IN THE SUPREME COURT
A five-judge constitution bench of the Supreme Court has unanimously held that a state government can levy non-agricultural tax on government companies which utilise central government land as a lessee for industrial, commercial or residential purposes.
Normally, central government land and property are exempted from all taxes imposed by a state government or any authority within the state.
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The Electronic Corporation of India Ltd, Hindustan Shipyard Ltd and Parel Investment & Trading Company were taxed by the Andhra Pradesh government for utilising central government land for industrial purposes, though as lessees.
The companies challenged the provisions of the state Non Agricultural Lands Assessment Act on the ground that Article 285 of the Constitution barred state governments from taxing central government land.
The Electronic Corporation argued that since it was the lessee of the land which belonged to the Union of India and since the property of the Union cannot be taxed by the state legislature under Article 285, the demand of tax by the Andhra Pradesh government was illegal and unconstitutional.
The Andhra Pradesh High Court had earlier rejected this argument. The constitution bench of the Supreme Court, headed by Justice S P Bharucha, upheld the view and rejected the contentions of the companies.
In this case, the Electronic Corporation was leased 280 acres by the department of atomic energy. The state government sent notices of levy to the company.
The company challenged it on several grounds. It argued that its property actually belonged to the central government and the company itself was a government company. The land and the company belonged to the government. Therefore, the levy was illegal.
The constitution bench rejected these arguments. It said the law provided that the lessee would be treated as the owner for purposes of non-agricultural levy. Therefore, the company was deemed to be the owner.
Moreover, there was a clear distinction between a company and its shareholder, even though the shareholder may be one person the c