M. Katju, J.:— These two writ petitions raise a common question of law and are hence being disposed of by a common judgment.
2. The petitioner is the Krishi Utpadan Mandi Samiti, Bulandshahr, which has been constituted under the U.P Krishi Utpadan Mandi Adhiniyam, 1964. The petitioner has challenged the impugned orders dated March 4, 2004, and October 15, 2003, requiring it to furnish income-tax returns for the assessment year 2003-2004 and also to show cause why penalty be not imposed for not furnishing the returns in time. The short contention of learned counsel for the petitioner is that the petitioner is a local authority and is hence exempt from income-tax under section 10(20) of the Income-tax Act.
3. Sri B.D Mandhyan, learned counsel for the petitioner, has submitted that earlier for the assessment year 1978-79 an assessment order was passed against the petitioner by the Income-tax Officer, A-Ward, Bulandshahr, on May 25, 1982, against which an appeal was filed before the Commissioner of Income-tax (Appeals), Meerut, who by order dated September 6, 1982, allowed the appeal and held that the petitioner is a local authority and hence exempt from income-tax. True copy of the order dated September 6, 1982, is annexure 3 to the writ petition.
4. Learned counsel for the petitioner has relied on the definition of “local authority” in section 3(31) of the General Clauses Act, and the definitions in some other Acts.
5. In our opinion there is no merit in this petition. It may be mentioned that although earlier the expression “local authority” was not defined in the Income-tax Act, subsequently by the Finance Act of 2002, it has been defined in the Explanation to section 10(20) of the Income-tax Act 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 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 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);”
6. Section 10(29) on which also the petitioner relied has been abolished by the Finance Act, 2002.
7. A bare perusal of the Explanation to section 10(20) shows that now only four entities are local authorities for the purpose of section 10(20) namely, (i) Panchayat; (ii) Municipality; (iii) Municipal Committee and District Board; (iv) Cantonment Board. Krishi Utpadan Mandi Samiti is not one of the entities mentioned in the Explanation to section 10(20).
8. It may be noted that the Explanation to section 10(20) uses the word “means” and not the word “includes”. Hence it is not possible for this court to extend the definition of “local authority” as contained in the Explanation to section 10(20), vide P. Kasilingam v. P.S.G College of Technology, 1995 Supp (2) SCC 348 : AIR 1995 SC. 1395 (para. 19). It is also not possible to refer to the definitions in other Acts, as the Income-tax Act now specifically defines “local authority”.
9. It is well settled that in tax matters the literal rule of interpretation applies and it is not open to the court to extend the language of a provision in the Act by relying on equity, inference, etc.
10. It is the first principle of interpretation that a statute should be read in its ordinary, natural and grammatical sense. As observed by the Supreme Court of India:
“In construing a statutory provision, the first and the foremost rule of construction is the literary construction. All that the court has to see at the very outset is what does the provision say. If the provision is unambiguous and if from that provision the legislative intent is clear, the court need not call into aid the other rules of construction of statutes. The other rules of construction of statutes are called into aid only when the legislative intent is not clear”, vide Hiralal Rattan Lal v. STO, (1973) 1 SCC 216 : AIR 1973 SC 1034 : [1973] 31 STC 178 (SC)”.
11. This principle is applied with particular emphasis while interpreting the taxing statutes vide Income Tax Officer, Tuticorin v. T.S Devinath Nadar & Others, [1968] 68 ITR 252 (SC), and the fundamental principle of interpreting taxing statutes is the principle of strict construction. In this respect taxing statutes are to be interpreted differently from beneficial legislation (e.g, labour laws) vide Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, [1980] 57 FJR 67 : (1980) 4 SCC 443 : AIR 1981 SC 422, or the Constitution vide State Trading Corporation of India Ltd. v. CTO, [1963] 33 Comp Cas 1057 (SC), where the principle of liberal interpretation applies.
12. The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt J., in his classic statement in Cape Brandy Syndicate v. IRC, [1921] 1 KB 64 (page 71):
“… in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
13. Learned counsel for the petitioner has submitted that such a view, which we are taking, will cause hardship to the petitioner. It is a well-settled principle of interpretation of taxing statutes that there is no equity in tax, and hence considerations of hardship are irrelevant.
14. In CIT v. G. Hyatt, [1971] 80 ITR 177 : (1971) 1 SCC 466 : AIR 1971 SC 725, the question was whether under section 17(3) of the Income-tax Act, 1961, the interest on the assessee's own contribution to an unrecognised provident fund could be treated as salary. The Supreme Court of India held that the language of section 17(3) was plain and unambiguous, and hence the said amount was not salary but income from other sources and hence taxable under section 56.
