Holding

An Agricultural Produce Market Committee is not a "local authority" within the meaning of the amended section 10(20) and therefore is not eligible for income‑tax exemption.

Summary

The Agricultural Produce Market Committee (AMC) of Narela claimed exemption from income tax under section 10(20) of the Income Tax Act, 1961, asserting it was a "local authority". The Finance Act, 2002 added an exhaustive Explanation to section 10(20) defining "local authority" as a Panchayat, Municipality, Municipal Committee/District Board, or Cantonment Board, omitting the phrase "other authority" from the earlier General Clauses Act definition. The Court held that the new definition is exhaustive and does not include AMC, which is neither a Municipal Committee nor a District Board nor a Panchayat nor a Municipality. Consequently, the functional and incorporation tests from R.C. Jain were inapplicable. The Court therefore ruled that AMC is not entitled to the exemption and dismissed the appeals.

Issues considered

Whether an Agricultural Produce Market Committee qualifies as a "local authority" under the Explanation to section 10(20) of the Income Tax Act, 1961 after the Finance Act, 2002 amendment.
Whether the Explanation to section 10(20) provides an exhaustive definition, thereby excluding entities not expressly listed.
Whether the functional test and "other authority" clause from the General Clauses Act, as applied in R.C. Jain, remain relevant after the amendment.

Legislation cited

Cantonments Act, 1924s. 3
Constitution of Indias. Article 243(d), s. Article 243P(e)
Delhi Agricultural Produce Marketing (Regulation) Act, 1998s. 2(1), s. 5
Finance Act, 2002s. amendment adding Explanation to s.10(20)
Finance Act, 2008s. 26AAB of s.10
General Clauses Act, 1897s. 3(31)
Income Tax Act, 1961s. 10(20)

Subjects

income tax exemptionlocal authorityagricultural produce market committeestatutory interpretationFinance Act 2002General Clauses Actmunicipal committeedistrict boardtax law

Judgment

[2008] 12 S.C.R. 387

AGRICULTURAL PRODUCE MARKET COMMITTEE, A
NARELA, DELHI
v.
COMMISSIONER OF INCOME TAX & ANR.
(Civil Appeal No. 5180 of 2008)
AUGUST 21, 2008 B

-\' [S.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ]
~

Income Tax Act, 1961:
s. 10(20), Explanation - 'local authority' - Agricultural · C
Prduce Market Committee (AMC) claiming exemption from
income tax - HELD: Definition of 'local authority' given in
the Explanation to s. 10(20) is an exhaustive definition and
words "other authority" do not find place therein - Therefore,
AMC is not entitled to exemption uls 10(20) after insertion D
of the Explanation by Finance Act 2002 - General Clauses
Act, 1897 - s. 3(31) - Constitution of India, 1950 - Articles
243(d) and 243-P(e) - Delhi Agricultural Produce Marketing
(Regulation) Act, 1998 - ss. 2(1) and 5.
The appellant in CA No. 5180 of 2008, an Agricultural E
Produce Market Committee (AMC), was availing
exemption benefit under s.10(20) of the Income Tax Act,
1961, prior to its amendment by Finance Act, 2002. By
the said amendment the Explanation was added to sub-
section (20) of s.10 of the 1961 Act, defining the term F
'local authority'. The words 'other authority' as occurring
in s.3(31) of the General Clauses Act, 1897, did not find
place in the said Explanation. Accordingly, the Revenue
rejected appellant's claim for exemption from payment
of tax on incom~ earned by it, for the assessment year G
2003-04. The appellant having failed before the
Commissioner of Income Tax (Appeals), the Income Tax
Appellate .Tribunal and the High Court, filed the instant
appeal. The other appeals were filed on similar facts.
387 H
388 SUPREME COURT REPORTS [2008] 12 S.C.R.

A On the strength of the decision in R. C. Jain's 1 case,
it was contended for the appellants that the Parliament,
by way of Explanation to s.10(20), bodily lifted the
definition of 'local authority' u/s 3(31) of the General
Clauses Act, 1897 and, as such, the AMC continued to
B be a 'local authority' even after the said amendment;
that even otherwise, Item (iii) of the Explanation to
s.10(20) of the 1961 Act, referred to "Municipal
Committees" and "District Boards", and as no Municipal
Committees were in existence, nor the term "Municipal
c Committee" was defined and, as such, AMC, though not
a Municipal Committee, would still be a 'local authority'
of like nature and character to that of a 'Municipal
Cc:>mmittee' performing muni~ipal functions.
For the respondents it was contended, that after
D the insertion of the Explanation to s.10 (20) of the 1961
Act, the term 'local authority' stood exhaustively defined-
and since AMC was not mentioned in the said
Explanation, the appellant was no more enti~led to the
exemption benefit. It was submitted that the clarification
E issued by CBDT expressly stated that Agricultural
· Marketing Societies and Agricultural Marketing Boards
would stand excluded from the Explanation to s.10 (20)
of the 1961 Act.
- The question for consideration before the Court
F was: "whether Agricultural Marketing Committee
[AMC(s)] is 'a "local authority", so as to be entitled to the
benefit under Section 10 of the 1961 Act after insertion
of the Explanation in Section 10(20) vide Finance Act,
2002 w.e.f. 1.4.2003?"
G
D~smissing the appeals, the Court

HELD: 1.1 The Explanation to Section 10(20) of the
Income Tax Act, 1961 provides a definition to the word
"local authority". It is an exhaustive, and not an inclusive,
H definition. The words "other authority" do not find place
- -f
AGRI. PRODUCE MARKET COMMT., NARELA,
DELHJ v. COMM!. OF INCOME TAX & ANR.

in the said Explanation. Even. according to the A
389

_appellants, Agricultural Produce Market Committee is
neither a Municipal Committee nor a District Board nor
a Municipality nor a Panchayat. Therefore, the functional
test and the test of incorporation as laid down in the
case of R. C. Jain* is no more applicable to the B
Explanation to Section 10(20) of the 1961 Act. Therefore,
the judgment in R. C. Jain followed by judgments of
various High Courts on the status and character of AMC
• is no more applicable to the provisions of s.10(20) after
the insertion of the Explanation/definition clause to that c
sub-section by Finance Act, 2002. [para 29] [416,E-H]
*Union of India and others v. R. C. Jain and others -
1981 ( 2 ) SCR 854=1981 (2) SCC 308 - held inapplicable.
1.2 Under Section 3(31) of the General Clauses Act,
0
1897, "local authority" was defined to mean "a municipal
committee, district board, body of port commissioners
- -.{ or other authority legally entitled to the control or
management of a· municipal or local fund. The words
"other authority" in Section 3(31) of the 1897 Act tias
been omitted by Parliament in the Explanation/definition E
clause inserted in Section 10(20) of the 1961 Act by
Finance Act, 2002. iherefore, it would not be correct to
say that the entire definition of the word "local authority"
is bodily lifted from Section 3(31) of the 1897 Act and
incorporated, by Parliament, in the Explanation to Section F
10(20) of the 1961 Act. This deliberate omission is
important. [para 27] [413,E-G]
1.3 As regards the use of the words "Municipal
Committee" and "District Board" in Item (iii) of the G
Explanation to s.10(20) of 1961 Act, Parliament has
defined "local authority" to mean - a Panchayat as
referred to in clause (d) of Article 243 of the Constitution
of India, and a Municipality as referred to in clause (e) of
Article 243P of the Constitution of India. However, there
H
390 SUPREME COURT REPORTS [2008] 12 S.C.R. ,

A is no reference to Article 243 after the words "Municipal
Committee" and "District Board". The Municipal
Committee and District Board in the said Explanation
are used out of abundant caution. In 1897 when General
Clauses Act was enacted there existed in India, Municipal
B Committees. and District Boards. They continued even
thereafter. Besides, Article 243N and Article 243ZF
indicate that there could be enactments· which still retain
the entities like Municipal Committees and District
Boards and if they exist, Parliament intends to give '
C' exemption to their income under Section 10(20) of the
1961 Act. [para 30] [417,A-C; 418,B]
1.4 Agricultural Produce Market Committee (AMC) is,
therefore, not entitled to exemption under Section 10(20)
of the 1961 Act after insertion of the said Explanation by
D Finance Act, 2002 w.e.f. 1.4.03. [para 33] [418,F-G]
Case Law Reference:
1981 ( 2 ) SCR 854 held inapplicable para 12
Union of India and others v. R. C. Jain and others -
E 1981 ( 2 ) SCR 854=1981 (2) sec 308
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5180 bf 2008
From the final Judgment and Order dated 2.06.2006 of
F the High Court of Delhi at New Delhi in ITA No. 819 of 2006 :.Ir
WITH
C.A. Nos. 5181 & 5182 of 2008
G M.L. Verma, Avnish Ahlawat, Pawan Chaudhary, Rani
Chhabra, Lalita Chaudhary, Simran Singh and Satya Mitra for
the Appellant.
Pa rag Tripathi, ASG., P. Vishwanatha Shetty, Amey
Nargolkar, Shweta Garg, Rahur Kausnik and B.V. Ba!aram
H Das for the Respondents.
AGRI. PRODUCE MARKET COMMT., NARELA, 391
DELHI v. COMM!. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
The Judgment of the Court was delivered by A
S.H. KAPADIA, J. 1. Leave granted.
2. In this batch of civil appeals a short question which
arises for determination is : whether Agricultural Market
Committee ("AMC", for short) is a "local authority" under the B
Explanation to Section 10(20) of the Income-tax Act, 1961
("1961 Act", for short).
3. For the sake of convenience we refer to the facts
mentioned in Civil Appeal No. 5180 of 2008 (arising out of
S.L.P. (C) No.6757 of 2007) filed by AMC, Narela, Delhi. C
4. Appellant-Committee is established under the Delhi
Agricultural Produce Marketing (Regulation) Act, 1998 ("1998
Act", for short). The provisions of the said 1998 Act enjoin
upon the appellant to provide the facilities for marketing of D

...
... agricultural produce in Narela ... Delhi. This is apart from
performing other functions and duties such as
superintendence, direction and control of markets for regulating
the marketing of agricultural produce.
5. For the assessment year 2003-04, the appellant- E
Committee claimed exemption from payment of tax under
income earned by it on the ground that it was a "local authority"
within the meaning of Section 10(20) of the said 1961 Act. It
relied upon the definition of "local authority" in Section 2(1) of
the said 1998 Act. The A.O. rejected the appellant's claim for F
exemption relying upon Circular No.8/2002 dated 27.8.02
issued by CBDT. The view taken was that the amended
provisions of Section 10(20) of the 1961 Act were not attracted
to "Agricultural Produce Marketing Societies" or "Agricultural
Market Boards" even when they may be local authorities under G
Central or State Legislations.
6. Aggrieved by the said order, appellant filed an appeal
before CIT(A) who upheld the view taken by the A.O. and
declined the exemption claimed by the appellant.
H
392 SUPREME COURT REPORTS [2008] 12 S.C.R.

A 7. A further appeal by the appellant, before the Tribunal,
also failed.
8. Aggrieved by the decision of the Tribunal, the appellant
moved the High Court by way of Income Tax Appeal No:819/
2006 under Section 260A of the 1961 Act. By impugned
B. decision dated 2.6.06, Delhi High Court following its earlier
judgment in the· case of Agricultural Produce Market
Committee, Azadpur v. Commissioner of Income-tax - (/.TA.
No. 74912006) dismissed the appellant's appeal. Hence this
civil appeal.
c
9. At the outset, it may be stated that all AMCs at different
places were enjoying exemption .from income tax under
Section 10(20) of the 1961 Act prior to its amendment by
Finance.Act, 2002 w.e.f. 1.4.03. ·
D 10. Prior to the amendment by Finance Act, 2002, l
Section 10(20) of the Income-tax Act, 1961 provided as under:
"CHAPTER Ill
.• I ~'
~-
INCOME WHICH DO NOT FORM PART
E
OF TOTAL INCOME
Incomes not included in total income.
10. In computing the total income of a previous year of any
person, any income falling within any of the following
F clauses shall. not be included - ·
(20) the income of a local authority which is chargeable
under the head "income from house property", "Capital
gains" or·"lncome from other sources" or from a trade or
G business carried on by it which accrues or arises from the
supply of a commodity or service (not being water or
electricity) within its own jurisdictional area er from the
supply of water or electricity within or outside its own
jurisdictional area."
~ .
H 11. Through the aforemenl\oned amendment (Finance
AGRI. PRODUCE MARKET COMMT., NARELA, 393
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]

Act, 2002) the following Explanation stood added to Section A
10(20) of the Income-tax Act, 1961 which reads as follows:
"Explanation.- For the purposes of this clause, the
expression "local authority" means -
(i) Panchayat as referred to in clause (d) of article 243 B
of the Constitution; or
(ii) Municipality as referred to in clause (e) of article
243P of the Constitution; or
(iii) Municipal Committee and District Board, legally c
entitled to, or entrusted by the Government with, the
control or management of a Municipal or local fund; or
(iv) Cantonment Board as defined in section 3 of the
Cantonments Act; 1924 (2 of 1924);"
D
12. Mr. M.L. Verma, learned senior counsel appearing
on behalf of the appellants, submitted that AMC(s) has been
held to be a "local authority" under Section 10(20) of the 1961
Act falling outside the taxing net. in this connection, learned
counsel placed reliance on the judgment of the Delhi High E
Court in the case of Commissioner of Income-tax v.
Agricultural Marketing Produce Committee - [2001] 250 !TR
369 and the reasoning given by this Court in the case of
Union of India and others v. R.C. Jain and others - 1981 (2)
SCC 308. According to learned counsel, even after the
amendment to Section 10(20) of the 1961 Act, by inserting F
the Explanation thereto, the AMC(s) continues to be covered
by Item (iii) in the said Explanation as it is a "local authority"
performing the municipal functions and is legally entitled to
the control of local fund, namely, Market Fund under the said
1998 Act. In this connection, learned counsel urged that vide G
Finance Act, 2002, Parliament has bodily lifted the definition
of the "local authority" under Section 3 (31) of the General
Clauses Act, 1897 ("1897 Act", for short) and has incorporated
the said definition vide Explanation inserted in Section 10(20)
and consequently AMC(s) is a "local authority" and continues H
394 SUPREME COURT REPORTS [2008] 12 S.C.R.

