes   of

claiming exemption the corporation has to be established by a

Central, State or Provincial Act. The corporations established

under an Act fall in a different category and are not entitled

for exemption.  He has submitted that CIT Appeals, Income Tax

Tribunal   as   well   as   High   Court   erred   in   not   correctly

construing the Notification dated 22.10.1970 and had wrongly

extended benefit under Section 194(3)(iii)(f).

8. Learned senior counsel appearing for the different banks

have refuted the above submissions of learned senior counsel

for the appellants. It is submitted that Section 3 of 1976 Act

provides   that   “the   State   Government   may   by   notification,

constitute   for   the   purpose   of   this   Act,   an   authority   to   be

called   (Name   of   the   area)   Industrial   Development   Authority,

for   any   Industrial   Development   Area”.   It   is   submitted   that

Authority   is   established   under   the   1976   Act.   Referring   to

provisions   of   State  Bank   of  India   Act,   1955,   Life   Insurance

Corporation of India Act, 1956, it is submitted that statute

provides   for   establishing   of   the   corporation   by  virtue   of   a

notification by the Central Government. It is submitted that

in similar manners Authority has been established by issuing a

notification,   hence,   Authority   has   to   be   treated   as

established by the 1976 Act.   Alternatively, it is submitted

that   the   legislature   has   used   the   words   “by   and   under”

interchangeably which is clear from the provisions of Section

194A(3)(iii)(c)   and   Section   194A((3)(iii)(d).   In   the   Section

194A(3)(iii),   itself   differentiation   in   “by   and   under”   has

been   done   away,  with   that   the   Authority  established  by   1976

Act is clearly covered by the Notification dated 22.10.1970.

The   Notification   dated   17.04.1976   establishing   Authority

fulfills the mandate of “by” hence it is clearly entitled for

the benefit of the Section 194A(3)(iii).


9. Learned counsel for the parties have placed reliance on

various  judgments   of   this   Court,   which   shall   be  referred   to

while considering the submissions in detail.

10. We have considered the submissions of the learned counsel

for the parties and perused the record. Present set of appeals

relates to Section 194A of the IT Act, 1961. It is useful to

extract provisions of 194A which is to the following effect:

“194A.   Interest   other   than   “Interest   on
securities”.­(1)   Any   person,   not   being   an
individual or a Hindu undivided family, who is
responsible   for   paying   to   a   resident   any
income   by   way   of   interest   other   than   income
[by   way   of   interest   on   securities],   shall   at
the   time   of   credit   of   such   income   to   the
account of the payee or at the time of payment
thereof   in   cash   or   by   issue   of   a   cheque   or
draft   or   by   any   other   mode,   whichever   is
earlier,   deduct   income­tax   thereon   at   the
rates in force:

[Provided   that   an   individual   or   a   Hindu
undivided   family,   whose   total   sales,   gross
receipts   or   turnover   from   the   business   or
profession   carried   on   by   him   exceed   the
monetary limits specified under clause (a) or
clause   (b)   of   section   44AB   during   the
financial   year   immediately   preceding   the
financial   year   in   which   such   interest   is
credited   or   paid,   shall   be   liable   to   deduct
income­tax under this section.]

[Explanation.­For   the   purposes   of   this
section,   where   any   income   by   way   of   interest
as   aforesaid   is   credited   to   any   account,

whether   called   “Interest   payable   account”   or
“Suspense   account”   or   by   any   other   name,   in
the books of account  of the person  liable to
pay   such   income,   such   crediting   shall   be
deemed   to   be   credit   of   such   income   to   the
account   of   the   payee   and   the   provisions   of
this section shall apply accordingly.]


