Electronics Corporation of India Ltd. and Others Vs. Secretary, Revenue Department,Govt. of Andhra Prades
EmailAppeal: Civil Appeals No. 142 of 1983
(From the Judgment and Order dated 30-7-1982 of the A.P. High Court in W.P. No. 1610 of 1979)
With
Nos. 3937 to 3941 of 1990 and 3393 of 1991
(From the Judgment and Order dated 30-7-1982 of the A.P. High Court in W.P. No. 1610 of 1979)
With
Nos. 3937 to 3941 of 1990 and 3393 of 1991
Petitioner: Electronics Corporation of India Ltd. and Others
Respondent: Secretary, Revenue Department,Govt. of Andhra Pradesh and Others
Apeal: Civil Appeals No. 142 of 1983
(From the Judgment and Order dated 30-7-1982 of the A.P. High Court in W.P. No. 1610 of 1979)
With
Nos. 3937 to 3941 of 1990 and 3393 of 1991
(From the Judgment and Order dated 30-7-1982 of the A.P. High Court in W.P. No. 1610 of 1979)
With
Nos. 3937 to 3941 of 1990 and 3393 of 1991
Judges: S.P. BHARUCHA, B.N. KIRPAL, S.RAJENDRA BABU, SYED SHAH MOHAMMED QUADRI & M.B. SHAH, JJ.
Date of Judgment: May 05, 1999
Appearances:
Mr. Yashank, Mr. P. Adhyaru, Mr. U.A. Rana and Mr. Arun, Advo-cates, for Mr. Gagrat & Co., Advocates, for the Appellant in CA No. 142 of 1983.
Mr. S.K. Dholakia, Senior Advocate (Mr. Rajiv Kapur, Mr. Sanjay Kapur, Mr. Y.P. Rao, Mr. P.N. Puri, Mr. Ashok Kr. Gupta, Ms. C.K. Sucharita and Mr. K. Ram Kumar, Advocates, with him) for the Appellants in CAs Nos. 3937 and 3938 of 1990.
Mr. P.A. Choudhary, Senior Advocate (Mr. G. Prabhakar and Ms. T. Anamika, Advocates, with him) for the Respondents.
Head Note:
LAND TAX
Andhra Pradesh Non-Agricultural Lands Assessment Act, 1963
Sec-tions 2(j), 3 and 12 with Constitution of India, Articles 285 and 289 – Levy of tax on non-agricultural lands – Scope of Section 12 of AP Act of 1963 – Owner of land – Meaning – Act providing that it shall not apply to land owned by State or Central Government other than the land leased out for commercial, industrial or other non-agricultural purposes – State Govt. granting lease of large area to Central Govt. Department – Latter leasing out part of the land to a Government company – State Govt. levying tax under the Act in respect of such land held by Govt. company – Whether such levy proper and valid. Held company being a distinct and legal entity and the Government being only the owner of the share capital, the levy of non agricultural land tax on the land held by the Govt. Company leased out by Central Govt. Department is proper and valid.
Andhra Pradesh Non-Agricultural Lands Assessment Act, 1963
Sec-tions 2(j), 3 and 12 with Constitution of India, Articles 285 and 289 – Levy of tax on non-agricultural lands – Scope of Section 12 of AP Act of 1963 – Owner of land – Meaning – Act providing that it shall not apply to land owned by State or Central Government other than the land leased out for commercial, industrial or other non-agricultural purposes – State Govt. granting lease of large area to Central Govt. Department – Latter leasing out part of the land to a Government company – State Govt. levying tax under the Act in respect of such land held by Govt. company – Whether such levy proper and valid. Held company being a distinct and legal entity and the Government being only the owner of the share capital, the levy of non agricultural land tax on the land held by the Govt. Company leased out by Central Govt. Department is proper and valid.