A to be a local authority even after the· said amendment to Section
10(20) of the 1961 Act. According to learned counsel, since
Section ;3(31) of the 1897 Act is bodily incorporated into ;
Section 10(20) of the 1961 Act, it follows that the judgments
;ii
of various High Courts earlier delivered prior to Finance Act, j

B 2002 holding AMC(s) to be a "local authority", would continue 1-
to apply and the tests laid down in those judgments would
continue to apply even after the said amendment to Section
10(20) of the 1961 Act. Therefore, according· to. learned
counsel, the said Explanation does not adversely affect the
c appellant(s) as the appellant(s) is covered by Item (iii) in the
Explanation, which according to the appellant(s), is identical
to Section 3(31) of the 1897 Act on the basis of which AMC(s)
.is a "local authority".
13. Learned counsel next contended that even after the
D amendment to Section 10(20), the appellant(s) is covered by
Item (iii) of the said Explanation as it is a "local authority"
performing municipal functions and as it is legally entitled to •
)r-·
the control of local fund, namely, Market Fund. In this
co~nection, learned counsel pointed out that the appellant(s)
E has the power and authority to levy and collect fees called
"Market Fees" and in fact it levies and collects "Market Fees"
and the fact that the Government exercises control, does not
. take away the statutory power of the appellant(s) under Section
62 of the 1998 Act.
F 14. Learned counsel next contended that it is true that
the words ''other authority" appearing in Section 3(31) of the
1897 Act do not find place in the Explanation to Section 10(20)
of the 1961 Act, however, that would not change the basis of
decision of this Court in the case of R. C. Jain (supra). Learned
G counsel urged that the judgment of this Court in the case of
•+-.A
R. C. Jain (supra) is squarely applicable to the facts of the
present case and applying the tests laid down in the said
judgment the position which emerges is that AMC(s) is a "local
authority" of "like nature and character" as a Municipal
H Committee performing municipal functions and legally entitled
AGRI. PRODUCE MARKET COMMT., NARELA, 395
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
* to the control of the local fund, namely, the Market Fund. One A
more aspect needs to be mentioned. An Explanatory Note (at
pages 114 to 116 of the paper book of S.L.P.(C) No.6757 of
2007) states that "Agricultural Produce Marketing Boards" and
"Agricultural Marketing Societies" are not entitled to exemption
after insertion of the said Explanation in Section 10(20) of the B
1 1961 Act. According to learned counsel AMC(s) is neither
"Agricultural Produce Marketing Board" nor "Agricultural
Marketing Society". Therefore, according to learned counsel
even the Explanatory Note indicates that AMC(s) is covered
by the Explanation and, therefore, AMC(s) is entitled to the c
continuance of the benefit of exemption even after Finance
Act, 2002. Further, in the Explanation to Section 10(20) there
are three items - Item (i) refers to "Panchayat", Item (ii) refers
to "Municipalities" whereas Item (iii) refers to "Municipal
Committees" and "District. Boards". According to learned
D
counsel, there is no independent definition of "Municipal
'. Committee". According to learned counsel, the Department is
~ also not able to answer whether any Municipal Committee still
exists so as to constitute a separate category or whether they
would be covered under Item (ii) in the said Explanation which
refers to "Municipality". Therefore, according to learned E
counsel, AMC(s) is a "local authority" of like nature and
character as a Municipal Committee performing municipal
functions legally entitled to control the local fund.
15. Lastly, learned counsel urged that in any event it is F
well-settled rule of construction of taxing statutes that if two
views are possible then the view that is favourable to assessee
should be executed and in case of doubt it should be resolved
in favour of that assessee.
16. Mr. Parag P. Tripathi, learned Additional Solicitor G
' -4.· General of India, submitted that before the insertion of the
Explanation, under Section 10(20) of the 1961 Act, by Finance
Act, 2002, various High Courts were of the view that since
"local authority" has not been defined under 1961 Act; the
definition may be borrowed from Section 3(31) of the 1897 H
396 SUPREME COURT REPORTS [2008] 12 S.C.R.
+
A Act. However, according to learned counsel, after the insertion
of the Explanation, vide Finance Act, 2002 whereby "local
authority" stood defined exhaustively, it was not necessary to
invoke Section 3(31) of the 1897 Act. He further contended
that the Notes on Clauses in the Finance Bill 2002 shows that
B Parliament intended to restrict the exemption to Panchayat '
and Municipality, as referred to in Article 243(d) and Article -1--
I
.....
243P(e) of the Constitution of India, Municipal Committees ·
and District Boards, legally entitled to or entrusted by the
Government with the control or management of a local fund as
c well as Cantonment Boards as defined under Section 3 of the
Cantonment Act, 1924. In this connection, learned counsel
urged that AMC(s) is not mentioned in the Explanation.
Therefore, according to learned counsel, it would not be proper
to read AMC(s) into the Explanation particularly when Section
10(20) of the 1961 Act is an exemption provision.
D
17. It was next contended that Section 3(31) of the 1897 .,
Act was riot bodily incorporated in the Explanation to Section
10(20) of the 1961 Act as it sought to be contended on behalf ~

of the appellant(s). Learned counsel submitted that Parliament
E in its wisdom has excluded the expression "other authority", .
found under Section 3(31) of the 1897 Act, from the
Explanation to Section 10(20) of the 1961 Act. According to
learned counsel, this conspicuous absence has to be
understood in the context, namely, that in the case of R. C.
F Jain (supra), the focus of this Court was on the said expression
-~
"other authority" under Section 3(31) of the 1897 Act and,
therefore, reliance placed by the appellants herein on the
judgment of this Court in the case of R. C. Jain (supra) was
misplaced.
G 18. Learned counsel further submitted that the
explanation/definition clause inserted by Finance Act, 2002 is ·+-"
exhaustive as it uses the expression "means" as contradistinct
from the expression "includes". Learned counsel submitted
that borrowing definition frorn other statutes is not a safe guide,
H particularly, when the explanation is a definition section,
AGRI. PRODUCE MARKET COMMT., NARELA, 397
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
~
specifically designed for grant of the exemption under Section A
10(20) of the 1961 Act.
19. Learned counsel next con~ended that in the hierarchy,
mentioned in 1998 Act, the Delhi Agricultural Marketing Board,
as defined under Section 5, is in complete control of the
finances of AMC(s) and, therefore, according to learned B
_,...,
counsel, the clarification, issued by CBDT, expressly states
~ that Agricultural Marketing Societies and Agricultural Marketing
Boards shall stand excluded from the said Explanation.
According to learned counsel, since the said Board is the
highest authority under the 1998 Act, the CBDT Circular c
clarifies that the exemption shall not be admissible to such
Agricultural Marketing Boards and when such an exemption
is not admissible to Agricultural Marketing Boards it would not
be admissible to a subordinate body under the 1998 Act,
namely, AMC(s). D

