Law:

Section:

JUDGMENT A.D.V. Reddy, J.-The Andhra Pradesh Road Transport Corporation established by a notification under the Road Transport Corporations Act, 1950 (Central Act LXIV of 1950), has been functioning with effect from January 11, 1958, providing road transport facilities to the general public in the State with a net work of bus routes and a fleet of buses plying thereon, with depots, workshops, equipment, tools, accessories, etc., for its maintenance. For the assessment years 1960-61, 1961-62 and 1962-63, the income of the Corporation was subject to tax under the relevant provisions of the Income-tax Acts of 1922 and 1961. On appeal the Appellate Assistant Commissioner held that the assessee could claim the benefit of the provisions of section 4(3)(i) of the Indian Income-tax Act of 1922 for the assessment years 1960-61 and 1961-62 and under section 11 of the Income-tax Act of 1961 for the assessment year 1962-63 and their income will be exempt from the tax. On appeal, the Tribunal held that the dominant motive of the assessee was to trade by running the transport service on business lines just as any other owner of a road transport service would do and, therefore, they would not attract the provisions of section 4(3)(i) of the Indian Income-tax Act, 1922, and section 11 of the Income-tax Act, 1961. Hence this reference. The question referred to us for our decision is as follows: "Whether, on the facts and in the circumstances of the case, the assessee's income for the assessment years 1960-61 and 1961-62 was exempt from income-tax under section 4(3)(i) of the Indian Income-tax Act of 1922, and for the assessment year 1962-63, under section 11 of the Income-tax Act, 1961?" Though the assessee is the same, the question whether the assessee's income is exempt from tax for the assessment years 1960-61, 1961-62 and for assessment year 1962-63 have to be considered separately, as there has been a change in the law applicable to the assessments. The assessment for the first of the two years 1960-61 and 1961-62 is governed by the provisions of section 4(3)(i) of the Indian Income-tax Act, 1922, which reads as follows: "4. (3) Any income, profits or gains falling within…

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