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2017 (8) TMI 385 - HC - Income TaxEligibility for exemption u/s 10(20A) - scope of development - assessee is a development authority - commencement of business - functions performed by assessee under the VIDC Act - Held that:- Hon’ble Supreme Court in the case of Gujarat Industrial Development Corporation [1997 (8) TMI 3 - SUPREME Court] held that the word “development” in Section 10(20A) of the Act should be understood in its wide sense and that schemes establishing industries help in accelerating development and that, therefore, in the said case the appellant- Corporation was held as being entitled to the exemption. It was also held by the Hon’ble Supreme Court that Section 10(20A) of the Act was meant for protection of public bodies created under law for the purpose of developing urban or rural areas for public good. It was also held that the said provision if interpreted rigidly and narrowly, would result in the anomaly of bringing such public bodies within the tentacles of income-tax liability. The Tribunal has held that as per the law laid down in the context of Section 10(20A) of the Act, it is not necessary that a direct nexus is to be established with the purpose of satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages and that an indirect nexus would suffice. Tribunal has correctly found that the functions performed by the respondent- assessee under the VIDC Act result in facilitating the “development” of cities, towns and villages because its actions make available drinking water as also electricity through hydro-electric projects. Apart from this, the respondent- assessee- Corporation is involved in activities of flood control and resettlement of displaced persons, thereby showing that there is a nexus with developmental activities. The Tribunal has analysed the provisions of the VIDC Act and rendered a finding that the respondent- assessee falls within the scope of Section 10(20A) of the Act. The Tribunal on fresh consideration of the facts in the impugned order found that the respondent-assessee- Corporation, upon it being set up under the VIDC Act, took over the projects concerning irrigation development in the State. It further found that even before the projects were taken over by the assessee, some portion of the canals were completed and water supplied to various fields and water charges were being collected. In fact it is the assessee's case before the Tribunal that it had received consideration of ₹ 1.12 lakhs on sale of water during the subject assessment year. In fact, the object of the assessee is to promote irrigation projects, supply of water by canal etc. as can be seen from Section 18 of the VIDC Act. This itself is the business of the respondent-assessee. The fact that existing canal networks and other activities for taking forward the irrigation projects were carried out by the respondent-assessee in the subject assessment year, would not detract from the fact that the assessee had already commenced its business. It has been found on facts by the Tribunal that the respondent -assessee- Corporation had commenced business. The question as to when an assessee can be said to have commenced business is a question of fact and no universal test can be laid down. The impugned order is not shown to be perverse. Therefore, we do not find any reason to interfere with the said finding of fact of the Tribunal. - Decided in favour of assessee.
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