Section 10(46) of Income Tax Act, 1961 – If NOIDA entitled to exemption
New Okhla Industrial Development Authority is constituted under the Uttar Pradesh Industrial Area Development Act, 1976.
By the Order dated 24.12.2020, the CBDT refused to accept the prayer for certification under Section 10(46) of the Income Tax Act, 1961, that the income of the authority constituted under the Central or State Act or created by the Central or the State Governments for administering any activity for the benefit of public and not engaged in any commercial activity is exempt from taxation. This was mainly done on the ground that NOIDA has extended loans to various entities.
Extension of loans by NOIDA and huge investments in bonds, shares, interest bearing fixed deposits, cannot be said to be activities undertaken otherwise than for the benefit of the general public.
CBDT erred in holding that the loans and advances extended by the petitioner – NOIDA would fall in the ambit of commercial activity within the meaning of Section 10(46) of the IT Act 1961 since it cannot be viewed as a corporation incorporated for profit or commercial motive.
Section 10(46) of the Income Tax Act, 1961, provides for exemption from taxation to a trust established by the Government for benefitting general public and not performing commercial activity.
Landmark judgment – Guiding judicial precedence for the State Industrial Development Authority as also other statutory authorities of the State advancing non-commercial public utility function.
HELD that a prudent deployment of funds and investments, surplus or otherwise, which may enable a statutory authority to earn a reasonable return and same being utilized to aid that entity in discharge of its statutory obligations cannot be described as a “commercial activity”. It is public money. The expression “commercial activity” is liable to draw colour from the word “commerce”. Moreover, it was noted that the exemption was granted to various government bodies in respect of similar specified income as mentioned in para 55 of the judgment.
Clause (46) of Section 10 of the IT Act exempts specified income from the charge. Only specified income is granted exemption and excluded from the charging section. All incomes earned from varied and different activities need not be granted exemption.
Judgment dated 11.7.2024 of the Delhi High Court in W.P.[C] No.4711 of 2021 of New Okhla Industrial Development Authority Vs. Union of India and others
DELHI HIGH COURT – JUDGEMENT INFORMATION SYSTEM (dhccaseinfo.nic.in)
