Commissionr Of Income Tax, Jaipur-Ii, Jaipur v. Rajasthan Housing Board, Jan Path, Jyoti Nagar, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 1. D.B. Income Tax Appeal No. 423 / 2009 Commissionr of Income Tax, Jaipur-II, Jaipur ----Appellant Versus Rajasthan Housing Board, Jan Path, Jyoti Nagar, Jaipur ----Respondent 2. D.B. Income Tax Appeal No. 37 / 2011 Raj Housing Board, Janpath, Jyot Nagar, Jaipur (Rajasthan) ----Appellant Versus The Assistant Commissioner Of Income-Tax, Circle 6, Central Revenue Building, Bhagwan Das Road, Jaipur (Rajasthan) ----Respondent 3. D.B. Income Tax Appeal No. 115 / 2015 Commissioner of Income tax (Exemptions) Hudco Building, Jyoti Nagar, Jaipur-V ----Appellant Versus Rajasthan Housing Board, Janpath, Jyoti Nagar, Jaipur (Raj.) ---Respondent _____________________________________________________ For Appellant(s) : Mr. N.M. Ranka, Sr. Counsel withMr. N.K. Jain in Appeal No.37/2011 Mr. R.B. Mathur, with Mr. Prateek Kedawat in Appeal No.423/2009Mr. Sameer Jain in Appeal No.115/2015For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana in Appeal No.115/2015 _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH 24/07/2017 Judgment 1. Since in all these appeals, common questions of law andfacts are involved, they are decided by this common judgment. 2.Two appeals are preferred by the department and one appeal is preferred by the assessee. While admitting the appeals,following substantial questions of law were framed by this Court ineach appeal which are as under:- D.B. Income Tax Appeal No.423/2009 admitted on 2.3.2012 “(i)Whether in the facts an circumstances of the case, theITAT was justified in holding the assessee a local authoritywithin the meaning of Section 10(20) of the I.T. Act in spiteof the fact that the assessee does not fulfill the conditionslaid down u/s. 10(20) of the I.T.Act and was itself as AOP inits return of income for this year and earlier years and filedapplication for registration u/s.12AA before the department? D.B. Income Tax Appeal No.37/2011 admitted on 6.4.2017 (i)Whether the ld. Tribunal was right in law and on factsin holding that the appellant Board is not a local Authoritywithin the meaning of Sec.10(20) of the I.T. Act, 1961 and isnot entitled to exemption? (ii)Whether the ld. Tribunal was right in law in not holdingthe appellant Board as a Local Authority when such statuswas accorded by the Assessing Officer in the assessmentorder and on similar facts and in totality of circumstances,exemption u/s.10(20) of the Act was allowed by the Tribunalon 28.11.2008 which was duly accepted by and remainedunchallenged by the Revenue. D.B. Income Tax Appeal No.115/2015 admitted on 11.12.2015 (i)Whether in the facts and circumstances of the case theITAT was justified in holding the assessee a local authoritywithin the meaning of Section 10(20) of the I.T. Act in spiteof the fact that the assessee does not fulfill the conditionslaid down under Section 10(20) of the I.T. Act.? (ii)Whether on the facts and in the circumstances of thecase the ITAT was correct in granting benefit of Section 36(i)(xii) of the Act? 3.Mr. R.B. Mathur, counsel for the department in appealNo.423/2009 has referred to the amended provisions of Section10(20) of the I.T. Act which came into force w.e.f. 1.4.2003. Hecontended that after the constitutional amendment andintroduction of Article 243(3) and other articles, legislation by amending the Finance Act w.e.f. 1.4.2003, added the definition of`local authority’ which reads as under:- “10(20A)any income of an authority constituted inIndia by or under any law enacted either for thepurpose of dealing with and satisfying the need forhousing accommondation or for the purpose ofplanning, development or improvement of cities townsand villages or for both” 3.Mr. R.B. Mathur, counsel for the department in appealNo.423/2009 has referred to the amended provisions of Section10(20) of the I.T. Act which came into force w.e.f. 1.4.2003. Hecontended that after the constitutional amendment andintroduction of Article 243(3) and other articles, legislation by amending the Finance Act w.e.f. 1.4.2003, added the definition of`local authority’ which reads as under:- “10(20A)any income of an authority constituted inIndia by or under any law enacted either for thepurpose of dealing with