,, 20. Mr. P. Vishwanatha Shetty, learned senior counsel
appearing for the Department, has adopted the arguments of
._.,. the learned Addi. Solicitor General. Learned counsel submitted
that earlier in 1897 when General Clauses Act stood enacted
there were District Boards and Municipal Committees in E
certain areas. Those District Boards, according to learned
counsel, were different from the Municipalities. Learned counsel
urged that if one looks at the said Explanation in its entirety, it
would be clear that Parliament intended to grant exemption to
Panchayat, Municipality, Municipal Committee and District F
Boards legally entitled to the control or management of a local
fund. Learned counsel contended that an AMC(s) is not a
Municipal Committee. He contended that the constitution of
Panchayat and Municipality indicated them to be a
representative body which is not there in the case of AMC(s). G
'-_I
Learned counsel submitted that even in the case of a Municipal
~·
,<
Committee the body consists of representatives of the people
whereas in the AMC(s) that is not the case. In the circumstances,
learned counsel submitted that AMC(s) cannot be equated to
the Municipal Committee under the said Explanation. H
398 SUPREME COURT REPORTS [2008] 12 S.C.R.

A 11. Learned counsel lastly urged that the entire finances
of AMC(s) are under the control of Agricultural Marketing Board
as defined under Section 5 of the 1998 Act and, therefore, it
cannot be said that AMC(s) is legally entitled to the control or
management of a local fund. In this connection, learned counsel
B submitted that even in the matter of prescription of fees the
upper and lower limits regarding the fees to be charged by
AMC(s) are fixed by the Government. Therefore, according to
learned counsel there is no merit in these civil appeals.
22. Before analyzing the submissions made, we quote
C hereinbelow the relevant sections of the Delhi Agricultural
Produce Marketing (Regulation) Act, 1998 which read as
under:
"CHAPTER I
D PRELIMINARY
2. Definitions -(1) In this Act, unless the context otherwise
requires, ·l

(c) "Board" means the Delhi Agricultural Marketing Board
E constituted under section 5;
(I) "local a1,.Jthority" means, in relation to an area within the
local limits of:-
(i) The Municipal Corporation of Delhi, that Corporation;
F (ii) the New Delhi Municipal Council, that Council; and
~-
(iii) the Delhi Cantonment Board, that Board;
Explanation- It is hereby clarified that, for the purpose of
this Act, the Delhi Development Authority constituted under
G the Delhi Development Act, 1957 and the Board and a
marketing committee established under this Act, shall be
deemed to be local authority;

H
AGRI. PRODUCE MARKET COMMT., NARELA, 399
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]

~ CHAPTER 111 A
CONSTITUTION AND POWERS OF DELHI
AGRICULTURAL MARKETING BOARD
17. Powers and functions of the Board - (1) The Board
shall exercise superintendence and control over the B
marketing. committees.

(2) The Government or the Chairman or the Vice-
Chairman of the Board or any other official of the
Board authorized in this behalf by the Board may call
for from any marketing committee or any trader, c
godown-keeper or any other functionary operating
within the market area any inforrnation or return
relating to agricultural produce .and shall have the
power to inspect the records and accounts of such
marketing committee, trader, godown-keeper or D
other functionary and shall also have power to seize
or take into possession against proper receipt the
€ records accounts books stocks of notified agricultural
-t produce alongwith its containers and carriers.
(3) It may authorise officer/officers of the Board and/or E
marketing committees to inspect works undertaken
by the marketing committees and Board and to take
corrective measures.

(4) Subject to the provisions of this Act and the rules and F
regulations made thereunder, the Board may employ
+ such persons for the performance of its functions as it
may consider necessary and the method of recruitment,
the scale of pay and other conditions of service of such
persons shall be such as may be provided in the
G
regulations made by the Board in this behalf.

', ~· (5) The Board shall, subject to the provisions of this Act,
perform the following functions and shall :Jiave the
power to do such things as may be necessary or
expedient for carrying out these functions, namely:- H
400 SUPREME COURT REPORTS [2008] 12 S.C.R.

A (i) Coordination of the working of the marketing +- .·.
committees and other affairs thereof including ·
programmes undertaken by such marketing
committees for the maintenance of markets,
sub-markets, check posts and other sites in
B the market areas;
(ii) undertake the planning and development of
markets for agricultural produce;
(iii) administer the Market Development Fund;
c (iv) issue direction to Marketing Committees in
general or to one or more Marketing
Committees in particular with a view to ensuring
improvement thereof;
(v) any other function specially entrusted to it by
D
this Act;
(vi) such other functions of like nature as may be
entrusted to the Board by the Government.
(6) Without prejudice to the generality of the foregoing
E provision, such functions of the Board shall include :-
(a) to consider proposals for sele~tion of new site(s)
for establishment of the markets ·and to make
recommendations to the Director for establishing
F principal market and sub-markets as per
provisions of sub-section (2) of section 22;
(b) to approve proposal for providing infrastructural
facilities in the market and market area;

G (c) to construct a market or to approve plans,
designs and estimates for constructing markets;
(d) to sanction, supervise and guide a Marketing
Committee in the preparation of plans and
estimates for maintenance and improvement
H works undertaken by the Marketing Committee;
AGRI. PRODUCE MARKET COMMT., NARELA, 401
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]

(e) to execute all works chargeable to the Market A
Development Fund;
(f) to encourage marketing of the .agricultural
produce on cooperative basis;
(g) to maintain accounts in such forms as may be B
prescribed and get the same audited in such
manner as may be prescribed;
(h) to publish annually at the close of the financial
year, its progress report, balance sheet and
statement of assets and liabilities and send C
copies thereof to all the members of the Board
and a copy to the Government;
(i) to make necessary arrangements for
dissemination of information on matters relating D
to regulated marketing of notified agricultural
produce;
(
(j) to provide facilities for the training of officers
and members of the staff of the Board as also
the Marketing Committees; E
(k) to prepare and adopt its budget for the ensuring
year;
(I) to sanction the budget of the Marketing
Committees; F

+ (m) to grant subventions of loans to the Marketing
Committees for the purposes of this Act on such
terms and conditions as the Board may
determine;
G
(n) to arrange or organize seminars or workshops
or exhibitions, etc. on subjects related to
agricultural marketing;
(o) to perform such other functions as may be of
general interest to the Marketing Committees H
402 SUPREME COURT REPORTS [2008] 12 S.C.R.

