1990 INSC 0582
                                            Union of India and Another

                                                           Vs

                                      U.P. State Ware Housing Corporation

                                          Civil Appeal No. 455 of 1976

                                        (M.M. Punchhi, S.C. Agarwal JJ)

                                                      31.10.1990

                                                        ORDER

1. This appeal by certificate is directed against the judgment and order dated 30-11-1973 of
Allahabad High Court at Allahabad in Civil Miscellaneous Writ Petition No. 6122 of 1973 whereby
U. P. State Ware Housing Corporation, the respondent herein, was granted exemption as envisaged
under S. 10(29) of the Income-tax Act, 1961.

2. The U. P. State Ware Housing Corporation is a creature of the Ware Housing Corporations Act,
1962. The Income-tax Officer, Lucknow, required the appellant to pay a sum of money as advanced
tax for the Assessment year 1974-75. The view of the Income-tax Officer throughout in the previous
years was that rental income derived by the assessee from its godowns and warehouses was not
exempt from Income-tax. The claim of the assessee having repeatedly been rejected it thought it
proper and did file a writ petition in the High Court of Allahabad challenging the notice. The High
Court quashed the notice. The view of the High Court has been assailed here by the Revenue.

3. The claim of the assessee is based on' S. 10(29) of the Income-tax Act, 1961. It provides:

                  "S. 10. For computing the total income of previous year of any person, any income
                  falling within any of the following clauses shall not be included.

                  (29). In the case of an authority constituted under any law for the time being in force
                  for the marketing of commodities, any income derived from the letting of godowns
                  or warehouses for storage, processing or facilitating the marketing of commodities."

4. As is apparent, the assessee would be entitled to exemption if.

                  i) it is an authority constituted under any law

                  ii) it is an authority constituted for marketing of commodities

                  iii) the exemptible income is in respect of letting of godowns or warehouses for
                  storage, processing or facilitating the marketing of commodities.

5. The High Court had no difficulty in coming to the conclusion that the assessee had been
established under law i.e., the Ware Housing Corporation Act, 1962. The question whether the
assessee was an "authority" within the' meaning of S. 10(29) of the Income-tax Act, 1961 led to a
long discussion, as is plain from the judgment. The High Court agreed with the assessee that it was
such an authority. Keeping apart, the reasoning given by the High Court, plain reading of sub-s. (29)
of S. 10 makes it evident that the authority must be constituted under any law for the time being in
force, which in other words means that it should be a creature of law. As an artificial person, it
should be clothed with a personality ordained by law. The power of the authority whether it is wide
or narrow, as discussed by the High Court, with due respect, appears to us alien for the concept with
which we are concerned in sub-s. (29) of S. 10. So the ancillary test, we say so unhesitatingly, was
also satisfied that the assessee was an authority constituted under the law.

6. The second test requiring the authority to be constituted for marketing of commodities is also
fully satisfied by S. 24(d) of the Ware Housing Corporations Act, 1962 which enjoins upon a State
Ware Housing Corporation to act as agent of the Central Ware housing Corporation of the
Government for the purpose of purchase, sale, storage and distribution of agricultural produce,
seeds, manures, fertilisers, agricultural employments and individual commodities. These activities
of the State Ware Housing Corporation as an agent, undoubtedly, would be activities facilitating the
marketing of commodities. This reasoning of ours is an addition to the reasoning assigned by the
High Court in coming to the conclusion that the activities of the assessee have a business element.
We agree with the High Court on that score also.

7. The third test with regard to the exemptable income being in respect of letting of godowns or
warehouses for storage, processing or facilitating the marketing of commodities presents no
difficulty because it stands undisputed that the income derived by the assessee was from letting of
godowns or warehouses.

8. The assessee having fulfilled all the tests was rightly entitled to the exemption as claimed. We are
fully in agreement with the High Court that the assessee was entitled to relief on these premises.
Accordingly, we dismiss this appeal. We should have awarded costs also but since there is no
opposition, there shall be no order as to costs.

Appeal dismissed.

</html