and satisfying the need forhousing accommondation or for the purpose ofplanning, development or improvement of cities townsand villages or for both” 4.Counsel for the appellant has placed reliance on thejudgment rendered in the case of Agricultural Produce Market Committee Narela Vs. Commissioner of Income Tax andAnother :: (2008) 305 ITR 1(SC) and contended that assesseewill not be covered under the local authority as envisaged underthe Income Tax Act. Para 28,29,30,31,32 and 33 of the judgmentread as under:- “28. As stated above, it has been argued on behalf ofthe appellants that AMC(s) is not a MunicipalCommittee. The words "Municipal Committee" findsplace in Item (iii) of the said Explanation. According tothe appellants that AMC(s) is not a MunicipalCommittee. The words "Municipal Committee" findsplace in Item (iii) of the said Explanation. According to the appellants, although AMC (s) is not a MunicipalCommittee still it is a "local authority" of a like natureand character to that of a Municipal Committeeperforming municipal functions legally entitled tocontrol the local fund, namely, the Market Fund. Forthat proposition reliance is placed on para `2' of thejudgment in the case of R.C. Jain (supra), as quotedhereinabove. However, it may be noted that this Courtin the case of R.C. Jain (supra) was required toconsider the question as to whether "DelhiDevelopment Authority" is a "local authority" as itsemployees stood outside the purview of Payment ofBonus Act, 1965. Under Section 32(iv) of the Paymentof Bonus Act, 1965 it is stated that nothing in the said1965 Act shall apply to employees employed by anestablishment engaged in any industry carried on byor under the authority of any Department of theCentral Government or State Government or a localauthority. It is in this context that the Courtwas required to consider in the case of R.C. Jain(supra) as to whether DDA is a "local authority". Therewas no definition of "local authority" in the said 1965Act. Therefore, this Court had to go back to Section3(31) of the 1897 Act. As quoted hereinabove, Section3(31) of the 1897 Act defines "local authority" to mean- a Municipal Committee, District Board, body of PortCommissioners or other authority. In the case of R.C.Jain (supra) this Court was aware that DDA is neither aDistrict Board nor a Body of Port Commissioners.Therefore, the only question the Court had to addressto was : whether DDA would fall within the meaning ofthe words "other authority" in Section 3(31) of the1897 Act. Therefore, we have to read para `2' of thejudgment in the case of R.C. Jain (supra) in thecontext of Section 3(31) of the 1897 Act as the word"local authority" was not defined in the Payment ofBonus Act, 1965. The Court, therefore, in the case ofR.C. Jain (supra) had to fall back upon Section3(31) of the 1897 Act and in doing so this Court in thecase of R.C. Jain (supra) applied the functional andincorporation tests. 29. One more aspect needs to be mentioned. In thecase of R.C. Jain (supra) the test of "like nature" wasadopted as the words "other authority" came after thewords "Municipal Committee, District Board, Body ofPort Commissioners". Therefore, the words "otherauthority" in Section 3(31) took colour from the earlierwords, namely, "Municipal Committee, District Boardor Body of Port commissioners". This is how thefunctional test is evolved in the case of R.C. Jain(supra). However, as stated, earlier Parliament in itslegislative wisdom has omitted the words "other authority" from the said Explanation to Section10(20) of the 1961 Act. The said Explanationto Section 10(20) provides a definition to the word"local authority". It is an exhaustive definition. It is notan inclusive definition. The words "other authority" donot find place in the said Explanation. Even, accordingto the appellant(s), AMC(s) is neither a MunicipalCommittee nor a District Board nor a MunicipalCommittee nor a Panchayat. Therefore, in our viewfunctional test and the test of incorporation as laiddown in the case of R.C. Jain (supra) is no moreapplicable to the Explanation to Section 10(20) ofthe 1961 Act. Therefore, in our view the judgment ofthis Court in the case of R.C. Jain (supra) followed byjudgments of various High Courts on the status andcharacter of AMC(s) is no more applicable to theprovisions of Section 10(20) after the insertion of theExplanation/definition clause to that sub- sectionvide Finance Act, 2002. 