A or considered necessary for efficient functioning
of the Board or the Marketing Committees.
(p) to transfer or to provide marketing technology
and market assistance to the Marketing
Committees as and when required.
B
CHAPTER V
MARKET OF NATIONAL IMPORTANCE
26. Establishment of market of national importance and
c Marketing Committee thereof - (1) Notwithstanding
anything contained in this Act, where the Government is
satisfied that on account of the national importance of
marketing of any commodity, in any area, it is expedient
to ensure the efficient regulation of the marketing of such
commodity in such area, it may establish ....:.
D
(a) in such area, special market, known as "Markets of
National Importance" for such commodities; and
(b) independent Marketing Committees known as
+
"Marketing Committees of Market of National
E
Importance" in relation to such markets,
notwithstanding that such area falls within the local
limits of the jurisdiction of any other Marketing
Committee or Committees already functioning in that
area.
F
(2) The Government may, after consideration of· such
aspects as, the turnover, upstream catchment area, dow·n-
steam servicing (number of consumers served), and price
leadership (whether the market influences the price at the
G national level), declare an area as a special market area
known as "Market area of the market of National Importance".
Provided that no such market shall be established:- ·~- ~

(a) if it handles less than one lakh tones of produce per
year;
H
,. AGRI. PRODUCE MARKET COMMT., NARELA, 403
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
-<(
(b) if, out of the total produce handled by it, less than A
thirty percent thereof is received from two or more
State or Union Territories; and
(c) if the market does not influence the price of the
commodity referred to in sub-section (1) at the
national level. B
-\'
J CHAPTER VII
MARKETING COMMITTEES - POWERS AND
DUTIES
c
55. Powers and duties of the Marketing Committees- (1)
Subject to the provisions of this Act, it shall be the duty of
a Marketing Committee:
(i) to implement the provisions of this Act, and rules,
regulations and bye-laws made there under for the D
market area;
(ii) to provide such facilities for marketing of notified
+ agricultural produce therein as the Board may, from
time to time, direct;
E
(iii) to perform other functions as may be required in
relation to the superintendence, direction and control
of markets, or for regulating and control of markets,
or for regulating the market area and for p1,,1rposes
connected with the matters aforesaid, and, for this F
purpose, may exercise such powers and perform
such duties and discharge such functions as may be
provided by or under this Act.
(2) Without prejudice to the generality of the foregoing
provisions, a Marketing Committee may - G

- . -l· (a) regulate the entry of the persons and of vehicular
traffic into the market;
(b) supervise the conduct of those who enter the market
for transacting business; H
404 SUPREME COURT REPORTS [2008] 12 S.C.R.
/

A (c) grant, renew, refuse suspend or cancel licences;
(d) provide for settling disputes arising out of any kind of
transaction connected with the marketing o notified
agricultural produce and all matters ancillary thereto;

B (e) prosecute persons for vi.elating the provisions of this
Act and to the rules regulations and bye-laws made -f-
thereunder; t
(f) maintain and merge the market, including the
regulation of admissions to, and conditions for use
c of, the market;
(g) regulate the marketing of notified agricultural produce
in the market area and the market, and weighment,
delivery of and payment for, such agricultural produce;
D Explanation - For the purposes of clause (g) the
word 'regulate' shall include -
(i) making, carrying out, enforcing or cancelling of
nay contract of sale of a notified agricultural +
produce;
E
(ii) conducting or supervising of a transaction of
sale or purchase of a notified agricultural
produce in accordance with the procedure laid
down under this Act, or rules, regulations and
F bye-laws made thereunder;
(iii) specifying any place or spot where a notified 4-
agricultural produce shall be stored or displayed
for purpose of sale by open auction;

G (iv) fixing the time for holding auction; and
(v) cancelling an auction if it is not held in the
..... ~
presence of the employees of the marketing
committee.
(h) arrange for the collection -
H
AGRI. PRODUCE MARKET COMMT., NARELA, 405
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
~

.... (i) of such notified agricultural produce in the
market in which all trade therein is to be carried
A

on exclusively by the Government by or under
any law for the time being in force for that
purpose, or
of such other notified agricultural produce in B
(ii)
) the market as the Government may, from time
to time notify in the official Gazette.
(i) acquire, hold and dispose of any movable or immovable
property (including any equipment) necessary for the c
purpose of efficiently carrying out its duties;
G) collect, maintain, disseminate and supply information
in respect of production, sale storage, processing,
. prices and movement of notified agricultural produce
(including information relating to crop-statistics and D
market intelligence) as m~y be required by the
'i Director or the Board;
'
(k) take all such steps to prevent adulteration and to
promote grading and standardization of such
agricultural produce, as may be prescribed; E

(I) enforce the provisions of this Act and of the rules,
regulations and bye-laws made thereunder including
the conditions of the licences granted, under this Act;
(m) perform such other duties as may be prescribed; F

(n) arrange to obtain fitness certificate of health from a
veterinary doctor in respect of animals, cattle or birds
brought for sale or sold in the market/sub-market;
(o) disseminate information about the benefits of G
..,,.. -l· regulation, the system of transaction, facilities
provided in the market yard, etc. through such means
as posters, pamphlets, hoarding, cinema slides, film
shows, group meetings, etc., or through nay other
means considered by it more effective or necessary; H
406 SUPREME COURT REPORTS [2008] 12 S.C.R. ~

}-

A (p) ensure payment in respect of a transaction which '
takes place in a market to be made on the same day ~
to the seller, and in default thereof to seize the
agricultural produce in question alongwith othet
property of the commission agent or purchaser if no
B commission agent is involved in the transaction;
(q) make arrangement for weighmen palledars for t I

weighing and transporting of goods in respect of
transactions held in the market yard/sub-yard;
1--
c (r) recover the charges in respect of .weighmen and
palledars and distribute the same to weighmen and
palledars if not paid by the purchaser or seller, as the
case may be.
62. Power to levy and collect market fee-Every
D Marketing Committee shall levy and collect such fee
(hereinafter referred to as the 'market fee") not being in
excess of, or less than, the amount determined by the
Government by notification published in the official ~-

Gazette from every purchaser of notified agricultural
E produce sold in a market area.
Provided that the amount to be determined by the Government
shall not be less than one rupee per one hundred rupees of
the sale price of the notified agricultural produce.

F 66. Assessment market fee payable by commission
agent and payment thereof-(1) If no teturn is furnished +
in respect of any period by the specified date, or if ·the
Marketing Committee is not satisfied that the return
furnished by commission agent is correct or complete, an
officer of the Marketing Committee specifically authorized
G
by it in this behalf (hereinafter referred to as the assessing I
..t~-
~

officer) shall proceed in such manner. as may be prescribed
in the bye-laws to assess, to the best of his judgment, the
amount of market fee due from such commission agent.

