TMI Blog2010 (7) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... Patel for the Respondent. Order Per D. C. Agrawal, Accountant Member. This an appeal filed by the Revenue against the order of ld. CIT(A) dated 29-1-2007. 2. The only issue involved in this appeal is whether assessee is entitled to exemption under section 10(20) of the I.T. Act, 1961. 3. The facts of the case are that assessee is a notified area in Surat for the industrial development. It filed return of income at NIL by claiming exemption under section 10(20). It was claimed by the assessee that it is a local authority notified by the State Government under the Gujarat Industrial Development Act, 1962 ( GIDA in short). It has been entrusted with the work of development and collection of tax under the notification dated 21-11-1997 instituted under the Gujarat Municipalities Act, 1963. The assessee further claimed that it is a local authority inasmuch as it is a deemed Municipality as it has been created under the Gujarat Industrial Development Act, 1962 (GIDA) and under that Act all the provisions of Municipalities Act, 1963 have been made applicable. However, the Assessing Officer was of the view that with the deletion of section 10(20A) the assessee is no long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial township under the provisions of clause (1) of article 243Q of the Constitution of India. In other words, such industrial townships are deemed as a Municipality as defined in the Explanation below section 10(2) of the IT Act. This would mean that the income of such notified areas would be exempt from taxation under the provisions of section 10(20) of the IT Act. The income of the municipality is from taxes collected on various facilities provided to the residents within the specified area. In the case of the assessee, as per the directions of the State Government, the sum of Rs. 1,02,80,888 was to be paid to the DRDAfor the development of the Gram and Nagar Panchayat, whose land had been taken away to form such area. Therefore, I am of the view that where the income of the Assessee was to be exempt under section 10(20) of the IT Act, such expenditure being in accordance with the statutory provisions applicable to the functioning of the assessee could not be disallowed and treated as income. On the same ground, the interest earned on Fixed Deposits of the sum of Rs. 8,95,711also cannot be treated as income and taxed. The Assessing Officer is, therefore, directed to dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of notified area being an urban area specified as industrial township area under proviso to clause (i) of Article 243Q of the Constitution. Thus according to him proviso to clause (i) of Article 243Q of the Constitution provides for concept of notified area being an industrial township. Therefore, according to him it is incorrect to say that notified areas as per the proviso to clause (i) of Article 243Q carves out an exception from being a Municipality. He then referred to section 16 of GIDA which provided for extension of all the provisions of Gujarat Municipalities Act, 1963 to notified areas under GIDA or under Municipalities Act, 1963. He then referred to section 264 of Gujarat Municipalities Act, 1963 for the proposition that all the provisions of Municipalities Act would be applicable to such notified areas. By taking us to these provisions ld. AR submitted that notified areas created under GIDA are treated at par with notified areas created under Municipalities Act, 1963 by virtue of section 264B of that Act. Thus there are two powers given to the State Government to declare an Industrial Township as notified area. One power is given under section 16 of GIDA and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that area and such other factors as he may deem fit by public notification, specify to be an industrial township. (2) In this article, a transitional area , a smaller urban area or a larger urban area means such area as the Governor may, having regard to the population of the area, the density of the population therein, the revenue generated for local administration, the percentage of employment in non-agricultural activities, the economic importance or such other factors as he may deem fit, specify by public notification for the purposes of this Part. 9. The above article clearly defines various institutions of the nature of municipality based on selected areas of the urban area. The self-governing institution which is in the state of transition from a rural area to an urban area is called Nagar Panchayat. The self-governing institution in small urban area is called Municipal Council and self-governing institution in larger urban area is called Municipal Corporation. The proviso to clause (1) in the above Article enables the Governor not to constitute Municipality under this clause if Municipal services are provided or proposed to be provided by an Industrial Establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apur MIDC Industries Association v. State of Maharashtra AIR 1997 SC 8 has held that industrial township created under GIDA would be deemed to be the industrial township for the purposes of local self-government by observing as under :- As held by this Court in Solapur MIDC Industries Association v. State of Maharashtra [JT 1996 (7) SC 14], a municipal corporation Act and an industrial development Act have distinct fields of operation and there is no inter se conflict between the two. By reason of the notifications of 7-9-1993, the industrial area developed under the Gujarat Industrial Development Act is also deemed to be an industrial township for the purposes of local self-government. Any possible conflict is also removed by the second notification of 7-9-1993 removing this area from the ambit of the Gujarat Panchayats Act, 1961 cannot be a notified area under the Gujarat Municipalities Act loses all force. Regarding interpretation of Article 243Q and treatment to be given to an industrial establishment as deemed municipality Hon ble Apex Court in that case held as under :- Article 243Q deals with constitution of municipalities. Municipality is defined under Article 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to any notified area the provision of any section of this Act, or part of any such section or of any rules in force or which can be imposed in any municipal borough under the provisions of this Act, subject to such restrictions and modifications, if any, as it may think fit; (b) impose in any such area any tax, which might be imposed therein under the provision of this Act if the said area were a municipal borough, (c) appoint a person or a committee for the purposes of the assessment and recovery of any tax imposed under clause (b), and in order to arrange for the due expenditure of the proceeds of such taxes, and for the preparation and maintenance of proper accounts, and generally for enforcing the provisions of any sections or rules applied or adopted under clause (a). (2) The proceeds of any tax levied in any notified area under this section shall be expended only in such manner in which, if the notified area were a municipal borough, the municipal fund thereof might be expended. 246C For the purposes of any section of this Act, which may be applied to a notified area, the person or committee appointed for such area under section 264B shall be deemed to be a municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nicipal Corporation have also been entrusted with the power to levy, assess and collect taxes. It is not the case that Nagar Panchayat, Municipal Council or Municipal Corporation are also functioning simultaneously along with administration by Notified area. The jurisdiction of Nagar Panchayat, Municipal Council or Municipal Corporation and notified area are different and defined and they do not overlap. The urban or transitional urban areas given for self-governance to these bodies are clearly demarcated. At least no case has been made out that they overlap. The notified area like the assessee has been given the same power under the Municipalities Act as is given to Nagar Panchayat, Municipal Council or Municipal Corporation. The Municipalities Act is applicable to all classes of urban area either Nagar Panchayat, Municipal Council or Municipal Corporation. It is also applicable with equal force upon the assessee functioning under demarcated and separate areas called Notified areas which are independent of any Nagar Panchayat, Municipal Council or Municipal Corporation. The power to constitute such notified areas or Municipal Council or Nagar Panchayat or Municipal Corporation are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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