Summary
The Supreme Court held that NOIDA was not a local authority entitled to income-tax exemption under Section 10(20) after its amendment effective 1 April 2003. Its industrial-township notification exempted the area from constitution of a municipality; it did not constitute NOIDA as one. The amended Explanation exhaustively defined eligible local authorities, and performance of municipal functions could not enlarge it. The separate bank TDS issues were addressed in the companion judgment.
Issues
- Whether notification as an industrial township made NOIDA a municipality for the amended income-tax exemption.
- Whether the earlier local-authority functional test or former development-authority exemption survived the Finance Act, 2002 changes.
Provisions considered
- Section 10(20), Explanation, as amended by Finance Act, 2002; former Section 10(20A), Income-tax Act, 1961The Explanation exhaustively limited local authorities for this exemption from 1 April 2003. The former exemption for specified development authorities had been omitted and could not sustain NOIDA’s claim. (¶¶ 14, 37, 43, 45, 46, 49, 55, 56)
- Articles 243P(e), 243Q and 243R, Constitution of IndiaMunicipality meant an institution of self-government constituted under Article 243Q. The industrial-township proviso created an exception to the requirement to constitute a municipality, rather than conferring that status on the development authority. (¶¶ 15, 16, 17, 27, 28, 30, 42)
- Section 3(31), General Clauses Act, 1897The general local-authority definition and related functional test could not enlarge the specific, exhaustive income-tax definition introduced in 2002. (¶¶ 35, 36, 37, 43)
Held
- Provision of municipal services did not give NOIDA the constitutional features of an institution of local self-government. The Governor’s notification under the proviso to Article 243Q(1) did not constitute a municipality or make the industrial development authority equivalent to one. (¶¶ 27, 28, 30, 42)
- The Explanation to Section 10(20) used an exhaustive definition. NOIDA’s claim under its municipality category failed, and it did not claim coverage under another category. The general statutory definition or functional resemblance could not extend the tax exemption. (¶¶ 35, 36, 37, 43, 55, 56)
- Exemption provisions must be strictly construed, and the claimant must clearly establish coverage. Earlier decisions granting development authorities exemption under Section 10(20A) did not preserve that exemption following its omission. (¶¶ 44, 45, 46, 49, 51, 52)
- The earlier High Court judgment had granted NOIDA relief under Section 10(20A) without deciding Section 10(20). It therefore did not determine entitlement under the later amended provision. (¶¶ 2, 48)
- These appeals addressed Section 10(20) status. The notices and TDS questions concerning the banks were considered in the separate Canara Bank companion judgment, rather than determined here. (¶¶ 5, 14)
Result
Appeals dismissed; NOIDA held outside the amended Section 10(20) definition of local authority.