H Provided that before finalizing any such assessment, the
AGRI. PRODUCE MARKET COMMT., NARELA, 407
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
~

commission agent concerned will be given a reasonable A
opportunity of showing cause as to why the assessment
should not be finalized.
(2) The amount of the market fee assessed under sub-
section (1 ), less than sum, if any, already paid, shall be
paid by the commission agent within fifteen days from the B
,..-"' date of the receipt of the assessment order by him.
(3) If any commission agent fails to pay the amount of
market fee as required by sub-section (2), he shall, in
addition to market fee due, be liable to pay simple interest c
on the amount so due at two per cent per month from the
date immediately following the last date for submission of
return under clause (b) of section 65, upto the date of
assessment under sub-section (1) and at the rate of three
percent per month thereafter till realization.
D
CHAPTER X

-+ MARKET DEVELOPMENT FUND AND MARKET
FUND AND AUDIT THEREOF
84. Constitution of Market Development Fund-(1) All E
moneys received by the Board shall be credited into a
fund to be called the Market Development Fund.
(2) No expenditure from the Market Development Fund
shall be defrayed unless it is sanctioned by the competent
-+ . authority. The Market Development Fund shall be operated F
in the manner as may be prescribed in the rules.
Explanation-For the purpose of this sub-section
'competent authority' shall mean the Board, or Vice-
Chairman or any other officer of the Board to whom the
G
...... powers of the Board to incur expenditure have been
---
\

( delegated, as tl;1e case may be.

(3) The amount standing to the credit of the Market
Development Fund shall be kept or invested in such
manner as may be prescribed. H
. I

408 SUPREME COURT REPORTS (2008] 12 S.C.R.
(
>-· ...
A 89. Application of Market Fund-(1) Subject to the
provisions of section 88, the Market Fund may be
expended for the following purposes only, namely:-
(i) the acquisition of a site or sites for the market yard;

B (ii) the establishment, maintenance and improvement
·-,L
of the market yards; I

...
(iii) the construction and repair of buildings necessary
for the purposes of the market and for convenience
or safety of the persons using the market yard;
c
(iv) the maintenance of standard weights and measures;
(v) the meeting of establishment charges including
payment and contribution of provident fund, pension,
gratuity, leave encashment on retirement or yearly
D basis, actual reimbursement of hospitalization
expenses in the authorized hospitals or other items
as may be laid down in the regulations/rules;
(vi) loans and advances to the employees of the
+-
committee;
E
(vii) the payment of interest on the loans that may be
raised for the purpose of the market and provisions
of sinking fund in respect of such loans;
(viii) the collection and dissemination or information
F relating to crop statistics and marketing of agricultural
produce; +
(ix) expenses incurred in auditing the accounts of the
marketing committee;
G (x) payment of honorarium to Chairman travelling
allowances of Chairman, Vice-Chairman and other ........ ~

members of the Marketing Committee and sitting
fees payable to number for attending the meeting;
(xi) contribution to the Board as prescribed and
H
AGRI. PRODUCE MARKET COMMT., NARELA, 409
DELHI v. COMM!. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]

Consolidated fund of the National Capital Territory of A
Delhi to the extent required for salary of the
· employees of the Government as provided in clause
(b) of sub-section (2) and sub-section (3) of this
section;
(xii) contribution to any scheme for development of ' .B
agricultural marketing including transport an9
j.
scientific storage;
(xiii) to provide facilities like grading services and
communication to agriculturists in the market area; c
(xiv) to provide for development of agricultural produce in
the market area;
(xv) payment of expenses on elections under this Act;
(xvi) incurring of all expenses for research, extension and D
training in marketing of agricultural produce;
(xvii) prevention. on conjunction with other agencies, State,
Union Territory, Central and others in relation to
distress sale of agricultural produce;
E
(xviii) fostering co-operative marketing and assisting co-
operative marketing societies in the procurement and
organization of profitable· disposal of produce
particularly the produce belonging to small and
marginal farmers; F
-+ (xix) acquisition of land for construction of office building,
guest house for farmers and visitors and staff quarters
and maintenance thereof; hiring built up
accommodation for office use, guest house or for
other purpose of agricultural marketing; G
(xx) . any other purpose connected with the marketing of
agricultural produce under this.. Act whereon the
expenditure of the marketing committee fund is in the
public interest subject to the prior sanction of the Board. H
~

410 SUPREME COURT REPORTS [?008] 12 S.C.R.
,,
l ~'
A (xxi) contribution to centralized pension fund of the Board
as may be prescribed.
(2) Without prejudice to the generality of sub-section (1 ),
every marketing committee shaH, out of the "market fund"
pay-
B
(a) 'IJI..
to the Board, as contribution, such percentage of its
·I
income derived from the licence fee, market fee,
fines received as specified below, to enable the
Board to defray its expenses on office establishment
c and other expenses incurred by it in the .i.nterest of
the marketing committee generally,-,
(i) if the annual income of a marketing committee
does not exceed ten thousand rupees, ten
percent.
D
(ii) if the annual income of a marketing committee
exceeds ten thousand rupees but does not ' -~
exceed fifteen thousand rupees, on the first
Rs.10,000 ten percent.
't-

E On the next five thousand rupees or part
thereof ... fifteen percent
(iii) if the annual income of a marketing committee
exceeds fifteen thousand rupees, on the first
}
F Rs.10,000 Ten percent
on the next Rs.5,000 Fifteen percent + ~

t
on the remaining income Twenty percent ,_
~
(b) to the Government, the cost of any ~peci"al or
G additional staff employed by the Government, in
consultation with the marketing_committeeCfot giving· ·~·-
effect to the provisions of this Act in the market afea.
(3) The Government shall determine the cost of the special
or additional staff referred to in clause (b) ·of sub-section
H
-; AGRI. PRODUCE MARKET COMMT., NARELA, 411
DELHI ~ COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]
j (2) and shall, where the staff is employed for the purposes A
of more than one marketing committee, apportion such
cost among the marketing committees concerned in such
manner as it things fit and the decision of the Government
determining the am_ount payable by any marketing
committee shall be final. . B
..; CHAPTER.XI
' .
BUDGET AND ACCOUNTS
91. Budget and Account of a Marketing Committee- (1)
Everything marketing committee shall prepare and pass c
the budget on its income and expenditure fo'r the ensuing
year in the prescribed Form and shall submit it to the
Board for sanction before the prescribed date. The Board
shall sanction the budget with or without modification within
three months from the date of receipt thereof. If the budget D
is not returned by the Board within three months, it shall be
· presumed to have been sanctioned.

