Law:

Section:

HEADNOTE: The Income-tax Officer (respondent No.(1) served a notice under s. 22 of the Income-tax Act on the appellant. Upon the receipt of the notice, the appellant appeared before the Income-tax Officer. The appellant pleaded before the Income-tax Officer that it did not fall under any of the five categories of assessees under s. 3 of the Income-tax Act. The appellant also raised the contention that it was a local authority exempt from income-tax. All these contentions were rejected by respondent No. 1 with the result that the impugned orders of assessment came to be passed. The appellant filed Writ Petitions before the High Court in which it challenged the impugned orders of assessment passed by respondent No. 1. In its Writ Petitions, the appellant claimed an ,order, writ or other appropriate direction quashing the assessment orders passed by respondent No. 1. The High Court dismissed these writ petitions. The High Court held that the appellant could not claim the exemption under Art. 289(1) because it was not a state-owned Corporation. The High Court granted a certificate under Art. 133 of the Constitution and hence the appeal. Held: (i) Art. 289 of the Constitution consists of three clauses. The first clause confers exemption from union taxation on the property and income of a State. Clause (2) then provides that the income from trade or business carried on by the Government of a State or on its behalf which would not have been taxable under cl. (1), can be taxed, provided a law is made by Parliament in that behalf. In other words cl. (2) is an exception to cl. (1). Clause (3) then empowers Parliament to declare by law that any trade or business would be taken out of the purview of cl. (2) and restored to the area covered by cl. (1) by declaring that the said trade or business is incidental to the ordinary functions of Government. In other words, cl. (3) is an exception to the exception prescribed by cl. (2). (ii) A trading activity carried on by the corporation (appellant) is not a trading activity carried on by the State departmentally, nor is it a trading activity carried on by a State through its agents appointed in that behalf because according to…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492