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PETITIONER:

M/S. ELECTRONICS CORPORATION OF INDIA LTD.

Vs.

RESPONDENT:

SECRETARY,REVENUE DEPARTMENT,GOVT.OF ANDHRA PRADESH AND ORS.

DATE OF JUDGMENT: 05/05/1999

BENCH:

B.N.Kirpal, S.P.Bharucha,S.R.Babu,Syed Shah Mohammed Quadri

JUDGMENT:

BHARUCHA, J. :

Under challenge is the principal judgment and order

dated 30th July, 1982 of the High Court of Andhra Pradesh in

the case of Electronics Corporation of India Ltd. (Civil

Appeal No.142 of 1983) and the orders following the

principal judgment and order in the cases of M/s. Parel

Investment and Trading Co. Limited (Civil Appeal No.3937-38

of 1990) and Hindustan Shipyard Ltd. (Civil Appeal

Nos.3939-41 of 1990 and 3393 of 1991).

It is enough to set out the facts pertaining to Civil

Appeal No.142 of 1983 filed by the Electronics Corporation

of India Ltd. (the appellant company) in as much as the

same issue of law is involved in all the appeals and all the

appellants are companies registered under the Companies Act.

The Andhra Pradesh Non Agricultural Lands Assessment

Act, 1963 (the Act) defined owner to include any person

for the time being receiving or entitled to receive whether

on his own account or as agent, or trustee, guardian,

manager, receiver for another person or for any religious,

educational or charitable purpose, rent or profits from the

non agricultural land or for the structure constructed on

such land, in respect of which the word is used.

Consequent upon amending Act 28 of 1974, with effect from

1st July, 1974, the definition of owner was amended and

the following, so far as is relevant here, was added: and

also includes in respect of the land owned by the State

Government or the Central Government (i) the lessee, if the

land has been leased out by that Government for any

commercial, industrial or other non agricultural purpose

......... Section 3 is the charging section of the Act and

provides for the levy of assessment on non agricultural

land, to be paid by the owner of such land. Section 12 of

the Act sets out the categories of land to which the Act

does not apply. Prior to amending Act 28 of 1974, the Act

did not apply to land owned by the State Government or the

Central Government. Thereafter, it did not apply to land

owned by the State Government or the Central Government

other than (i) the land leased out for any commercial,

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industrial or other non agricultural purpose ..........

In 1963 the State of Andhra Pradesh had granted a

large area of land to the Department of Atomic Energy of the

Central Government. In 1964 the Department of Atomic Energy

gave 220.25 acres (the said land) thereout to the

appellant company. On 1st October, 1978, the first

respondent issued to the appellant company notices of demand

for non-agricultural assessment on the said land under the

Act. For the period 1970-71 to 1973-74 the sum demanded was

Rs.1,91,189.68. For the period 1974-75 to 1978-79 the sum

demanded was Rs.11,98,826.32.

The appellant company filed a writ petition in the

High Court of Andhra Pradesh impugning the said notices of

demand. The contention of the appellant company in the writ

petition, as set out in the judgment and order under appeal,

was that it was the lessee of the said land which belonged

to the Union of India and, since the property of the Union

of India could not, by virtue of Article 285 of the

Constitution, be taxed by a State legislature, the Act did

not apply to the said land and, accordingly, no demand

thereunder could be made upon the petitioner, which is a

lessee of the Union of India. It is stated that an area of

approximately 1,000 acres was granted by the State

Government to the Department of Atomic Energy, Government of

India, and that the Department of Atomic Energy, in turn,

leased out an extent of 280.25 acres to the petitioner

corporation for establishing its plant and machinery. It is

further contended that out of the extent granted to the

petitioner an extent of 29 acres is covered by buildings, an

extent of 12 acres by roads, and the rest of the area is

meant for future expansion. It is also submitted that an

extent of 14.25 acres is being used for agricultural

purposes.

The response on behalf of the State Government to the

writ petition was contained in an affidavit made by N.

Janakiramulu. The tenor of the affidavit was that the Act

had been amended by Act 28 of 1974 and that, thereby, the

appellant company had become liable to pay non agricultural

assessment upon the said land.

The High Court, by the principal judgment and order

(which is reported in AIR 1983 AP 239), held that Article

285 was not attracted and that the State Government was

entitled to levy and collect the non agricultural assessment

from the appellant company so long as it continued to be a

lessee of the Central Government in respect of the said

land. It clarified that the assessment could be levied only

upon land which was actually used for any of the specified

purpose, namely, commercial, industrial or any other

non-agricultural purpose, including residential purpose.

What extent of the said land was so used and what was the

appropriate rate applicable was a matter for the assessing

authority to decide. The appellant company was permitted to

file an appeal to the appellate authority under the Act

against the impugned demands, wherein it would be open to

the appellant company to establish the actual extent of land

used for the aforesaid purposes. The applicable rate could

also be ascertained in such appeal.