30. The question still remains as to why Parliamenthas used the words "Municipal Committee" and"District Board" in Item (iii) of the said Explanation. In our view, Parliamenthas defined "legal authority" to mean - a Panchayat asreferred to in clause (d) of Article 243 of theConstitution of India, Municipality as referred to inclause (e) of Article 243P of the Constitution of India.However, there is no reference to the Article 243 afterthe words "Municipal Committee" and "District Board".In our view, the Municipal Committee and DistrictBoard in the said Explanation are used out of abundantcaution. In 1897 when General Clauses Act wasenacted there existed in India Municipal Committeesand District Boards. They continued even thereafter. Insome remote place it is possible that there exists aMunicipal Committee or a District Board. Therefore, inour view, apart from a Panchayat and Municipality,Parliament in its wisdom decided to give exemption toMunicipal Committee and District Board. Earlier therewere District Board Acts in various States. Most of theStates had repealed those Acts. However, it is quitepossible that in some remote place District Board maystill exists. Therefore, Parliament decided to giveexemption to such Municipal Committees and DistrictBoards. Therefore, in our view, advisedly Parliamenthas retained exemption for Municipal Committee andDistrict Board apart from Panchayat and Municipality.Our view finds support from the provisions containedin Part IX of the Constitution of India. Article243N provides for continuance of existing laws andPanchayats. It states, inter alia, that notwithstanding anything in Part IX, any law relating to Panchayats in aState immediately before commencement of theConstitution (Seventy-third Amendment) Act, 1992,which is inconsistent with the provisions of Part IX,shall continue to be in force until repealed by acompetent Legislature. Similarly, under Part IXA thereis Article 243ZF which refers to the "Municipalities".This Article, inter alia, states that notwithstandinganything in Part IXA, any provision of any law relatingto Municipalities in force in a State immediately beforethe commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistentwith the provisions of Part IXA, shall continue to be inforce until amended or repealed by a competentLegislature. In our view, Article 243N and Article243ZF indicates that there could be enactments whichstill retain the entities like Municipal Committees andDistrict Boards and if they exist, Parliament intends togive exemption to their income under Section 10 (20)of the 1961 Act. 31. Before concluding we quote hereinbelow animportant principle of law enunciated by this Court inthe case of R.C. Jain (supra) which reads as under: "...it is not a sound rule of interpretation to seek themeaning of words used in an Act, in the definitionclause of other statutes." 32. Since we are of the view that AMC(s) is neither aMunicipal Committee nor a District Board under thesaid Explanation to Section 10(20) of the 1961 Act,we refrain from going into the question : whether theAMC(s) is legally entitled to the control of the localfund, namely, Market Fund, under the said 1998 Act.There is one more reason why we do not wish toexpress any opinion on the said question. VideFinance Act, 2008, income of AMC(s) is exempt. Sub-section 26AAB of Section 10 comes into force witheffect from 1.4.2009. Therefore, we do not wish toexpress any opinion on the question as to whetherAMC(s) is legally entitled to the control of the localfund. 33. We hold that AMC(s) is, therefore, not entitled toexemption under Section 10(20) of the 1961 Act afterinsertion of the said Explanation vide Finance Act,2002 w.e.f. 1.4.03. 5Counsel for the appellant has further relied on the judgment rendered in the case of Adityapur Industrial Area Development Authority Vs. Union of India (UOI) and orsreported in (2006) 283 ITR 197(SC) wherein it has been held thatit is not a local authority. The observations made in para 15,16,18,19 and 20 are as under:- “15. This Court considered the scheme of the Actunder which the State Corporation was constitutedand held :- 33. We hold that AMC(s) is, therefore, not entitled toexemption under Section 10(20) of the 1961 Act afterinsertion of the said Explanation vide Finance Act,2002 w.e.f. 1.4.03. 5Counsel for the appellant has further relied on the judgment rendered in the case of Adityapur Industrial Area Development Authority Vs. Union of India (UOI) and orsreported in (2006) 283 ITR 197(SC) wherein it has been held thatit is not a local authority. The observations made in para 15,16,18,19 and 20 are as under:- “15. This Court considered the scheme of the Actunder which the State Corporation was constitutedand held :- ...The main point which we are examining at thisstage is: is the income derived by the appellant fromits trading activity, income of the Stage under Article289(1)? In our opinion, the answer to this questionmust be in the negative. Far from making anyprovision which would make the income of theCorporation the income of the State, all the relevantprovisions emphatically bring out the separatepersonality of the Corporation and proceed on thebasis that the trading activity is run by theCorporation and the profit and loss of the Corporation.There is no provision in the Act which has attemptedto lift the veil from the face of the Corporation andthereby enable the shareholders to claim that despitethe form which the organization has taken, it is theshareholders who run the trade and who can claim theincome coming from it as their own. Section 28 whichprovides for the payment of interest clearly brings outthe duality between the Corporation on the one handand the State and Central Governments on the other.Take for instance the case of supersession of theCorporation authorized by Section 38. Section 38(2)(c) emphatically brings out the fact that the propertyreally vests in the corporation, because it providesthat during the period of supersession, it shall vest inthe State Government.... Therefore, we are satisfiedthat the income derived by the appellant from itstrading activity cannot be said to be the income of theState under Article 289(1), and if that is so, the factsthat the trading activity carried on by the appellantmay be covered by Article 289(2), does not reallyassist the appellant's case. Even if a trading activityfalls under Clause (2) of Article 289, it can sustain aclaim for exemption from Union taxation only if it isshown that the income derived from the said tradingactivity is the income of the State. That is howultimately, the crux of the problem is to determinewhether the income in question is the income of theState and on this vital test, the appellant fails. 16. Considerable reliance was placed on the principleslaid down in the aforesaid decision by learned Counselappearing for the Union of India. He submitted thathaving regard to the provisions of the Act under whichthe appellant/Authority is established, the sameconclusion may be reached. In particular, emphasizingthe fact that as in Andhra Pradesh Road TransportCorporation case, so in the instant case as well,Section 17 of the Act provides that upon dissolution ofthe appellant/Authority, the properties, funds anddues realizable by the Authority along with itsliabilities shall devolve upon the State Government.Impliedly, therefore, such properties, funds and duesvest in the Authority till its dissolution, and onlythereafter it vests in the State Government. He alsoreferred to various other provisions of the Act andsubmitted that there was nothing in the Act whichattempted to lift the veil from the face of theCorporation. Even though the Authority was createdunder an Act of the Legislature, it was still anAuthority which had a distinct personality of its own,having perpetual succession and a common seal, withpowers to acquire, hold and dispose of property, andto contract, and could sue and be sued in its ownname. Shri Venugopal, on the other hand, tried todistinguish the judgment on the ground that theAndhra Pradesh Road Transport Corporation is beingrun on business lines, and a Corporation that runs onbusiness lines is distinguishable and different from aCorporation which is not run on those lines. Even ifsuch a distinction is drawn, that will not have theeffect of making the income of the Corporation theincome of the State Government having regard to the other features noticed above. Shri Venugopal then relied upon two decisions