Held:
A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares. In Western Coalfields Ltd. v. Special Area Development Au-thority (1982) 1 SCC 125 this Court reviewed earlier judgments on the point. It held that even though the entire share capital of the appellant before it had been subscribed by the Government of India, it could not be predicated that the appellant itself was owned by the Government of India. Companies, it was said, which are incorporated under the Companies Act, have a corporate per-sonality of their own, distinct from that of the Government of India. The lands and the buildings in question in that matter were vested in and owned by the appellant. The Government of India only owned the share capital. In Rustom Cavasjee Cooper v. Union of India (1970) 1 SCC 248 it was held: (SCC p. 273, para 11) “11. A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the sharehold-ers. A shareholder has merely an interest in the Company aris-ing under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the distributed profit.” In Heavy Engineering Mazdoor Union v. State of Bihar (1969) 1 SCC 765 this Court held that an incorporated company has a sepa-rate existence and the law recognises it as a juristic person, separate and distinct from its members. We are, in the premises, left in no doubt that the State Government was entitled to levy non-agricultural assessment upon the said land and recover it from the appellant Company.(Para 15, 16, 17, 18, 19)
Cases Reffered:
:
1. Air India Statutory Corpn. v. United Labour Union JT 1996 (11) SC 109
2. New Delhi Municipal Council v. State of Punjab JT 1997 (1) SC 40
3. Electronics Corpn. of India Ltd. v. Secy., Revenue Deptt., Govt. of A.P. AIR 1983 AP 239)
4. Western Coalfields Ltd. v. Special Area Development Authority (1982) 1 SCC 125
5. Rustom Cavasjee Cooper v. Union of India (1970) 1 SCC 248
6. Heavy Engineering Mazdoor Union v. State of Bihar (1969) 1 SCC 765
JUDGEMENT:
BHARUCHA, J.
1. Under challenge is the principal judgment and order dated 30-7-1982 of the High Court of Andhra Pradesh in the case of Electronics Corpn. of India Ltd. (Civil Appeal No. 142 of 1983) and the orders following the principal judgment and order in the cases of Parel Investment and Trading Co. Ltd. (Civil Appeals Nos. 3937-38 of 1990) and Hindustan Shipyard Ltd. (Civil Appeals Nos. 3939-41 of 1990 and 3393 of 1991).
2. It is enough to set out the facts pertaining to Civil Appeal No. 142 of 1983 filed by Electronics Corporation of India Ltd. (“the appellant Company”) inasmuch as the same issue of law is involved in all the appeals and all the appellants are companies registered under the Companies Act, 1956.
3. The Andhra Pradesh Non-Agricultural Lands Assessment Act, 1963 (“the Act”) defined “owner” to include
“any person for the time being receiving or entitled to re-ceive, whether on his own account or as agent, or trustee, guardian, manager, receiver for another person or for any religious, educational or charitable purpose, rent or profits for the non-agricultural land or, for the structure constructed on such land, in respect of which the word is used”.
Consequent upon amending Act 28 of 1974, with effect from 1-7-1974, the definition of “owner” was amended and the following, so far as is relevant here, was added:
“and also includes in respect of the land owned by the State Government or the Central Government (i) a lessee, if the land has been leased out by that Government for any commercial, industrial or other non-agricultural purpose….”
Section 3 is the charging section of the Act and provides for the levy of assessment on non-agricultural land, to be paid by “the owner of such land”. Section 12 of the Act sets out the catego-ries of land to which the Act does not apply. Prior to amending Act 28 of 1984, the Act did not apply to land owned by the State Government or the Central Government. Thereafter, it did not apply to land owned by the State Government or the Central Gov-ernment
“other than (i) the land leased out for any commercial, indus-trial or other non-agricultural purpose…”
4. In 1963 the State of Andhra Pradesh had granted a large area of land to the Department of Atomic Energy of the Central Govern-ment. In 1964 the Department of Atomic Energy gave 220.25 acres (“the said land”) thereout to the appellant Company. On 1-10-1978, the first respondent issued to the appellant Company notic-es of demand for non-agricultural assessment on the said land under the Act. For the period 1970-71 to 1973-74 the sum demanded was Rs. 1,91,189.68. For the period 1974-75 to 1978-79 the sum demanded was Rs. 11,98,826.32.