-1 (2) No expenditure shall be incurred on any item if there
is no provision in the sanctioned budget thereof, unless it
can be met by reappropriation from saving under any other E
Head and has sanction for re-appropriation of the Vice-
Chairman of the Board.
95. Preparation of Balance and administrative report-
(1) At the end of every year, a marketing committee shall F
draw up its final accounts of receipts and expeAditure and
a balance sheet of its assets and liabilities and prepare
an annual administrative report in such manner and in
such Form as may be prescribed.
(2) Copies of accounts, balance sheet and administrative G
I
report referred to in sub-section (1) shall be submitted to
~· the Board and the Director by such time as may be
prescribed."

(emphasis supplied by us)
H

r
412 SUPREME COURT REPORTS [2008] 12 S.C.R.
-
·'..:-

'
A 23. We also quote Section 3(31) of the General Clauses
Act, 1897 herein below which reads as under:
"GENERAL DEFINITIONS
"3. DEFINITIONS.- In this Act, and in all Central Acts and
B Regulations. made after the commencement of this Act,
unless there is anything repugnant in the subject or context,- j.
"l
(31 ): "local authority" shall mean a municipal committee,
district boar.d, body of port commissioners or other authority
legally entitled to, or entrusted by the Government with, the
·C control or management of a municipal or local fund;"
(emphasis supplied by us)
24. The short question which arises in this batch of civil
appeals is : whether Agricultural Marketing Committee
D [AMC(s)] is a "local authority", so as to be entitled to the
,..
benefit under Section 10 of the 1961 Act after insertion of the
Explanation in Section 10(20) vide Finance Act, 2002 w.e.f.
1.4,2003.
25. Before analyzing the above question, we quote
E hereinbelow a comparative chart containing the Explanation
to Section 10(20) of the 1961 Act on one hand in juxtaposition
to Section 3(31). of the 1897 Act:

Explanation to Section Section 3(31) of the 1897
F . 10(20) of the 1961 Act Act
"Explanation.- For the
purposes ·of this clause, the
3. DEFINITIONS.- In this
Act, and in all Central Acts
+·
expression "local authority" and Regulations made after
m~ans - the commencement of this
G Act, unless there is anything
(i) Panchayat as referred to in
clause (d) of article 243 of the
Constitution; or
repugnant in the subject or
context, - ·-
\ "

(31 ). "local authority" shall I
mean a municipal committee,
H
AGRI. PRODUCE MARKET COMMT., NARELA, 413
,. · DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, J.]

the Constitution; or district board, body of port A
commissioners or other
(iii) Municipal Committee and
authority legally entitled to, or
District Board, legally entitled
entrusted by the Government
to, or entrusted by the
with, the control or management
Government with, the control B
of a municipal or local· fund.
or management of a Municipal
~ ""
. or local fund; or
(iv) Cantonment Board as
defined in section 3 of the
Cantonments Act, 1924 (2 of c
1924);

26. At the outset, it may be noted that prior to Finance
Act, 2002, the said 1961 Act did not contain the definition of
the word "local authority". That word came to be defined for
0
the first time by Finance Act, 2002 vide the said Explanation/
definition clause.
27. Certain glaring features can be deciphered from the
. above comparative chart. Under Section 3(31) of the General
Clauses Act, 1897, "local authority" was defined to mean "a E
municipal committee, district board, body of port
commissioners or other authority legally entitled to the control
or management of a municipal or local fund. The words "other
authority" in Section 3(31) of the 1897 Act has been omitted
by Parliament in the Explanation/definition clause inserted in F
Section 10(20) of the 1961 Act vide Finance Act, 20,02.
+ Therefore, in our view, it would not be correct to say that the
entire definition of the word "local authority" is bodily lifted
from Section 3(31) of the 1897 Act and· incorporated, by
Parliament, in the said Explanation to Section 10(20) of the G
1961 Act. This deliberate omission is important. It may be
noted that various High Courts had taken the view prior to
Finance Act, 2002 that AMC(s) is a "local authority". That was
because there was no definition of the word "local authority"
in the 1961 Act. Those judgments proceeded primarily on the H
"'·

l>
414 SUPREME COURT REPORTS [2008] 12 S.C.R. .;-
f

r
A functional tests as laid down in the judgment of this Court vide
_,para '2' in the case of R.C. Jain (supra). We quote hereinbelow
para '2' which reads as under:
"2. Let us, therefore, concentrate and confine our attention
and enquiry to the definition of "local authority" in Section
B 3(31) of the General Clauses. Act. A proper and careful
). J--
scrutiny of the language of Section 3(31) suggests that an
authority, in order to be a local authority, must be of like
nature and character as a Municipal Committee, District
Board or Body of Port Commissioners, possessing,
c therefore, many, if not all, of the distinctive attributes and
characteristics of a Municipal Committee, District Board,
or Body of Port Commissioners, but, ·possessing one
·essential feature, namely, that it is legally entitled to or
entrusted by the government with, the control and
D management of a municipal or local fund. What then are the
distinctive attributes and characteristics, all or many of which
a Municipal Committee, District Board or Body of Port
Commissioners shares with any other local authority? First, ~
the authorities must have separate legal existence as
E corporate bodies. They must not be mere governmental
agenci~s but must be legally independent entities. Next,
they must function in a defined area and must ordinarily,
wholly or partly; directly or indirectly, be elected by the
inhabitants of the area. Next, they must enjoy a certain degree
F of autonomy, with freedom to decide for themselves
questions of policy affecting the area administered by them.
The autonomy may not be complete and the degree of the
+.
dependence may vary considerably. but, an appreciable
measure of autonomy there must be. Next, they must be
entrusted by statute with such governmental functions and
G
duties as are usually entrusted to municipal bodies, such
as those connected with providing amenities, to the .,.. +
inhabitants of the locality, like health and education services,
water and sewerage, town planning and development,
roads, markets, transportation, social welfare services etc.
H
AGRI. PRODUCE MARKET COMMT., NARELA, 415
DELHI v. COMMI. OF INCOME TAX & ANR. (S.H. KAPADIA, J.]

etc. Broadly we may say that they may be entrusted with the A
performance of civic duties and functions which would
otherwise be governmental duties and functions. Finally,
they must have the power to raise funds for the furtherance
of their activities and the fulfilment of their projects by levying
taxes, rates, charges, or fees. This may be in addition to B
moneys provided by government or obtained by borrowing
or otherwise. ·what is essential is that control or management
~-_of the fund must vest in the authority."