of thisCourt reported in 1970 (3) SCC 323 Shri Ramtanu Co-operative Housing Society Ltd. and Anr. Vs. State ofMaharashtra and Ors. and (1997) 7 SCC 339 NewDelhi Municipal Council Vs. State of Punjab and Ors..In Shri Ramtanu Co- operative Housing Society; thequestion which arises for consideration in the instantappeal did not arise at all. The question was whetherthe State of Maharashtra was competent to enact theMaharashtra Industrial Development Act, 1961 andwhether the impugned Legislation fell within Entry 43List I of the Seventh Schedule of the Constitution, sothat only the Parliament was empowered to enactsuch Legislation and not the State of Maharashtra. Inthat context, this Court considered the true characterscope and intent of the Act by reference to thepurposes and the provisions of the Act. Having considered the various provisions of the Act includingthose relating to the functions and powers of theCorporation, this Court concluded that in pith andsubstance the Act was meant for the establishment,growth and organization of industries, acquisition ofland in that behalf and carrying out the purposes ofthe Act by setting up the Corporation as one of thelimbs or agencies of the Government. It held thateven though the Corporation received moneys fromdisposal of lands, buildings and other properties andalso received rents and profits, such receipts arosenot out of any business or trade but out of solepurpose of establishment, growth and development ofindustries. The Corporation was not a tradingCorporation, as it was not involved in buying or sellingactivity. The true character of the Corporation was toact as an architectural agent of the development andgrowth of industrial towns by establishing anddeveloping industrial estates and industrial areas. It,therefore, negative the argument that the Corporationbeing a trading one, the impugned Legislation fellwithin Entry 43 of List I of the Seventh Schedule.Thisdecision does not help the appellant because even if itis held that the appellant/ Authority is not a tradingAuthority, yet that does not answer the questionwhether the income of the Authority is the income ofthe State so as to attract Clause (1) of Article 289. 18. Similarly, the decision in New Delhi MunicipalCouncil v. State of Punjab and Ors. (supra) does notadvance the case of the appellant. It was held thatthe property/ municipal taxes levied by the New DelhiMunicipal Council under the relevant Act constitutedUnion taxation within the meaning of Clause (1) ofArticle 289 of the Constitution of India. The levy ofproperty taxes under the aforesaid enactments onlands or buildings belonging to the State Governmentwas invalid and incompetent by virtue of the mandatecontained in Clause (1) of Article 289. However, if anyland or building is used or occupied for the purpose ofany trade or business, meaning thereby a trade orbusiness carried on with profit motive, by or on behalfof the State Government, such land or building shallbe subject to the levy of the property taxes levied bythe said enactments. In other words, State propertyexempted under Clause (1) means such property as isused for the purpose of the Government and not forthe purpose of trade or business. That was a casewhere the question arose in relation to the levy ofproperty tax on lands and buildings owned by theState Governments which was "property of the State Government". In the instant case, we are concernedwith the income of the appellant/Authority and thesame principles apply. The exemption can be claimedonly if the income can be said to be the income of theState Government. In the facts of this case, it is notpossible to hold that the income of theappellant/Authority is the income of the StateGovernment. Government". In the instant case, we are concernedwith the income of the appellant/Authority and thesame principles apply. The exemption can be claimedonly if the income can be said to be the income of theState Government. In the facts of this case, it is notpossible to hold that the income of theappellant/Authority is the income of the StateGovernment. 