5. The appellant Company filed a writ petition in the High Court of Andhra Pradesh impugning the said notices of demand. The contention of the appellant Company in the writ petition, as set out in the judgment and order under appeal, was that it was the lessee of the said land which belonged to the Union of India and since the property of the Union of India could not, by virtue of Article 285 of the Constitution, be taxed by a State Legislature, the Act did not apply to the said land and, accordingly, no demand thereunder could be made
“upon the petitioner, which is a lessee of the Union of India. It is stated that an area of approximately 1000 acres was granted by the State Government to the Department of Atomic Energy, Government of India, and that the Department of Atomic Energy, in turn, leased out an extent of 280.25 acres to the petitioner-Corporation for establishing its plant and machinery. It is further contended that out of the extent granted to the petitioner an extent of 29 acres is covered by building, an extent of 12 acres by roads and the rest of the area is meant for future expansion. It is also submitted that an extent of 14.25 acres is being used for agricultural purpos-es”.
6. The response on behalf of the State Government to the writ petition was contained in an affidavit by N. Janakiramulu. The tenor of the affidavit was that the Act had been amended by Act 28 of 1974 and that, thereby, the appellant Company had become liable to pay non-agricultural assessment upon the said land.
7. The High Court, by the principal judgment and order (which is reported as Electronics Corpn. of India Ltd. v. Secy., Revenue Deptt., Govt. of A.P. AIR 1983 AP 239) held that Article 285 was not attracted and that the State Government was entitled to levy and collect the non-agricultural assessment from the appellant Company so long as it continued to be a lessee of the Central Government in respect of the said land. It clarified that the assessment could be levied only upon land which was actually used for any of the specified purposes, namely, commercial, industrial or any other non-agricultural purpose, including residential purpose. What extent of the said land was so used and what was the appropriate rate applicable was a matter for the assessing authority to decide. The appellant Company was permitted to file an appeal to the appellate authority under the Act against the impugned demands, wherein it would be open to the appellant Company to establish the actual extent of land used for the aforesaid purposes. The applicable rate could also be ascertained in such an appeal.
8. It is against the principal judgment and order that all the appeals are really directed.
9. The first submission of Mr. Adhyaru, counsel for the appellant Company was that, in fact, the appellant Company was not a lessee of the Union of India in respect of the said land and that there was no lease in its favour. The submission is quite the reverse of the case of the appellant Company in its writ petition. It is, therefore, an impermissible submission and we indicated to learned counsel when he made it that we declined to entertain it.
10. Article 285(1) of the Constitution of India, upon which reliance has been placed by the learned counsel for the appellant Company, reads thus:
“285. (1) The property of the Union shall, save insofar as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.”
In learned counsel’s submission, the property of the appellant Company was the property of the Union of India inasmuch as the appellant Company was a government company, its shares being wholly owned by the Union of India. The said land was, therefore, the property of the Union of India and the legislature of the State of Andhra Pradesh was barred by the provisions of Article 285 from imposing any tax, including non-agricultural assessment, on the property of the Union of India. Learned counsel supported the submission by reference to Article 265, which provides that “no tax shall be levied or collected except by authority of law”, and to Article 366(28), which says that “taxation includes the imposition of any tax or impost, whether general or local or special, and tax shall be construed accordingly”.
11. Learned counsel then referred to Article 289 which deals with the exemption of property and income of a State from Union taxa-tion and reads thus:
“289. (1) The property and income of a State shall be exempt from Union taxation.
(2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith.
(3) Nothing in clause (2) shall apply to any trade or busi-ness, or to any class of trade or business, which Parliament may be law declare to be incidental to the ordinary functions of Government.”
Our attention was drawn by learned counsel to the judgment of this Court on Article 289, namely, New Delhi Municipal Council v. State of Punjab JT 1997 (1) SC 40. In construing Article 289, reference was made to Article 285 and it was said in the majority judgment that “Article 285 imposed a ban, which was absolute and emphatic and there was no way in which a State Legislature could levy a tax upon the property of the Union of India”. Article 289 was different by reason of clauses (2) and (3) thereof.
12. In the next case cited by learned counsel, namely, Air India Statutory Corpn. v. United Labour Union JT 1996 (11) SC 109 this Court was dealing with which was the “appropriate Government” in relation to an establishment pertaining to an industry “carried on by or under authority of the Central Government” and it was held that the statutory corporation, Air India, was such an industry and the “appropriate Government” for the purposes of the Contract Labour (Regulation and Abolition) Act, 1970 was the Central Government. Reliance was placed by learned counsel upon the propositions enunciated in para 26 of the majority judgment thus: (SCC p. 409)
“26. (1) The constitution of the corporation or instrumen-tality or agency or corporation aggregate or corporation sole is not of sole material relevance to decide whether it is by or under the control of the appropriate Government under the Act.
(2) If it is a statutory corporation, it is an instrumental-ity or agency of the State. If it is a company owned wholly or partially by a share capital, floated from public exchequer, it gives indicia that it is controlled by or under the authority of the appropriate Government.”
In our view, neither has Article 285 any application to these appeals nor are we concerned with whether or not the appellants are controlled by or under the authority of the Central Govern-ment.
13. With effect from 1-7-1974, Section 12 of the Act was amended so that it now applied to land which was owned by the Central or a State Government and was leased out for any commercial, indus-trial or other non-agricultural purpose. With effect from that date, by reason of the amendment of Section 2(j), an “owner” included a lessee of land owned by the Central or a State Govern-ment if the land was leased out by such a Government for a com-mercial, industrial or other non-agricultural purpose. By virtue of Section 3, the obligation to pay non-agricultural assessment on the leased land lay upon the owner-lessee.
14. It is the case of the appellant Company in its writ petition that it is the lessee of the Department of Atomic Energy of the Union of India in respect of the said land. The said land, there-fore, is of the ownership of the Central Government and, being leased out to the appellant Company for an industrial and commer-cial purpose, is land to which the Act applies. By virtue of the amended definition of “owner” under Section 2(j) of the Act, the appellant Company is the owner of the said land and by virtue of Section 3, is liable to pay non-agricultural assessment thereon.
15. A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares.
16. In Western Coalfields Ltd. v. Special Area Development Au-thority (1982) 1 SCC 125 this Court reviewed earlier judgments on the point. It held that even though the entire share capital of the appellant before it had been subscribed by the Government of India, it could not be predicated that the appellant itself was owned by the Government of India. Companies, it was said, which are incorporated under the Companies Act, have a corporate per-sonality of their own, distinct from that of the Government of India. The lands and the buildings in question in that matter were vested in and owned by the appellant. The Government of India only owned the share capital.
17. In Rustom Cavasjee Cooper v. Union of India (1970) 1 SCC 248 it was held: (SCC p. 273, para 11)
“11. A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the sharehold-ers. A shareholder has merely an interest in the Company aris-ing under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the distributed profit.”
18. In Heavy Engineering Mazdoor Union v. State of Bihar (1969) 1 SCC 765 this Court held that an incorporated company has a sepa-rate existence and the law recognises it as a juristic person, separate and distinct from its members.
19. We are, in the premises, left in no doubt that the State Government was entitled to levy non-agricultural assessment upon the said land and recover it from the appellant Company.
20. Learned counsel then submitted that in any event, the recov-ery of non-agricultural assessment in respect of the said land could not have been effected from the appellant Company by reason of the application of the principle of promissory estoppel. In this behalf he referred to a letter dated 7-2-1967 addressed by the Under-Secretary to the Government of India to the Secretary of the Government of Andhra Pradesh, Industries Department, in regard to the “transfer of land to the Department of Atomic Energy for the location of the electronics plant and other plants.” The letter stated that it had been agreed by the State Government that this land would be exempt from the levy of tax under the Act “irrespective of whether the plants are managed departmentally or through a public sector undertaking”. The letter requested that “notifications exempting the lands already handed over to the Department of Atomic Energy or to be handed over in future from levy of tax under Andhra Pradesh Act 14 of 1963, while vesting in the Department of Atomic Energy or in public sector projects would also require to be issued”. the issuance of the same was, therefore, requested. In reply, the Deputy Secretary of the Government of Andhra Pradesh, Industries Department, stated on 17-10-1967 that “no separate notification is required exempting the land given to the Atomic Energy Depart-ment for establishment of Atomic Energy Complex at Hyderabad from payment of non-agricultural assessment under the A.P. Non-Agricultural Assessment Act so long as the units are run by the Government of India in public sector”. It was contended by learned counsel that the appellant Company had acted upon this promise. Accordingly, the State Government was bound by its promise and was estopped from going back upon it.