(3)   The   provisions   of   sub­section   (1)   shall
not apply ­



(iii) to such income credited or paid to­

(a)   any   banking   company   to   which   the
Banking Regulation Act, 1949 (10 of 1949),
applies,   or   any   co­operative   society
engaged   in   carrying   on   the   business   of
banking   (including   a   co­operative   land
mortgage bank), or

(b) any financial corporation established
by   or   under   a   Central,   State   or
Provincial Act, or

(c)   the   Life   Insurance   Corporation   of
India established under the Life Insurance
Corporation Act, 1956 (31 of 1956), or

(d)   the   Unit   Trust   of   India   established
under   the   Unit   Trust   of   India   Act,   1963
(52 of 1963), or

(e)   any   company   or   co­operative   society
carrying on the business of insurance, or

(f) such other institution, association or
body   [or   class   of   institutions,

associations or bodies] which the Central
Government may, for reasons to be recorded
in writing, notify in this behalf in the
Official Gazette;”

11. In   the   present   case   notification   on   which   reliance   has

been placed by the respondent is Notification dated 22.10.1970

issued under Section 194A(3)(iii)(f), hence, it is necessary

to refer to the entire Notification dated 22.10.1970 which is

to the following effect:

“Notification   No.   S.O.   3489   [No.   170

(F.No.12/164/68­ITCC/ITJ).], Dated 22.10.1970
In pursuance of sub­clause(f) of clause (iii)
of   sub­section   (3)   of   section   194A   of   the
Income Tax Act, 1961 (43 of 1961), the Central
Government hereby notify the following for the
purposes of the said sub­clause:­

(i)any   corporation   established   by   a   Central,
State or Provincial Act;

(ii) any  company in which all the shares  are
held (whether singly or taken together) by the
Government  or the Reserve Bank  of India or a
Corporation owned by that Bank; and

(iii)   any   undertaking   or   body,   including   a
society   registered   under   the   Societies
Registration Act, 1860 (21 of 1860), financed
wholly by the Government. ”

12.  Before   we   proceed   to   examine   rival   contentions   of   the

parties,   it   is   necessary   to   ascertain   the   concept   of   a

Corporation.  A Corporation is an artificial being which is a

legal person. It is a body/corporate established by an Act of

Parliament   or   a   Royal   Charter.   It   possesses   properties   and

rights   which   are   conferred   by   the   Charter   constituting   it

expressly   or   incidentally.   Halsbury’s   Laws   of   England   Fifth

Edition, Vol. 24 defines the Corporation as follows:

“301.   Corporations   and   unincorporated
associations.  A corporation may be defined as a
body   of   persons   (in   the   case   of   a   corporation
aggregate)   or   an   office   (in   the   case   of   a
corporation sole) which is recognised by the law
as  having  a personality which  is  distinct  from
the separate personalities of the members of the
body or the personality of the individual holder
for   the   time   being   of   the   office   in   question.
There   are   many   associations   and   bodies   of
persons   which   are   not   corporations.
Unincorporated   associations   do   not   have   legal
personality, may not sue or be sued in their own
name nor (unless their purposes are charitable)
may   property   be   held   for   their   purposes
otherwise  than  by  virtue  of a  contract  between
the members for the time being. ”

13. “Corporation   aggregate”,   has   further   been   defined   by

Halsbury’s   Laws   of   England,   Fifth   Edition,   Vol.   24   to   the

following effect:

“312.   Meaning   of   ‘Corporation   aggregate’.   A
corporation   aggregate   has   been   defined   as   a
collection of individuals united into one body under
a   special   denomination,   having   perpetual   succession
under an artificial form, and vested by the policy of
the   law   with   the   capacity   of   acting   in   several
respects as an individual, particularly of taking and
granting property, of contracting obligations and of

suing   and   being   sued,   of   enjoying   privileges   and
immunities in common and of exercising a variety of
political   rights,   more   or   less   extensive,   according
to   the   design   of   its   institution,   or   the   powers
conferred on it, either at the time of its creation
or at any subsequent period of its existence. ”