28. As stated above, it has been argued on behalf of the
appellants that ·AMC(s) is not a Municipal Committee. The C
words "Mu·nicipal Committee" finds place. in Item (iii) of the
said Explanation. According to the appellants, although AMC(s)
is no! a Municipal Committee stm it is a "local authority" of a
like nature and character to that of a Municipal Committee
performing municipal functions legally entitled to control the D
local fund, namely, the Market· Fund. For fhat proposition
reliance is placed on para '2' of the judgment in the case of
R. C. Jain (supra}, as quoted hereinabove. However, it may
be noted that this Court in the case of R. C. Jain (supra) was
required to consider· the question as to whether "Delhi E
Development Authority" is a "local authority" as its employees
stood outside the purview of Payment of Bonus Act, 1965.
Under Section 32(iv) of the Payment of Bonus Act, 1965 it is
stated that nothing in the said 1965 Act shall apply to
employees employed by an establishment engaged in any F
industry carried on by or under the authority of any Department
+ of the Central Government or State Government or a local
authority. It is in this context that the Court was required to
consider in the case of R. C. Jain (supra) as to whether ODA
is a "local authority". There was no definition of "local authority" G
in the said_ 1965 Act. Therefore, this Court had to go back to
Section 3(31) of the 1897 Act. As quoted hereinabove, Section
3(31) of the 1897 Act defines "local authority" to mean - a
Municipal Committee, District Board, body of Port
Commissioners or other authority In the case of R. C. Jain H
416 SUPREME COURT REPORTS [2008] 12 S.C.R.

~-
A (supra) this Court was aware that DOA is neither a District
Board nor a Body of Port Commissioners. Therefore, the only
question the Court had to address to was : whether DOA
would fall within the meaning of the words "other authority" in
Section 3(31) of the 1897 Act. Therefore, we have to read
B para '2' of the judgment in the case of R. C. Jain (supra) in the
context of Section 3(31) of the 1897 Act as the word "local
"'"I-
authority" was not defined in the Payment of Bonus Act, 1965. . ~

The Court, therefore, in the case of R. C. Jain (supra) had to
fall back upon Section 3(31) .of the 1897 Act and in doing so
this Court in the.case of R.C. Jain (supra) applied the functional
c and incorporation tests.
29. One more aspect needs to be mentioned. In the
case of R. C. Jain (supra) the test of "like nature" was adopted
as the words "other authority" came after the words "Municipal
Committee, District Board, Body of Port Commissioners".
D
Therefore, the words "other authority" in Section 3(31) took
colour from the earlier words, namely, "Municipal Committee,
District Board or Body of Port commissioners". This is how the
functional test is evolved in the case of R.C. Jain (supra). ~
However, as stated, earlier Parliament in its legislative wisdom
E has omitted the words "other authority" from the said Explanation
to Section 10(20) of the 1961 Act. The said Explanation to
Section 10(20) provides a definition to the word "local authority''.
It is an exhaustive definition. It is not an inclusive definition. The
words "other authority" do not find place in the said Explanation.
F Even, according to the appellant(s), AMC(s) is neither a
Municipal Committee nor a District Board nor a Municipal
Committee nor a Panchayat. Therefore, in our vie\11( functional +
test and the test of incorporation as laid down in the case of
R. C. Jain (supra) is no more applicable to the Explanation to
Section 10(20) of the 1961 Act. Therefore, ·in our view the
G judgment of this Court in the case of R. c_ Jain (supra) followed
by judgments of various High Courts on the status and character
'~
..
of AMC(s) is no more applicable to the provisions of Section
10(20) after the insertion of the Explanation/definition clause to
that sub-section vide Finance Act 2002.
H
AGRI. PRODUCE MARKET COMMT., NARELA, 417
DELHI v. COMMI. OF INCOME TAX & ANR. [S.H. KAPADIA, j.]

30. The question still remains as to why Parliament has A
used the words "Municipal Committee" and "District Board" in
Item (iii) of the said Explanation. In our view, Parliament has
defined "local authority" to meah - a Panchayat as referred to
in clause (d) of Article 243 of the Constitution of India,
Municipality as referred to in clause (e) of Article 243P of the B
x Constitution of India. However, there is no reference to the
~ Article 243 after the words "Municipal Committee" and "District
Board". In our view, the Municipal Committee and District
Board in the said Explanation are used out of abundant caution.
In 1897 when General Clauses Act was enacted there existed c
in India Municipal Committees and District Boards. They
continued even thereafter. In some remote place it is possible
that there exists a Municipal Committee or a District Board.
Therefore, in our view, apart from a Panchayat and Municipality,
Parliament in its wisdom decided to give exemption to
D
Municipal Committee and District Board. Earlier there were
District Board Acts in various States. Most of the States had
repealed those Acts. However, it is quite possible that in some
' -~ remote place District Board may still exists. Therefore,
Parliament decided to give exemption to such Municipal
Committees and District Boards. Therefore, in our view, E
advisedly Parliament has retained exemption for Municipal
Committee and District Board apart from Panchayat and
Municipality. Our view finds support from the provisions
contained in Part IX of the Constitution of India. Article 243N
provides for continuance of existing laws and Panchayats. It F
~ states, inter alia, that notwithstanding anything in Part IX, any
law relating to Panchayats in a State immediately before
commencement of the Constitution (Seventy-third Amendment)
Act, 1992, which is inconsistent with the provisions of Part IX,
shall continue to be in force until repealed by a competent G
Legislature. Similarly, under Part IXA there is Article 243ZF
< ·-+' which refers to the "Municipalities". This Article, inter alia,
states that notwithstanding anything in Part IXA, any provision
of any law relating to Municipalities in force in a State
H
418 SUPREME COURT REPORTS {2008] 12 S.C.R.

A immediately before the commencement of the Constitution
(Seventy-fourth Amendment) Act, 1992, which is inconsistent
with the provisions of Part IXA, shall continue to be in force
until amended or repealed by a competent Legislature. In oor
view, Article 243N and Article 243ZF indicates that there could
B be enactments which still retain the entities !ike Municipal
Committees and District Boards and if they exist, Parliament
intends to give exemption to their income under Section 10(20)
of the 1961 Act.
31. Before concluding we quote hereinbelow an imoortant
C principle of law enunciated by this Court in the case of R. C.
Jain (supra) which reads as under:
" ... it is not a sound Yule of interpretatior) to seek the
meaning of words used in an Act, in the definition clause
of other statutes." '
D
32. Since we are of the view that AMC(s) is neither a
Municipal Committee nor a District Board under the said
Explanation to Section 10(20) of the 1961 Act, we refrain from
going into the question : whether the AMC(s) is legally entitled to
E the control of the local fund, namely, Market Fund, under the said
1998 Act. There is one more reason why we do not wish to
expr~§S any opinion on the said question. Vide Finance Act,
2008, income of AMC(s) is exempt. Sub-section 26AAB of
Section 10 comes into force with effect from 1.4.2009. Therefore,
F we do not wish to express any opinion on the ·question as to
whether AMC(s) is legally entitled to the control of the local fund.
33. We hold that AMC(s) is, therefore, not entitled to
exemption under Section 10(20) of the 1961 Act after insertio.n
of the said Explanation vide Finance Act, 2002 w.e.f. 1.4.03.
G
34. For the aforestated reasons, we find no merit in this
batch of Civil Appeals and accordingly the said Civil Appeals
are dismissed with no order as to costs.
R.P. Appeal dismissed.
H