21. There are two short answers to this contention. In the first place, there can be no estoppel against a statute. In the second place, the letter dated 17-10-1967 needs to be carefully read. It says that no notification was required for exempting the land from payment of non-agricultural assessment “so long as the units are run by the Government of India in public sector”. The appell-ant Company is a separate and distinct legal entity that runs its own industry. The letter dated 17-10-1967 cannot be read as promising exemption to companies, though their shares be held wholly by the Union of India.
22. Mr. Dholakia, learned counsel for M/s. Parel Investment and Trading Co. Limited (appellant in Civil Appeals Nos. 3937-38 of 1990), adopted the submissions aforementioned. He submitted that Article 285 was intended to protect public revenues; the shares of the appellant Companies being fully owned by the Central Government, their funds were public revenues. It was, therefore, necessary to read down the provisions of Section 2(j) and Section 12 of the Act to exclude therefrom all but private owners and lessees of land. The question of reading down comes in if it is found that these provisions are ultra vires as they stand. We have held that these provisions are ultra vires as they stand. We have held that these provisions are not ultra vires because Article 285 does not apply when the property that is to be taxed is not of the Union of India but of a distinct and separate legal entity. Each of the appellants being companies registered under the Companies Act, they are entities other than the Union of India. The question of reading down does not, therefore, arise.
23. The discussion so far relates to demands for non-agricultural assessment subsequent to 12-7-1974, when the amendments made by Act 28 of 1974 in the Act came into effect. The defence to the writ petition filed by the appellant Company was, as we have already stated, exclusively based upon the amendments made by Act 28 of 1974 in the Act. These amendments have no retrospective effect. No demand for non-agricultural assessment could, there-fore, have been made upon the appellant Companies for any period prior to 12-7-1974. To this extent, the demands are quashed.
24. In regard to demands for non-agricultural assessment subse-quent to 12-7-1974, which are upheld, the appellant Companies shall be at liberty to file appeals within 8 weeks from the date of this order, wherein it will be open to them to establish the actual extent of the land that was used at the relevant time for commercial, industrial or other non-agricultural purposes. Only upon such land can non-agricultural assessment be levied. What the applicable rate should be can also be canvassed and decided in such appeals.
25. To the extent aforestated, the appeals succeed and are al-lowed. Orders on the appeals accordingly. No order as to costs.
1. Under challenge is the principal judgment and order dated 30-7-1982 of the High Court of Andhra Pradesh in the case of Electronics Corpn. of India Ltd. (Civil Appeal No. 142 of 1983) and the orders following the principal judgment and order in the cases of Parel Investment and Trading Co. Ltd. (Civil Appeals Nos. 3937-38 of 1990) and Hindustan Shipyard Ltd. (Civil Appeals Nos. 3939-41 of 1990 and 3393 of 1991).
2. It is enough to set out the facts pertaining to Civil Appeal No. 142 of 1983 filed by Electronics Corporation of India Ltd. (“the appellant Company”) inasmuch as the same issue of law is involved in all the appeals and all the appellants are companies registered under the Companies Act, 1956.
3. The Andhra Pradesh Non-Agricultural Lands Assessment Act, 1963 (“the Act”) defined “owner” to include
“any person for the time being receiving or entitled to re-ceive, whether on his own account or as agent, or trustee, guardian, manager, receiver for another person or for any religious, educational or charitable purpose, rent or profits for the non-agricultural land or, for the structure constructed on such land, in respect of which the word is used”.
