COMMISSIONER OF INCOME TAX ANDHRA PRADESH HYDERABAD Vs. ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION HYDERABAD

JUDGEMENT

(1.) The above three appeals have been filed by certificate granted by the Andhra Pradesh High Court under S. 261 of the Income Tax Act, 1961, against the judgment of that High Court in an income-tax reference. The Respondent, the Andhra Pradesh State Road Transport Corporation, is a Road Transport Corporation established with effect from Jan. 11, 1958, by the State of Andhra Pradesh by a notification issued under section 3 of the Road Transport Corporations Act 1950 (Act No. 64 of 1950) (hereinafter referred to in short as "the RTC Act"). Prior to the establishment of the Respondent Corporation Road Transport in the State of Andhra Pradesh was a department of the Government, being run by the Government of Hyderabad prior to the formation of the State of Andhra and thereafter by the Government of Andhra Pradesh. During the whole of this period the income made from road transport was exempt from income-tax. After the Respondent Corporation was formed, the Income-tax Department took the view that the income of the Respondent Corporation was liable to income-tax and assessed the Respondent Corporation to income-tax for the assessment years 1958-59 and 1959-60. The Respondent Corporation thereupon filed a writ petition in the Andhra Pradesh High Court contending that the property owned by it and the income earned by it were the property and income of a State exempted from Union taxation under Art. 289(1) of the Constitution. This contention was rejected and the writ petitions were dismissed by the High Court. Appeals filed by the Respondent Corporation in this Court were also dismissed. The judgment of this Court is reported as Andhra Pradesh State Road Transport Corpn. v. Income-tax Officer, Hyderabad, (1964) 52 ITR 524, 535-36. (1964) 7 SCR 17, 29-30. After referring to the various provisions of the RTC Act, this Court held:

(2.) Having failed in its contention that its income was exempt from income-tax under Art. 289(1) of the Constitution. the Respondent Corporation filed returns in respect of the assessment years 1960-61, 1961-62, and 1962-63, showing its income as "Nil". In respect of the assessment years 1960-61 and 1961-62, which are the subject of Civil Appeals Nos. 216 and 217(NT) of 1973 before us, it claimed exemption from income-tax under S. 4(3)(i) of the Indian Income Tax Act, 1922 (hereinafter referred to a-, "the 1922 Act"). In respect of the assessment year 1962-63, which is the subject of Civil Appeal No. 218 (NT) of 1973 before us, it claimed exemption under S. 11 of the Income Tax Act, 1961 (hereinafter referred to as "the 1961 Act"). The Respondent Corporation's claim for exemption was rejected by the I.T.O., Company Circle, Hyderabad. The appeals filed by the Respondent Corporation were allowed by the Appellate Assistant Commissioner of Income-tax, D Range, Hyderabad, but the appeals filed by the Department before the Income-tax Appellate Tribunal, Hyderabad Bench, were allowed and at the instance of the Respondent Corporation the Tribunal by a common order made in all the three appeals before it stated a case and referred the following question of law to the High Court:

(3.) Section 4(3)(i) of the 1922 Act, omitting what is not relevant for our purpose, provided as follows: