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New Delhi, 26 February 2018:- In a massive tax relief for Greater NOIDA, the Delhi High Court has held that their “specified income” is eligible for exemption under the Income Tax Act, 1961. The Writ Petition was filed by Greater NOIDA assailing the order of Central Board of Direct Taxes (CBDT), which had declined their application for notification under Section 10(46) of the Income Tax Act, 1961 (IT Act).
Section 10(46) of the IT Act stipulates that an “specified income” of a notified Authority is exempt from the purview of Income Tax. In order to be notified (by CBDT) the Authority should satisfy the twin tests being, (i) it should be constituted under a Central/State Act for regulating and administering any activity for the benefit of general public, and (ii) it is not engaged in any commercial Activity.
Greater NOIDA in its petition represented by Mr. Balbir Singh, Senior Advocate, along with Mr. Jasmeet Singh, Advocate on Record and SARC Associates, contested that they are an Authority constituted under the U.P. Industrial Area Development Act, 1976 for administering general municipal public functions and have not been doing any commercial activity, and hence CBDT ought to have notified GNOIDA under Section 10(46) of the IT Act.
The Tax department contested that GNOIDA does all commercial activities including giving properties on rent, taking premiums and business administrative charges etc. Further, the Hon’ble Allahabad High Court has held that GNOIDA is neither “local authority” nor “municipality” and hence, GNOIDA is not eligible for any exemption.
The Hon’ble High Court, speaking through at Division bench comprising of Mr. Justice Sanjiv Khanna and Ms. Justice Pratibha M. Singh, laid down the determinative test for exemption of “specified activities” to be such activities which are intrinsically associated, connected and had immediate nexus with the object of regulating and administering the activity for the benefit of general public. The Hon’ble High Court thereby allowed the Writ Petition filed by GNOIDA and quashed the order of CBDT. The activities of GNOIDA were held to be not “commercial activities” under section 10(46) of the IT Act. CBDT was directed to issue the necessary notification within a period of three months.
Speaking on the judgment, Mr. Jasmeet Singh said, “this judgment comes as a huge relief for GNOIDA and other industrial authorities constituted under the State/Central Act. They would now be in a position to invest their funds more efficiently for general public utilities. We foresee the judgment to be challenged by the Department before the Hon’ble Supreme Court and will take appropriate steps as per law get our rights enforced. The judgment would be a landmark precedent on interpretation of 10(46) of the IT Act”
GNOIDA Industrial Development Authority vs UOI
Writ Petition no. 732 of 2017
Hon’ble Delhi High Court
Judgment reserved on: 26.10.2017
Judgment pronounced on: 26.02.2018