14. This   Court   in  S.S.   Dhanoa   vs.   Municipal   Corporation,

Delhi and Others (1981) 3 SCC 431  had elaborately considered

the concept of Corporation. This Court referred and relied the

definition of Corporation as given by  Chief Justice Marshall

in   celebrated   case   of  Dartmouth   College   v.   Woodward,   NH   4

Wheat 518, 636:4 L Ed 629. It is useful to extract paragraph

Nos. 8 and 9 of the judgment which are as follows: 

“8.   A   corporation   is   an   artificial   being
created by law having a legal entity entirely
separate and distinct from the individuals who
compose   it   with   the   capacity   of   continuous
existence   and   succession,   notwithstanding
changes   in   its   membership.   In   addition,   it
possesses the capacity as such legal entity of
taking,   holding   and   conveying   property,
entering into contracts, suing and being sued,
and   exercising   such   other   powers   and
privileges   as   may   be   conferred   on   it   by   the
law of its  creation just as a natural person
may.   The   following   definition   of   corporation
was   given   by   Chief   Justice   Marshall   in   the
celebrated Dartmouth College case:

A corporation is an artificial being, invisible,
intangible,   and   existing   only   in   contemplation
of   law.   Being   the   mere   creature   of   law,   it
possesses   only   those   properties   which   the
charter of its creation confers upon it, either
expressly   or   as   incidental   to   its   very
existence.  These  are  such  as  are  supposed  best

calculated to effect the object for which it was
created.   Among   the   most   important   are
immortality,   and,   if   the   expression   may   be
allowed,   individuality;   properties,   by   which   a
perpetual   succession   of   many   persons   are
considered as the same, and may act as a single
individual. They enable a corporation to manage
its own affairs,  and  to hold  property,  without
the   perplexing   intricacies,   the   hazardous   and
endless necessity, of perpetual conveyances for
the   purpose   of   transmitting   it   from   hand   to
hand. It is chiefly for the purpose of clothing
bodies   of   men,   in   succession,   with   these
qualities and capacities, that corporations were
invented,   and   are   in   use.   By   these   means,   a
perpetual succession of individuals are capable
of   acting   for   the   promotion   of   the   particular
object, like one immortal being.
The   term   “corporation”   is,   therefore,   wide
enough to include private corporations. But, in
the context of clause Twelfth of Section 21 of
the   Indian   Penal   Code,   the   expression
‘corporation’   must   be   given   a   narrow   legal

“9.  Corporation,  in  its  widest sense,  may  mean
any   association   of   individuals   entitled   to   act
as an individual. But that certainly is not the
sense   in   which   it   is   used   here.   Corporation
established   by   or   under   an   Act   of   Legislature
can   only   mean   a   body   corporate   which   owes   its
existence, and not merely its corporate status,
to the Act. For example, a Municipality, a Zilla
Parishad or a Gram Panchayat owes its existence
and   status   to   an   Act   of   Legislature.   On   the
other   hand,   an   association   of   persons
constituting themselves into a company under the
Companies  Act  or  a society  under  the  Societies
Registration  Act  owes  its  existence not to  the
Act   of   Legislature   but   to   acts   of   parties
though,   it   may   owe   its   status   as   a   body
corporate to an Act of Legislature.”

15. Before us, there is no issue that the Authority is not a

Corporation. It is also not contended before us that Authority

is not a statutory corporation. What is contended before us is

that Authority having not been established by a Central, State

or   Provincial  Act  is   not   covered   by   Notification   dated

22.10.1970 hence, not eligible for the benefit. The provision

of   Section   194A   and   the   notification   issued   by   Central

Government   under   194A(3)(iii)(f)   falls   for   consideration.   We

may   beneficially   notice   a   principle   of   statutory

interpretation   which   needs   to   be   applied   while   interpreting

the   above   provisions   of   IT   Act,   1961.   This   Court   in  RBI  vs

Peerless General Finance  Investment Co. Ltd., (1987) 1 SCC

424,  laid down the following in paragraph No. 33:

“  33.   Interpretation   must   depend   on   the   text
and   the   context.   They   are   the   bases   of
interpretation.   One   may   well   say   if   the   text
is   the   texture,   context   is   what   gives   the
colour.   Neither   can   be   ignored.   Both   are
important.   That   interpretation   is   best   which
makes   the   textual   interpretation   match   the
contextual. A statute is best interpreted when
we   know   why   it   was   enacted.   With   this
knowledge, the statute must be read, first as
a whole and then section by section, clause by
clause, phrase by phrase and word by word. If
a statute is looked at, in the context of its
enactment,   with   the   glasses   of   the
statute­maker,   provided   by   such   context,   its
scheme,   the   sections,   clauses,   phrases   and
words   may   take   colour   and   appear   different
than when the statute is looked at without the
glasses   provided   by   the   context.   With   these
glasses we must look at the Act as a whole and

discover what each section, each clause, each
phrase and each word is meant and designed to
say   as   to   fit   into   the   scheme   of   the   entire
Act.   No   part   of   a   statute   and   no   word   of   a
statute   can   be   construed   in   isolation.
Statutes   have   to   be   construed   so   that   every
word   has   a   place   and   everything   is   in   its
place. It is by looking at the definition as a
whole in the setting of the entire Act and by
reference   to   what   preceded   the   enactment   and
the   reasons   for   it   that   the   Court   construed
the   expression   “Prize   Chit”   in  Srinivasa  and
we  find no  reason to depart from the  Court’s

16. A Constitution Bench of this Court in  Sukhdev Singh and

Others   vs.   Bhagatram   Sardar   Singh   Raghuvanshi   and   Another,

(1975)   1   SCC   421  had   occasion   to   consider   the   nature   and

character of Corporation including its early history.  Justice

Mathew,   delivering   his   concurrent   opinion   noted   that

Corporations in 17th, 18th and 19th Centuries were far more like

the bodies   corporate we call “public authorities” today. In

paragraph Nos. 83, 86 and 87 following has been laid down:

“83.   The   chartered   corporations   of   the   17th,
18th and 19th centuries were expected, perhaps
required,   to   perform   stated   duties   to   the
community   like   running   a   ferry,   founding   a
colony   or   establishing   East   Indian   trade.
Performance   of   these   functions   and   securing
whatever   revenue   the   enterprise   made   to   the
Crown   were   the   primary   reasons   why   a   charter
was granted. Corporations in early English law
were   in   fact,   and   in   legal   cognizance,   a
device   by   which   the   political   State   got
something   done.   They   were   far   more   like   the
bodies corporate we call “public authorities”
today.  Few in the 17th  or 18th  century would

have   disputed   that   such   a   corporation   was   an
agency of the State.”

86. The public corporation, therefore, became
a   third   arm   of   the   Government.   In   Great
Britain,   the   conduct   of   basic   industries
through giant corporations is now a permanent
feature of public life.

87.   A   public   corporation   is   a   legal   entity
established normally by Parliament and always
under legal authority, usually in the form of
a   special   statute,   charged   with   the   duty   of
carrying   out   specified   governmental   functions
in   the   national   interest,   those   functions
being   confined   to   a   comparatively   restricted
field,   and   subjected   to   control   by   the
Executive,   while   the   corporation   remains
juristically   an   independent   entity   not
directly   responsible   to   Parliament.   A   public
corporation   is   not   generally   a   multipurpose
authority   but   a   functional   organisation
created   for   a   specific   purpose.   It   has
generally   no   shares   or   shareholders.   Its
responsibility generally is to Government. Its
administration   is   in   the   hands   of   a   Board
appointed   by   the   competent   Minister.   The
employees of public corporation are not civil
servants. It  is, in fact, likely  that in  due
course   a   special   type   of   training   for
specialized   form   of   public   service   will   be
developed   and   the   status   of   the   personnel   of
public   corporation   may   more   and   more   closely
approximate   to   that   of   civil   service   without
forming   part   of   it.   Insofar   as   public
corporations fulfil public tasks on behalf of
Government, they are public authorities and as
such subject to control by Government.”