19. Learned counsel for the Union of India also reliedupon two decisions reported in MANU/SC/0420/1999 :AIR1999SC2573 Food Corporation of India v.Municipal Committee, Jalalabad and Anr. andMANU/SC/0416/1999 : AIR1999SC2552 Board ofTrustees for the Visakhapatnam Port Trust v. State ofA.P. and Ors. and submitted that this Court hasconsistently taken the view that a Corporation havingthe attributes of a Company must be held to bedistinct from the Central Government, and not eligiblefor exemption from taxation under Article 285. TheHigh Court also in its impugned judgment and orderhas referred to several decisions of this Court whereinthis Court dealing with cases arising under Article 285of the Constitution of India, which exempts propertiesof the Union from State taxation, took a similar view.We may usefully refer to the cases reported in:MANU/SC/0420/1999 : AIR1999SC2573 FoodCorporation of India v. Municipal Committee,Jalalabad and Anr., MANU/SC/0752/1995 :(1995)5SCC251 Municipal Commissioner of Dum DumMunicipality and Ors. v. Indian Tourism DevelopmentCorporation and Ors., MANU/SC/1179/1994 CentralWarehousing Corporation v. Municipal Corporation andMANU/SC/0244/1982 : [1982]2SCR1 WesternCoalfields Ltd. v. Special Area Development Authority,Korba and Anr. and Bharat Aluminium Company Ltd.v. Special Area Development Authority, Korba andOrs.MANU/MP/0056/1978 20. Having considered all aspects of the matter wehold that the High Court is right in concluding that theappellant/Authority could not claim exemption fromUnion taxation under Article 289(1) of theConstitution of India. The impugned notice issued bythe Income Tax Authorities was, therefore, valid andlegal and could not be successfully challenged in thewrit petition. Accordingly, this appeal is dismissed butwithout any order as to costs.” 6.In that view of the matter, he contended that in view of thedecision taken by the authority though the assessee himself hasfiled its return of income tax in the capacity of AOP, the CIT (A)has seriously committed an error in holding in para 1.1 and 1.2which reads as under:- “1.1 In support of this ground of appeal Sh. P.C.Parwal and Sh. Anil Nuhal CA & Ar of the appellanthas argued that the appellant board filed a return ofincome in the status of AOP however, the A.O. hascompleted the assessment in the name of RajasthanHousing Board Corpn. Ltd. Since, the appellant is nota company and therefore, relying on old SupremeCourt judgment in the case of Amarchand N.Sharaff itwaqs argued that there can be no assessment on adead person and since, there is no person in the nameof Rajasthan Housing Board Corpn. Ltd. therefore, theassessment framed by A.O. is illegal and bad in law.Further, according to him the appellant is a localauthority u/s 3 of Rajasthan Housing Board, 1970.According to him it can be noted that assessee is alocal authority u/s 10(20) of I.T. Act as the appellantis a District Board entrusted by the government withthe control and management of the local fund andtherefore, according to them the status of theappellant was a local authority and not as a companyor AOP. It is further argued that the income of theappellant from business carried on by it within its ownjurisdictional area is exempt U/s 10(22) andaccordingly it was requested to quash the assessmentorder. 1.2 I have considered facts of the case and argumentstaken by Sh. Parwal and Sh. Nuhal quite carefully. Itis a fact that the appellant namely Rajasthan HousingBoard has filed its return of income in the capacity ofAOP and once such return of income has been filedthe assessment had to be made when a notice U/s143(2) of I.T. Act was issued within permissible time.It is further seen that during the assessmentproceedingssuchstatuswasneverchanged/challenged and therefore, at this stage theappellant cannot be allowed to change the status inwhich return of income was filed as well as theassessment was completed. Without prejudice to thiswhen provision of S.10(20) read with explanationwere examined which defines the local authority it is seen that the appellant is not covered in sub section(i), (ii) and (iv) of the explanation which defines thelocal authority. Now remains the sub section (I)according to which Municipal Committee and DistrictBoard legally entitled to or entrusted by theGovernment with, the control or management of aMunicipal or local fund. With reference to thisdefinition it is clear that appellant is neither aMunicipal Committee nor it is District Board andmoreover such Municipal Committee and MunicipalBoard