Consequent upon amending Act 28 of 1974, with effect from 1-7-1974, the definition of “owner” was amended and the following, so far as is relevant here, was added:
“and also includes in respect of the land owned by the State Government or the Central Government (i) a lessee, if the land has been leased out by that Government for any commercial, industrial or other non-agricultural purpose….”
Section 3 is the charging section of the Act and provides for the levy of assessment on non-agricultural land, to be paid by “the owner of such land”. Section 12 of the Act sets out the catego-ries of land to which the Act does not apply. Prior to amending Act 28 of 1984, the Act did not apply to land owned by the State Government or the Central Government. Thereafter, it did not apply to land owned by the State Government or the Central Gov-ernment
“other than (i) the land leased out for any commercial, indus-trial or other non-agricultural purpose…”
4. In 1963 the State of Andhra Pradesh had granted a large area of land to the Department of Atomic Energy of the Central Govern-ment. In 1964 the Department of Atomic Energy gave 220.25 acres (“the said land”) thereout to the appellant Company. On 1-10-1978, the first respondent issued to the appellant Company notic-es of demand for non-agricultural assessment on the said land under the Act. For the period 1970-71 to 1973-74 the sum demanded was Rs. 1,91,189.68. For the period 1974-75 to 1978-79 the sum demanded was Rs. 11,98,826.32.
5. The appellant Company filed a writ petition in the High Court of Andhra Pradesh impugning the said notices of demand. The contention of the appellant Company in the writ petition, as set out in the judgment and order under appeal, was that it was the lessee of the said land which belonged to the Union of India and since the property of the Union of India could not, by virtue of Article 285 of the Constitution, be taxed by a State Legislature, the Act did not apply to the said land and, accordingly, no demand thereunder could be made
“upon the petitioner, which is a lessee of the Union of India. It is stated that an area of approximately 1000 acres was granted by the State Government to the Department of Atomic Energy, Government of India, and that the Department of Atomic Energy, in turn, leased out an extent of 280.25 acres to the petitioner-Corporation for establishing its plant and machinery. It is further contended that out of the extent granted to the petitioner an extent of 29 acres is covered by building, an extent of 12 acres by roads and the rest of the area is meant for future expansion. It is also submitted that an extent of 14.25 acres is being used for agricultural purpos-es”.
6. The response on behalf of the State Government to the writ petition was contained in an affidavit by N. Janakiramulu. The tenor of the affidavit was that the Act had been amended by Act 28 of 1974 and that, thereby, the appellant Company had become liable to pay non-agricultural assessment upon the said land.
7. The High Court, by the principal judgment and order (which is reported as Electronics Corpn. of India Ltd. v. Secy., Revenue Deptt., Govt. of A.P. AIR 1983 AP 239) held that Article 285 was not attracted and that the State Government was entitled to levy and collect the non-agricultural assessment from the appellant Company so long as it continued to be a lessee of the Central Government in respect of the said land. It clarified that the assessment could be levied only upon land which was actually used for any of the specified purposes, namely, commercial, industrial or any other non-agricultural purpose, including residential purpose. What extent of the said land was so used and what was the appropriate rate applicable was a matter for the assessing authority to decide. The appellant Company was permitted to file an appeal to the appellate authority under the Act against the impugned demands, wherein it would be open to the appellant Company to establish the actual extent of land used for the aforesaid purposes. The applicable rate could also be ascertained in such an appeal.
8. It is against the principal judgment and order that all the appeals are really directed.
9. The first submission of Mr. Adhyaru, counsel for the appellant Company was that, in fact, the appellant Company was not a lessee of the Union of India in respect of the said land and that there was no lease in its favour. The submission is quite the reverse of the case of the appellant Company in its writ petition. It is, therefore, an impermissible submission and we indicated to learned counsel when he made it that we declined to entertain it.
10. Article 285(1) of the Constitution of India, upon which reliance has been placed by the learned counsel for the appellant Company, reads thus:
“285. (1) The property of the Union shall, save insofar as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.”