17. One more principle which was reiterated by this Court in

above Constitution Bench judgment is that Corporations which

are   instrumentalities   of   the   Government   are   subject   to   the

limitation as contained in the Constitution. The Corporations

which were under consideration in the above case, namely, Life

Insurance   Corporation   of   India,   Oil   and   Natural   Gas

Commission,  Industrial   Finance   Corporation  were   held   to   be

constituted   within   the   meaning   of   Article   12   of   the

Constitution. Two categories of Corporations have been noticed

i.e.   statutory   corporations   and   non­statutory   corporations.

Whereas, the statutory corporations owe their existence from

“by or under” statute, non­statutory bodies and corporations

are not created by or under statute rather are governed by a



18. The appellant on the one hand submits that the Authority

has   not   been   established  by   1976   Act  rather   it   has   been

established  under   the   1976   Act,   hence   it   is   not   covered   by

Notification   dated   22.10.1970   whereas   the   respondent   submits

that Authority has been established by the 1976 Act hence, it

fulfills the condition as enumerated under Notification dated

2.10.1970. Alternatively, it is submitted that words “by and

under” have been interchangeably used in the IT Act, 1961 and

there is no difference, even if, the Authority is established

under the 1976 Act.

19. Section   194A(3)(iii)   clauses   (b),   (c)   and   (d)   refer   to

expression “established”. In sub clause (b) expression used is

“established by or under a Central, State or Provincial Act”,

in   sub   clause   (c)   the   expression   used   is   “established   under

the   Life   Insurance   Corporation   Act”   and   in   sub   clause   (d)

expression used is “established under the Unit Trust of India

Act”.   The   Section   thus   uses   both   the   expressions   “by   or

under”.   The   expression   established   by   or   under   an   Act   have

come for consideration before this Court on several occasions.

In this context, it shall be useful to refer to few judgments

of   this   Court.   In  Sukhdev   Singh   (supra),   the   Court   had

occasion to consider the status of company incorporated under

the Companies Act. The Court held that Company incorporated is

not a Company created by the Companies Act. In paragraph No.

25 following was held: 

“25……A   company   incorporated   under   the
Companies Act is not created by the Companies
Act   but   comes   into   existence   in   accordance
with   the   provisions   of   the   Act.   It   is   not   a
statutory   body   because   it   is   not   created   by
the   statute.   It   is   a   body   created   in
accordance   with   the   provisions   of   the

20. Mathew  J.,   writing   concurrent   opinion   while   discussing

the public corporation held that such corporations are created

by   State.   In  Executive   Committee   of   Vaish   Degree   College,

Shamli and Others vs. Lakshmi Narain and Others, (1976) 2 SCC

58,   the   question   for   consideration   fell   as   to   whether   the

Executive Committee of a degree college is a statutory body.

Contention before the Court was that the Executive Committee

was   the   statutory   body   since   it   was   affiliated   to   the   Agra

University   which   was   established   by   the   statute.     The

Executive Committee was further covered by the statute framed

by the Agra University. In the above context, this Court held

that   there   is   a   clear   distinction   between   a   body   which   is

created by the Statute and a body which having been come into

existence is governed in accordance with the provisions of the

statute. In paragraph No. 10 following was held:

“10……….It   is,   therefore,   clear   that
there   is   a   well   marked   distinction   between   a
body   which   is   created   by   the   statute   and   a
body which after having come into existence is
governed in accordance with the provisions of
the statute. In other words the position seems
to be that the institution concerned must owe
its very existence to a statute which would be
the   fountainhead   of   its   powers.   The   question
in such cases to be asked is, if there is no
statute   would   the   institution   have   any   legal
existence.   If   the   answer   is   in   the   negative,
then   undoubtedly   it   is   a   statutory   body,   but
if the institution has a separate existence of
its   own   without   any   reference   to   the   statute
concerned   but   is   merely   governed   by   the
statutory provisions it cannot be said to be a

statutory body……….”