It is against the principal judgment and order that

all the appeals are really directed.

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The first submission of Mr. Adhyaru, counsel for the

appellant company, was that, in fact, the appellant company

was not a lessee of the Union of India in respect of the

said land and that there was no lease in its favour. The

submission is quite the reverse of the case of the appellant

company in its writ petition. It is, therefore, an

impermissible submission, and we indicated to learned

counsel when he made it that we declined to entertain it.

Article 285(1) of the Constitution of India, upon

which reliance has been placed by the learned counsel for

the appellant company, reads thus :

285(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.

In learned counsels submission, the property of the

appellant company was the property of the Union of India in

as much as the appellant company was a Government company,

its shares being wholly owned by the Union of India. The

said land was, therefore, the property of the Union of India

and the legislature of the State of Andhra Pradesh was

barred by the provisions of Article 285 from imposing any

tax, including non-agricultural assessment, on the property

of the Union of India. Learned counsel supported the

submission by reference to Article 265, which provides that

no tax shall be levied or collected except by authority of

law, and to Article 366(28), which says that taxation

includes the imposition of any tax or impost, whether

general or local or special, and tax shall be construed

accordingly.

Learned counsel then referred to Article 289 which

deals with the exemption of property and income of a State

from Union taxation and reads thus :

289(1) The property and income of a State shall be

exempt from Union taxation.

(2) Nothing in clause (1) shall prevent the Union from

imposing, or authorising the imposition of, any tax to such

extent, if any, as Parliament may by law provide in respect

of a trade or business of any kind carried on by, or on

behalf of, the Government of a State, or any operations

connected therewith, or any property used or occupied for

the purposes of such trade or business, or any income

accruing or arising in connection therewith.

(3) Nothing in clause (2) shall apply to any trade or

business, or to any class of trade or business, which

Parliament may by law declare to be incidental to the

ordinary functions of Government.

Our attention was drawn by learned counsel to the

judgment of this Court on Article 289, namely, New Delhi

Municipal Council vs. State of Punjab & Ors. 1997(7) SCC

339. In construing Article 289, reference was made to

Article 285 and it was said in the majority judgment that

Article 285 imposed a ban, which was absolute and emphatic

and there was no way in which a State Legislature could levy

a tax upon the property of the Union of India. Article 289

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was different by reason of clauses 2 and 3 thereof.

In the next case cited by learned counsel, namely, Air

India Statutory Corporation & Ors. vs. United Labour Union

& Ors., 1997(9) SCC 377, this Court was dealing with which

was the appropriate Government in relation to an

establishment pertaining to an industry carried on by or

under authority of the Central Government and it was held

that the statutory corporation, Air India, was such a

industry and the appropriate Government for the purposes

of the Contract Labour (Regulation and Abolition) Act, 1970,

was the Central Government. Reliance was placed by learned

counsel upon the propositions enunciated in paragraph 26 of

the majority judgment, thus:

(1) The constitution of the corporation or

instrumentality or agency or corporation aggregate or

corporation sole is not of sole material relevance to decide

whether it is by or under the control of the appropriate

Government under the Act.

(2) If it is a statutory corporation, it is an

instrumentality or agency of the State. If it is a company

owned wholly or partially by a share capital, floated from

public exchequer, it gives indicia that it is controlled by

or under the authority of the appropriate Government.

In our view, neither has Article 285 any application

to these appeals nor are we concerned with whether or not

the appellants are controlled by or under the authority of

the Central Government.

With effect from 1st July, 1974, Section 12 of the Act

was amended so that it now applied to land which was owned

by the Central or a State Government and was leased out for

any commercial, industrial or other non-agricultural

purpose. With effect from that date, by reason of the

amendment of Section 2(j), an owner included a lessee of

land owned by the Central or a State Government if the land

was leased out by such Government for a commercial,

industrial or other non- agricultural purpose. By virtue of

Section 3, the obligation to pay non-agricultural assessment

on the leased land lay upon the owner lessee.

It is the case of the appellant company in its writ

petition that it is the lessee of the Department of Atomic

Energy of the Union of India in respect of the said land.

The said land, therefore, is of the ownership of the Central

Government and, being leased out to the appellant company

for an industrial and commercial purpose, is land to which

the Act applies. By virtue of the amended definition of

owner under Section 2(j) of the Act, the appellant company

is the owner of the said land and, by virtue of Section 3,

is liable to pay non-agricultural assessment thereon.

A clear distinction must be drawn between a company

and its shareholder, even though that shareholder may be

only one and that the Central or a State Government. In the

eye of the law, a company registered under the Companies Act

is a distinct legal entity other than the legal entity or

entities that hold its shares.