In learned counsel’s submission, the property of the appellant Company was the property of the Union of India inasmuch as the appellant Company was a government company, its shares being wholly owned by the Union of India. The said land was, therefore, the property of the Union of India and the legislature of the State of Andhra Pradesh was barred by the provisions of Article 285 from imposing any tax, including non-agricultural assessment, on the property of the Union of India. Learned counsel supported the submission by reference to Article 265, which provides that “no tax shall be levied or collected except by authority of law”, and to Article 366(28), which says that “taxation includes the imposition of any tax or impost, whether general or local or special, and tax shall be construed accordingly”.
11. Learned counsel then referred to Article 289 which deals with the exemption of property and income of a State from Union taxa-tion and reads thus:
“289. (1) The property and income of a State shall be exempt from Union taxation.
(2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith.
(3) Nothing in clause (2) shall apply to any trade or busi-ness, or to any class of trade or business, which Parliament may be law declare to be incidental to the ordinary functions of Government.”
Our attention was drawn by learned counsel to the judgment of this Court on Article 289, namely, New Delhi Municipal Council v. State of Punjab JT 1997 (1) SC 40. In construing Article 289, reference was made to Article 285 and it was said in the majority judgment that “Article 285 imposed a ban, which was absolute and emphatic and there was no way in which a State Legislature could levy a tax upon the property of the Union of India”. Article 289 was different by reason of clauses (2) and (3) thereof.
12. In the next case cited by learned counsel, namely, Air India Statutory Corpn. v. United Labour Union JT 1996 (11) SC 109 this Court was dealing with which was the “appropriate Government” in relation to an establishment pertaining to an industry “carried on by or under authority of the Central Government” and it was held that the statutory corporation, Air India, was such an industry and the “appropriate Government” for the purposes of the Contract Labour (Regulation and Abolition) Act, 1970 was the Central Government. Reliance was placed by learned counsel upon the propositions enunciated in para 26 of the majority judgment thus: (SCC p. 409)
“26. (1) The constitution of the corporation or instrumen-tality or agency or corporation aggregate or corporation sole is not of sole material relevance to decide whether it is by or under the control of the appropriate Government under the Act.
(2) If it is a statutory corporation, it is an instrumental-ity or agency of the State. If it is a company owned wholly or partially by a share capital, floated from public exchequer, it gives indicia that it is controlled by or under the authority of the appropriate Government.”
In our view, neither has Article 285 any application to these appeals nor are we concerned with whether or not the appellants are controlled by or under the authority of the Central Govern-ment.
13. With effect from 1-7-1974, Section 12 of the Act was amended so that it now applied to land which was owned by the Central or a State Government and was leased out for any commercial, indus-trial or other non-agricultural purpose. With effect from that date, by reason of the amendment of Section 2(j), an “owner” included a lessee of land owned by the Central or a State Govern-ment if the land was leased out by such a Government for a com-mercial, industrial or other non-agricultural purpose. By virtue of Section 3, the obligation to pay non-agricultural assessment on the leased land lay upon the owner-lessee.
14. It is the case of the appellant Company in its writ petition that it is the lessee of the Department of Atomic Energy of the Union of India in respect of the said land. The said land, there-fore, is of the ownership of the Central Government and, being leased out to the appellant Company for an industrial and commer-cial purpose, is land to which the Act applies. By virtue of the amended definition of “owner” under Section 2(j) of the Act, the appellant Company is the owner of the said land and by virtue of Section 3, is liable to pay non-agricultural assessment thereon.
15. A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares.
16. In Western Coalfields Ltd. v. Special Area Development Au-thority (1982) 1 SCC 125 this Court reviewed earlier judgments on the point. It held that even though the entire share capital of the appellant before it had been subscribed by the Government of India, it could not be predicated that the appellant itself was owned by the Government of India. Companies, it was said, which are incorporated under the Companies Act, have a corporate per-sonality of their own, distinct from that of the Government of India. The lands and the buildings in question in that matter were vested in and owned by the appellant. The Government of India only owned the share capital.
17. In Rustom Cavasjee Cooper v. Union of India (1970) 1 SCC 248 it was held: (SCC p. 273, para 11)
“11. A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the sharehold-ers. A shareholder has merely an interest in the Company aris-ing under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the distributed profit.”