21. Again   in   S.S.Dhanoa   (supra),   this   Court   had   occasion   to

consider a Registered Society which was a body/corporate.  The

question   was   as   to   whether   the   State   Body   /corporate   is   a

Corporation within the meaning of Clause Twelfth of Section 21

of   the   IPC   (Indian   Penal   Code).   This   Court   again   held   that

expression   Corporation   means   a   Corporation   created   by   the

legislature. In paragraph No. 7 following was held: 

“7………In   our   opinion,   the   expression
‘corporation’   must,   in   the   context,   mean   a
corporation created by the legislature and not
a body or society brought into existence by an
act   of   a   group   of   individuals.   A   cooperative
society   is,   therefore,   not   a   corporation
established by or under an Act of the Central
or State Legislature.”

22. Further   noticing   the   distinction   between   Corporation

established by or under Act or body created by or under Act,

following was held in paragraph No. 10:

“10.   There   is   a   distinction   between   a
corporation established by or under an Act and
a   body   incorporated   under   an   Act.   The
distinction   was   brought   out   by   this   Court   in
Sukhdev   Singh  v.  Bhagatram   Sardar   Singh
Raghuvanshi. It was observed: [SCC p. 435: SCC
(LS) p. 115, para 25]

“A   company   incorporated   under   the
Companies   Act   is   not   created   by   the
Companies Act but comes into existence in
accordance   with   the   provisions   of   the

There   is   thus   a   well­marked   distinction
between a body created by a statute and a body
which,   after   coming   into   existence,   is
governed in accordance with the provisions of
a statute……….”

23. Another   judgment   which   had   occasion   to   consider   the

expression established by or under the Act is a judgment of

this   Court   in  Dalco   Engineering   Private   Limited   vs.   Satish

Prabhakar Padhye and Others (2010) 4 SCC 378.   The Court had

occasion   to   examine   the   provision   of   Section   2k,   of   the

Persons with Disabilities (Equal Opportunities, Protection of

Rights   and   Full   Participation)   Act,   1995,   specifically

expression “establishment” means a Corporation established by

or under Central, Provincial or State Act.   This Court held

that the phrase established by or under the Act is a standard

term   used   in   several   enactments   to   denote   a   statutory

corporation established or brought into existence by or under

the statute. On Company it was held that the company is not

established   under   the   Companies   Act   and   an   incorporated

company does not “owe” its existence to the Companies Act. In

paragraph No. 20 following has been laid down:

“20.   A   “company”   is   not   “established”   under
the   Companies   Act.   An   incorporated   company
does not “owe” its existence to the Companies
Act. An incorporated company is formed by the

act   of   any   seven   or   more   persons   (or   two   or
more persons for a private company) associated
for any lawful purpose subscribing their names
to   a   memorandum   of   association   and   by
complying   with   the   requirements   of   the
Companies   Act   in   respect   of   registration.
Therefore,   a   “company”   is   incorporated   and
registered   under   the   Companies   Act   and   not
established   under   the   Companies   Act.   Per
contra,   the   Companies   Act   itself   establishes
the   National   Company   Law   Tribunal   and   the
National   Company   Law   Appellate   Tribunal,   and
these   two   statutory   authorities   owe   their
existence to the Companies Act.”

24. This   Court   further   elaborating   the   expression   held   that

when the expression used is “established by or under the Act”,

the emphasize should be on the word “established” in addition

to the words “by or under”.  It is useful to refer to what has

been said in paragraph Nos. 21 and 22 of the judgment which is

to the following effect: 

“21.   Where   the   definition   of   “establishment”
uses the term “a corporation  established  by or
under   an   Act”,   the   emphasis   should   be   on   the
word “established” in addition to the words “by
or   under”.   The   word   “established”   refers   to
coming   into   existence   by   virtue   of   an
enactment.   It   does   not   refer   to   a   company,
which,   when   it   comes   into   existence,   is
governed   in   accordance   with   the   provisions   of
the   Companies   Act.   But   then,   what   is   the
difference   between   “established  by  a   Central
Act” and “established under a Central Act”?

22.   The   difference   is   best   explained   by   some
illustrations.   A   corporation   is   established   by
an   Act,   where   the   Act   itself   establishes   the

corporation. For example, Section 3 of the State
Bank of India Act, 1955 provides that a bank to
be   called   State   Bank   of   India   shall   be
constituted to carry on the business of banking.
Section 3 of the Life Insurance Corporation Act,
1956 provides that

3.  Establishment   and   incorporation   of   Life
Insurance Corporation of India.—(1) With effect
from such date as the Central Government may, by
notification   in   the   Official   Gazette,   appoint,
there shall be established a Corporation called
the Life Insurance Corporation of India.

State   Bank   of   India   and   Life   Insurance
Corporation   of   India   are   two   examples   of
corporations established by “a Central Act”.”

25. This Court has also referred to provisions of The State

Financial   Corporations   Act,   1951   which   provides   for

establishment of various financial corporations under the Act.

It is useful to refer to definition of financial corporation

as contained in Section 2(b) which is to the following effect:

“2(b)   Financial   Corporation   means   a   Financial
Corporation   established   under   Section   3   and
includes   a   Joint   Financial   Corporation
established under Section 3A;”

26. Section   3   deals   with   establishment   of   State   Financial

Corporation which provides as follows:

“3.   Establishment   of   State   Financial
Corporations.: (1) The State Government may, by
notification in the Official Gazette, establish
a   Financial   Corporation   for   the   State   under

such   name   as   may   be   specified   in   the

(2)   The   Financial   Corporation   shall   be   a   body
corporate by the name notified under sub­section
(1),   having   perpetual   succession   and   a   common
seal,  with  power,  subject  to  the  provisions of
this   Act,   to   [acquire,   hold   and   dispose   of]
property and shall by the said name sue and be
sued. ”

27. This   Court   clearly   in   above   case,  Dalco   Engineering

(supra)  has   held   that   such   Financial   Corporations   are

established by an Act or under an Act. In paragraph No. 23 of

the judgment following has been held:

“23.   We   may   next   refer   to   The   State   Financial
Corporations   Act,   1951   which   provides   for
establishment  of  various  financial  corporations
under that Act. Section 3 of that Act relates to
establishment   of   State   Financial   Corporations
and provides that “the State Government may, by
notification in the Official Gazette, establish
a financial corporation for the State under such
name   as   may   be   specified   in   the   notification”
and such  financial  corporation  shall  be a  body
corporate   by   the   name   notified.   Thus,   a   State
Financial   Corporation   is   established   under   a
Central Act.  Therefore, when  the  words  “by  and
under   an   Act”   are   preceded   by   the   words
“established”, it is clear that the reference is
to a corporation established, that it is brought
into   existence,   by   an   Act   or   under   an   Act.   In
short,   the   term   refers   to   a   statutory
corporation   as   contrasted   from   a   non­statutory
corporation incorporated or registered under the
Companies Act.”

28. Now, we revert back to the provisions of 1976, Act. The

very   preamble   of   that   Act   reads   “an   Act   to   provide   for   the

Constitution   of   an   Authority   for   the   development   of   certain

areas in the State into industrial and urban township and for

masses connected through with”. 

29. Thus,   the   Act   itself   provides   for   constitution   of   an

authority. Section 2(b) of the 1976 Act defines Authority as

authority   constituted   under  Section  3   of   the   Act.   Section   3

which is very relevant for the present case is as follows:

“3.   (1)   The   State   Government   may,   by
notification,   constitute   for   the   purposes   of
this Act, An authority to be called (Name of the
area) Industrial Development Authority, for any
industrial development area. 

(2) The Authority shall be a body corporate.

(3) The Authority shall consist of the following

(a) The Secretary to the            Member
Government, Uttar Pradesh, 
Industries Department      Chairman
or his Nominee not below 
the rank of 
Joint Secretary­ex­official.