should have been entrusted by the governmentthe control or management of a Municipal or LocalFund. Certainly, to the appellant the government hasnot entrusted the control or management of anyMunicipal or Local Fund. With this discussion it is clearthat the appellant is not covered in the definition oflocal authority as defined U/s 10(20) of I.T. Act. As faras the second argument is concerned, that A.O. haswrongly completed the assessment in the hands ofRajasthan Housing Board Corpn. Ltd. when theappellant is not a company, the assessment orderpassed in the name of the company was bad in law isnot acceptable at all because the A.O. has clearlycompleted the assessment in the status of AOP whichis clear from page No.1 of the assessment order andaccording to me this mistake is clearly covered U/s292B of the I.T. Act which prescribes that noassessment made in pursuance of the provision of theI.T. Act shall be invalid merely by reason of anymistake if such assessment is in substance and ineffect is in conformity with or according to intend andpurpose of the Act. In fact, the assessment ordernowhere the assessing officer has used the word"company" and time and again she has used the word"Rajasthan Housing Board". With this discussion thesaid ground of appeal is hereby rejected. 7.While considering the matter, the Tribunal has partly allowed the appeal considering the assessee to be the local authorityunder the Act. 8.Mr. N.M. Ranka, Sr. counsel appearing in appeal No.37/2011wherein two questions are raised has brought to the notice of theCourt that the order dated 28.11.2008 is already subject matter of appeal in Appeal No.423/2009, therefore, the second question willnot arise. 9.Counsel for the appellant has referred to the provisions ofSection 3(e) of the Rajasthan Local Fund Audit Act, 1954 andSection 32(3) of the Rajasthan General Clauses Act, 1955 whereinlocal funds is defined as under:- “Section 3(e) “Local Fund” means any fund to thecontrol or management of which a Local Authority islegally entitled and includes the proceeds of any cess,rate, duty, fee or tax which such authority is legallyentitled to impose and property vested in suchauthority”. It also mandates a Local Authority tosubmit their accounts for audit u/s.4. The RajasthanHousing Board (Section 45(2) mandates auditstatutory from the Local Fund Department.“ appeal in Appeal No.423/2009, therefore, the second question willnot arise. 9.Counsel for the appellant has referred to the provisions ofSection 3(e) of the Rajasthan Local Fund Audit Act, 1954 andSection 32(3) of the Rajasthan General Clauses Act, 1955 whereinlocal funds is defined as under:- “Section 3(e) “Local Fund” means any fund to thecontrol or management of which a Local Authority islegally entitled and includes the proceeds of any cess,rate, duty, fee or tax which such authority is legallyentitled to impose and property vested in suchauthority”. It also mandates a Local Authority tosubmit their accounts for audit u/s.4. The RajasthanHousing Board (Section 45(2) mandates auditstatutory from the Local Fund Department.“ 3. 'Local Fund'-Meaning of.-(1) It means inter alia "the moneys received and administered by a bodywhich though not a part of the Governmentorganization, has been placed under the control of theGovernment by a law, or a rule having the force oflaw whether in regard to its proceedings generally orto specific matters e.g. its budget or sanction ofparticular post in its service and appointments to suchposts, and the leave, pension and other rulesapplicable to its servants."Budha Veera Naidu V. Stateof A.P. (1978) Andh. LT 175. 10.He has also referred to Sub-Section 2(10) and (12) of the The Rajasthan Housing Board Act, 1970 which reads thus:- “2(10). “Housing Scheme” means a housing schemeframed under this Act and includes a scheme fordevelopment of land required for the purpose of thescheme.” (12). “Local authority” includes a Municipal Boardestablished under section 7 of the RajasthanMunicipalities Act, 1959 (Act 38 of 1959), a panchayatestablished under Section 3 of the RajasthanPanchayat Act, 1953 (Act 21 of 1953) or a PanchayatSamiti or a Zila Parishad respectively constituted under Section 7 and 42 of the Rajasthan Panchayat SamitiesAct and Zila Parishad Act, 1959 (Act 37 of 1959). 