18. In Heavy Engineering Mazdoor Union v. State of Bihar (1969) 1 SCC 765 this Court held that an incorporated company has a sepa-rate existence and the law recognises it as a juristic person, separate and distinct from its members.
19. We are, in the premises, left in no doubt that the State Government was entitled to levy non-agricultural assessment upon the said land and recover it from the appellant Company.
20. Learned counsel then submitted that in any event, the recov-ery of non-agricultural assessment in respect of the said land could not have been effected from the appellant Company by reason of the application of the principle of promissory estoppel. In this behalf he referred to a letter dated 7-2-1967 addressed by the Under-Secretary to the Government of India to the Secretary of the Government of Andhra Pradesh, Industries Department, in regard to the “transfer of land to the Department of Atomic Energy for the location of the electronics plant and other plants.” The letter stated that it had been agreed by the State Government that this land would be exempt from the levy of tax under the Act “irrespective of whether the plants are managed departmentally or through a public sector undertaking”. The letter requested that “notifications exempting the lands already handed over to the Department of Atomic Energy or to be handed over in future from levy of tax under Andhra Pradesh Act 14 of 1963, while vesting in the Department of Atomic Energy or in public sector projects would also require to be issued”. the issuance of the same was, therefore, requested. In reply, the Deputy Secretary of the Government of Andhra Pradesh, Industries Department, stated on 17-10-1967 that “no separate notification is required exempting the land given to the Atomic Energy Depart-ment for establishment of Atomic Energy Complex at Hyderabad from payment of non-agricultural assessment under the A.P. Non-Agricultural Assessment Act so long as the units are run by the Government of India in public sector”. It was contended by learned counsel that the appellant Company had acted upon this promise. Accordingly, the State Government was bound by its promise and was estopped from going back upon it.
21. There are two short answers to this contention. In the first place, there can be no estoppel against a statute. In the second place, the letter dated 17-10-1967 needs to be carefully read. It says that no notification was required for exempting the land from payment of non-agricultural assessment “so long as the units are run by the Government of India in public sector”. The appell-ant Company is a separate and distinct legal entity that runs its own industry. The letter dated 17-10-1967 cannot be read as promising exemption to companies, though their shares be held wholly by the Union of India.
22. Mr. Dholakia, learned counsel for M/s. Parel Investment and Trading Co. Limited (appellant in Civil Appeals Nos. 3937-38 of 1990), adopted the submissions aforementioned. He submitted that Article 285 was intended to protect public revenues; the shares of the appellant Companies being fully owned by the Central Government, their funds were public revenues. It was, therefore, necessary to read down the provisions of Section 2(j) and Section 12 of the Act to exclude therefrom all but private owners and lessees of land. The question of reading down comes in if it is found that these provisions are ultra vires as they stand. We have held that these provisions are ultra vires as they stand. We have held that these provisions are not ultra vires because Article 285 does not apply when the property that is to be taxed is not of the Union of India but of a distinct and separate legal entity. Each of the appellants being companies registered under the Companies Act, they are entities other than the Union of India. The question of reading down does not, therefore, arise.
23. The discussion so far relates to demands for non-agricultural assessment subsequent to 12-7-1974, when the amendments made by Act 28 of 1974 in the Act came into effect. The defence to the writ petition filed by the appellant Company was, as we have already stated, exclusively based upon the amendments made by Act 28 of 1974 in the Act. These amendments have no retrospective effect. No demand for non-agricultural assessment could, there-fore, have been made upon the appellant Companies for any period prior to 12-7-1974. To this extent, the demands are quashed.
24. In regard to demands for non-agricultural assessment subse-quent to 12-7-1974, which are upheld, the appellant Companies shall be at liberty to file appeals within 8 weeks from the date of this order, wherein it will be open to them to establish the actual extent of the land that was used at the relevant time for commercial, industrial or other non-agricultural purposes. Only upon such land can non-agricultural assessment be levied. What the applicable rate should be can also be canvassed and decided in such appeals.
25. To the extent aforestated, the appeals succeed and are al-lowed. Orders on the appeals accordingly. No order as to costs.