(b) The Secretary to the  Member
Government, Uttar Pradesh, 
Public works Department 
or his nominee not below 
the rank of Joint 
Secretary ex­official. 

(c) The Secretary to the Member
Government, Uttar Pradesh, 

Local Self­Government 
or his nominee not below 
the rank of joint Secretary­ex official. 

(d) The Secretary to the
Government, Uttar Pradesh,
Finance Member Department
or his nominee not below 
the rank of Joint Secretary­ex official.

(e) The Managing Director, 
U.P. State Industrial 
Development Corporation­ex 

(f) Five members to be nominated     Member
by the State Government 
by notification.


(g) Chief Executive Officer.  Member 

(4) The headquarters of the Authority shall be
at such place as may be notified by the State

(5)   The   procedure   for   the   conduct   of   the
meetings   for   the   Authority   shall   be   such   as
may be prescribed.

(6)   No   act   or   proceedings   of   the   Authority
shall be invalid by reason of the existence of
any   vacancy   in   or   defect   in   the   constitution
of the Authority.”

30. When we compare the provisions of Section 3 of 1976 Act

with those of The State Financial Corporations Act, 1951, it

is   clear   that   the   establishment   of   Corporation   in   both   the

enactments is by a notification by State Government.   In the

present   case,   notification   has   been   issued   in   exercise   of

power of Section 3, the Authority has been constituted. It is

useful   to   extract   paragraph   No.   2   of   the   Notification   dated


“2.  The  Governor  is  hereby further pleased,  in
exercise   of   the   powers   under   Section   3   of   the
said   Act,   to   constitute,   in   respect   of   the
above­mentioned Industrial Development Area, for
the purposes of the said Act, an Authority to be
called     the   ‘New   Okhla   Industrial   Development
Authority’, consisting of the following, namely,

(i) Secretary to the Government, 
Uttar Pradesh, 
Industries Department,    Member Chairman
Ex officio       (Under Clause(a))

(ii) Secretary to the Government, Uttar
    Pradesh, Public Works Department,
Ex Officio  (Under Clause(b))

(iii) Secretary to the Government, 
Uttar Pradesh,  Local 
self­Government, Member
Department Ex officio (Under Clause (c))

(iv) Secretary to the                  
Government, Uttar Pradesh,
Finance Department, Member
Ex officio (Under Clause (d))

(v) Managing Director, UP State
Industrial Development 
Corporation Member
Ltd. Ex. Officio (Under Clause (e))

(vi) Chairman, UP State Member
Electricity Board,     

                        (Nominated under 
Clause (f)) 

(vii) Chief Engineer, UP Jal Nigam
   Board,  Member
   Ex­officio     (Nominated under Clause (f))

(viii) Chief Engineer, Irrigation       Member
Department UP,         
 Ex­officio    (Nominated under(f))

(ix) Chief Town and Country  Member
      Planner, UP,   (Nominated under 

(x)  District Magistrate,
Bulandshahr, Member
     Ex­officio   (Nominated under Clause(f))

(xi) Chief Executive Officer

Member Secretary 
    (Under Clause (g))”

31. This Court having already laid down in  Dalco  Engineering

(supra)   that   establishment   of   various   financial   corporations

under   State   Financial   Corporation   Act,   1951   is   establishment

of a Corporation by an Act or under an Act. We are of the view

that the above ratio fully covers the present case and we have

no doubt that the Authority have been established by the 1976

Act   and   it   is   clearly   covered   by   the   Notification   dated

22.10.1970. It is further relevant to note that composition of

the Authority is statutorily provided by Section 3 of 1976 Act

itself,   hence,   there   is   no   denying   that   Authority   has   been

constituted by Act itself.

32.  In view of what has been said above, we are of the view

that   High   Court   did   not   commit   any   error   in   dismissing   the

appeal   filed   by   the   Revenue.   In   result,   all   the   appeals   are



     ( A.K. SIKRI )


        ( ASHOK BHUSHAN )
JULY 02, 2018.

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