In Western Coalfields Limited vs. Special Area

Development Authority, Korba & Anr., 1982(1) SCC 125, this

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Court reviewed earlier judgments on the point. It held that

even though the entire share capital of the appellant before

it had been subscribed by the Government of India, it could

not be predicated that the appellant itself was owned by the

Government of India. Companies, it was said, which are

incorporated under the Companies Act, have a corporate

personality of their own, distinct from that of the

Government of India. The lands and the buildings in

question in that matter were vested in and owned by the

appellant. The Government of India only owned the share

capital.

In Rustom Cavasjee Cooper vs. Union of India, 1970(1)

SCC 248, it was held, A company registered under the

Companies Act is a legal person, separate and distinct from

its individual members. Property of the company is not the

property of the shareholders. A shareholder has merely an

interest in the company arising under its Articles of

Association, measured by a sum of money for the purpose of

liability, and by a share in the distributed profit.

In Heavy Engineering Mazdoor Union vs. State of

Bihar, 1969(1) SCC 765, this Court held that an incorporated

company has a separate existence and the law recognises it

as a juristic person, separate and distinct from its

members.

We are, in the premises, left in no doubt that the

State Government was entitled to levy non-agricultural

assessment upon the said land and recover it from the

appellant company.

Learned counsel then submitted that, in any event, the

recovery of non agricultural assessment in respect of the

said land could not have been effected from the appellant

company by reason of the application of the principle of

promissory estoppel. In this behalf he referred to a letter

dated 7th February, 1967 addressed by the Under Secretary to

the Government of India to the Secretary of the Government

of Andhra Pradesh, Industries Department, in regard to the

transfer of land to the Department of Atomic Energy for the

location of the Electronics Plant and other plants. The

letter stated that it had been agreed by the State

Government that this land would be exempt from the levy of

tax under the Act irrespective of whether the plants are

managed departmentally or through a Public Section

Undertaking. The letter requested that notifications

exempting the lands already handed over to the Department of

Atomic Energy or to be handed over in future from levy of

tax under Andhra Pradesh Act 14 of 1963, while vesting in

the Department of Atomic Energy or in public sector projects

would also require to be issued. The issuance of the same

was, therefore, requested. In reply, the Deputy Secretary

of the Government of Andhra Pradesh, Industries Department,

stated on 17th October, 1967 that no separate notification

is required exempting the land given to the Atomic Energy

Department for establishment of Atomic Energy Complex at

Hyderabad from payment of non-agricultural assessment under

the A.P. Non- Agricultural Assessment Act so long as the

units are run by the Government of India in Public Sector.

It was contended by learned counsel that the appellant

company had acted upon this promise. Accordingly, the State

Government was bound by its promise and was estopped from

going back upon it.

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There are two short answers to this contention. In

the first place, there can be no estoppel against a statute.

In the second place, the letter dated 17th October, 1967

needs to be carefully read. It says that no notification

was required for exempting the land from payment of

non-agricultural assessment so long as the units are run by

the Government of India in Public Sector. The appellant

company is a separate and distinct legal entity that runs

its own industry. The letter dated 17th October, 1967

cannot be read as promising exemption to companies, though

their shares be held wholly by the Union of India.

Mr. Dholakia, learned counsel for M/s. Parel

Investment and Trading Co. Limited (appellant in Civil

Appeal Nos.3937-38 of 1990), adopted the submissions

aforementioned. He submitted that Article 285 was intended

to protect public revenues; the shares of the appellant

companies being fully owned by the Central Government, their

funds were public revenues. It was, therefore, necessary to

read down the provisions of Section 2(j) and Section 12 of

the Act to exclude therefrom all but private owners and

lessees of land. The question of reading down comes in if

it is found that these provisions are ultra vires as they

stand. We have held that these provisions are not ultra

vires because Article 285 does not apply when the property

that is to be taxed is not of the Union of India but of a

distinct and separate legal entity. Each of the appellants

being companies registered under Companies Act, they are

entities other than the Union of India. The question of

reading down does not, therefore, arise.

The discussion so far relates to demands for

non-agricultural assessment subsequent to 12th July 1974,

when the amendments made by Act 28 of 1974 in the Act came

into effect. The defence to the writ petition filed by the

appellant company was, as we have already stated,

exclusively based upon the amendments made by Act 28 of 1974

in the Act. These amendments have no retrospective effect.

No demand for non-agricultural assessment could, therefore,

have been made upon the appellant companies for any period

prior to 12th July, 1974. To this extent, the demands are

quashed.

In regard to demands for non-agricultural assessment

subsequent to 12th July, 1974, which are upheld, the

appellant companies shall be at liberty to file appeals

within 8 weeks from the date of this order, wherein it will

be open to them to establish the actual extent of the land

that was used at the relevant time for commercial,

industrial or other non-agricultural purposes. Only upon

such land can non-agricultural assessment be levied. What

the applicable rate should be can also be canvassed and

decided in such appeals.

To the extent aforestated, the appeals succeed and are

allowed. Orders on the appeals accordingly. No order as to

costs.