11.Counsel for the appellant has also relied on the judgmentrendered by the Andhra Pradesh High Court in the case of BudhaVeerinaidu Vs. State of Andhra Pradesh & Anr. Reported in(1983)143 ITR 1021. He has also relied on the decision of theSupreme Court in the case of Union of India and others Vs. R.C.Jain and Ors. Reported in AIR 1981 SC 951 and the judgmentwhich is sought to be relied upon by the department, he hasempasised para 31 and 32 and contended that this will comewithin the local authority. 12.In Appeal No.115/2015, Counsel Mr. Jhanwar has pointed outthat the Tribunal while considering the issue of local authority hasrelied on earlier decision. In para 2.4, the tribunal has observed asunder:- “We have heard the rival contentions and perused thematerials available on record. This Bench of ITAT in itstwo earlier orders including the one for the sameassessment year has held that the assessee would beeligible for benefits of Section 11 and 12. The ld.CIT(A) passed the impugned order without benefit ofITAT order inasmuch as the impugned order is passedby the ld. CIT(A) on 16-03-2012. Consequently, theissue of applicability of Section 11 and 12 including theissue of Sec 36(i)(xii) stands decided in favour of theassessee and the matter is restored back to the file ofthe AO to extend the benefit of Section 11 and 12 tothe assessee in accordance with law.” 13.Mr. Jhanwar also pointed out that they have not preferredthe appeal though the issue is not decided in their favour. Evenotherwise, he relied on the judgment rendered by the Karnataka High Court in the case of CIT Vs. Janma Bhumi :: 242 ITR 457 andthe Madras High Court in 153 ITR and after considering thejudgment, the Tribunal has extended the benefit of Section 11 and12 to the assessee. 14.. We have heard the learned counsel for the parties. 13.Mr. Jhanwar also pointed out that they have not preferredthe appeal though the issue is not decided in their favour. Evenotherwise, he relied on the judgment rendered by the Karnataka High Court in the case of CIT Vs. Janma Bhumi :: 242 ITR 457 andthe Madras High Court in 153 ITR and after considering thejudgment, the Tribunal has extended the benefit of Section 11 and12 to the assessee. 14.. We have heard the learned counsel for the parties. 15.. Before proceeding with the matter, it will not be out of placeto mention here that the Appeal No.423/2009 was preferred bythe appellant department and in view of the amendment in theclause of Local authority has restricted meaning and as per sub-section (3) which is sought to be relied on by the counsel for therespondent Mr. Ranka that a local authority is legally entitled andor entrusted by the Government with the control and managementof a municipal council or local fund. 16.In our considered opinion, the benefit of local fund will notcome to the rescue of the assessee inasmuch as the local fundwhich has been described in the General Clauses Act cannot beinterpreted under the Income Tax Act. There is no collection of anycess, rate, duty, fees or tax. 17.In that view of the matter, the argument raised by thecounsel regarding local funds cannot be accepted. The RajasthanHousing Board has been entrusted with the housing scheme at aconcessional rate. They are not collecting water charges andelectric charges which are collected against the consumption ofelectricity and water. It is not the tax or the fees as envisagedunder the Act. 18.Accordingly, the contention raised by the counsel for theappellant is required to be accepted that it is not a local authority.Thus, the first issue in appeal preferred by the department isanswered in favour of the department and against the assessee. 19.The appeal No.423/2009 stands allowed. 20.The Second appeal (37/2011) fails and the issue is answeredin favour of the department and against the assessee. The samestands dismissed. 21.The first issue raised in the third appeal (115/2015) is notdecided by the Tribunal, therefore, the said question will not arise. 22.The second question is answered in favour of the assessee inview of the observations made in para 2.4 of the order of theTribunal. 23.Accordingly, the appeal No.115/2015 stands dismissed. 24.In the result, Appeal No.423/2009 stands allowed and appealNos.37/11 and 115/15 stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Pdaiya/46-48