15. In Polestar and Co. Ltd. v. Addl. Commr. of Sales Tax, (1978) 1 SCC 636 : AIR 1978 SC 897 : [1978] 41 STC 409 (SC), the question was whether sales outside Delhi would also be included in taxable income. The Supreme Court held that the section used the word “resale” simpliciter, and hence it referred to all resales and could not be limited to resales within Delhi alone. Thus, the Supreme Court went by the plain language of the statute, and did not speculate on the intention of the Legislature.
16. In Hemraj Gordhandas v. H.H Dave, Asst. Collector, [1978] 2 ELT 350 (SC), the Supreme Court of India considered the language of a notification under the Central Excise Tariff and held that all that was required for claiming an exemption was that the cotton fabric must be produced on power looms owned by the co-operative society. There was no further requirement in the language of the notification that the cotton fabric must be produced by the society for itself. The Supreme Court refused to go into the question of the intention behind the exemption since the language of the notification was clear.
17. In Assessing Authority-cum-Excise and Taxation Officer v. East India Cotton Manufacturing Co. Ltd., [1981] UPTC 1319 (SC) : [1981] 48 STC 239 (SC), the concessional rate under the Punjab Sales Tax Act was payable if certain raw materials were used in the manufacture of goods for sale. The contention of the assessee was that the word used in the Act was “for sale” and not “for sale by him” and hence the goods sold by a third party were also covered by the provision. This contention was accepted by the Supreme Court, which followed the literal rule of interpretation.
18. In Commissioner Of Wealth Tax, Gujarat-Iii, Ahmedabad v. Ellis Bridge Gymkhana, [1998] 229 ITR 1 (SC) : (1998) 1 SCC 384 : AIR 1998 SC 120, the Supreme Court held that the word “individual” in the charging section could not be stretched to include an association of persons. The court held that the charging section had to be construed strictly, and if a person could not be brought within the ambit of the charging section by clear words, he could not be taxed at all.
19. In A.V Fernandez v. State of Kerala, AIR 1957 SC 657, the Supreme Court of India stated the principle as follows (page 661):
“If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter.” It is said that tax and equity are strangers vide Partington v. Attorney-General, [1869] LR 4 HL 100. This view was best expressed by Lord Cairns as follows:
“If the person sought to be taxed, comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.”
20. Hence even if prior to the Finance Act, 2002, this court could have treated the petitioner as a local authority relying on the General Clauses Act, it cannot do so now after the above enactment, since now “local authority” has been defined in the Income-tax Act itself.
21. Sri B.D Mandhyan, learned counsel for the petitioner, then submitted that article 14 of the Constitution has been violated because some other statutory bodies are treated as local authorities under the Explanation to section 10(20).
22. In our opinion there is no merit in this submission also.
23. It may be mentioned that in tax matters the Government has a greater latitude to tax one category and not to tax other categories vide Anant Mills Co. Ltd. v. State of Gujarat, (1975) 2 SCC 175 : AIR 1975 SC 1234; R.K Garg v. Union of India, [1982] 133 ITR 239 (SC) : [1982] UPTC 355 (SC); Malwa Bus Service P. Ltd. v. State of Punjab, (1983) 3 SCC 237; ITO v. N. Takin Roy Rymbai, [1976] 103 ITR 82 (SC) : (1976) 1 SCC 916 : AIR 1976 SC 670; Amalgamated Tea Estates Co. Ltd. v. State Of Kerala, [1974] 94 ITR 479 (SC) : [1975] UPTC 89, etc. A taxing statute is not open to attack on the ground that it taxes some persons or objects and not others vide East India Tobacco Co. v. State of A.P, [1962] 13 STC 529 (SC) : AIR 1962 SC 1733. The State has a wide discretion in selecting the objects or persons that it will tax, and in order to tax something it is not bound to tax everything, vide Orient Weaving Mills P. Ltd. v. Union of India, AIR 1963 SC 98; State Of Madhya Pradesh v. Bhopal Sugar Industries Ltd. ., AIR 1964 SC 1179 : [1964] 52 ITR 443. It can pick and choose objects, areas, persons, rates of tax, etc. V. Venugopala Ravi Varma Rajah v. Union of India, [1969] 74 ITR 49 (SC) : (1969) 1 SCC 681 : AIR 1969 SC 1094; Gopal Narain v. State of U.P, AIR 1964 SC 370; Khyerbari Tea Co. Ltd. v. State of Assam, AIR 1964 SC 925; T.G Venkataraman v. State of Madras, [1970] 25 STC 196 (SC) : (1969) 2 SCC 299 : AIR 1970 SC 508, etc. The above decisions have been followed by the decision of this court in Lalooji and Sons v. State of U.P, [2003] UPTC 900.
24. For the reasons given above, we find no merit in these petitions and they are dismissed.