TMI Blog2017 (8) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development authority eligible for exemption u/s 10(20A) of the Income Tax Act? 2. Whether on the facts and circumstances of the case, the Tribunal was correct in holding that the business of the assessee commenced? 4. The facts leading up to the instant appeal are that the respondent- assessee- Vidarbha Irrigation Development Corporation, a statutory Corporation set up by the Vidarbha Irrigation Development Corporation Act, 1997 ( VIDC Act ) , claimed exemption from taxation under Section 10(20A) of the Act, on the ground that it was an authority constituted by law for the purpose of planning, development, improvement of cities, towns and villages and that, therefore, it was exempted from being brought to tax. However, the Assessing Officer by an assessment order on 9.3.2001 not only rejected the claim for exemption under Section 10(20A) of the Act but also held that the appellant had not commenced its business for its income to be taxed as business income under Section 28 of the Act. Thus holding the respondent- assessee- Corporation was liable to pay tax along with interest of ₹ 5,05,83,200/-. 5. Being aggrieved, the respondent-assessee filed an appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 10 (20A ) of the Act. According to him, since the nature of duties and functions performed by the respondent-assessee under the VIDC Act had nothing to do with the aforesaid functions of an authority contemplated under Section 10 (20A) of the Act, the Tribunal was not justified in setting aside the concurrent orders of the authorities below. According to Mr. Parchure, the crucial words in Section 10(20A) of the Act were satisfying the need for housing accommodation and planning, development or improvement of cities, towns and villages . These were the key words in the said provision with which the respondentassessee had no nexus and that therefore, the impugned order of the Tribunal was unsustainable. Mr. Parchure relied upon judgments of the Hon ble Supreme Court in the cases of CIT .vs. U.P. Forest Corporation 230 ITR 945, Calcutta State Transport Corporation .vs. CIT 219 ITR 515, the judgment of the Karnataka High Court in Karnataka State Small Industries Development Corporation Ltd. .vs. Assistant Commissioner of Income Tax 220 Taxman 4 (Karnataka) and the judgment of the Madras High Court in CIT .vs. State Industries Promotion Corporation of Tamil Nadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) to plan, investigate, design, construct and manage the schemes of the generation of hydro-electrical energy; (d) to enter into contracts in respect of the works and any other matters transferred to the Corporation along with assets and liabilities under this Act; (e) to invite tenders, bids, offers and enter into contracts for the purposes of all the activities of the Corporation ; (f) to promote participation of any person or body or association of individuals, whether incorporated or not, in planning, investigation, designing, construction and management of irrigation projects, and command area development and Hydro-Electric Power Projects including flood control ; (g) to undertake schemes or works, either jointly with other corporate bodies, or institutions, or with Government or local authorities, or on agency basis in furtherance of the purposes for which the Corporation is established and all matters connected therewith ; (h) to promote irrigation related activities such as fisheries, pisciculture, floriculture, horticulture, sericulture, tissueculture, etc.; (i) to promote tourism, water sports and other related activities on and aro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain and operate laboratories, experimental and research stations and farms for conducting experiments and research for - (i) utilising the water, electrical energy, and other resources in the most economical manner for the development of the Godavari and Tapi River Valley in Vidarbha region ; (ii) determining the effect of its operations on the flow conditions in the Godavari and Tapi River and its tributaries in Vidarbha region ; (iii) providing navigation conditions in the Godavari and Tapi River and its tributaries in Vidarbha region ; (h) to engage suitable qualified consultant or person having special knowledge or skill to assist the Corporation in the performance of its functions ; (i) to do all such other things including making interest bearing monetary advances to the contractors executing works on the projects of the Corporation and perform such acts as may be necessary for, or incidental or conducive to any matters which are necessary for furtherance of the objectives for which the Corporation is established. Section 23. The Corporation shall keep coordination with the State Government, Railway Authorities, local authorities and statutory bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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. (vii) In the case of Rajasthan Land Development Corporation (supra), similar liberal interpretation of the term development in Section 10(20A) of the Act was adopted by the Rajasthan High Court. It was held that the respondent- Corporation therein was entitled to the exemption under Section 10(20A) of the Act, even though the predominant function of the said Corporation was development of land, which included land leveling, shaping, re-alignment of field boundaries, growing of trees, developing permanent and temporary pastures and farm forestry and commercial afforestation amongst others. The Rajashan High Court relied upon the judgment of the Hon ble Supreme Court in Gujarat Industrial Development Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, distinguishable. The reliance placed by the appellant- Revenue on the judgment in the case of Karnataka State Small Industries Development Corporation (supra) is also misplaced, because the Corporation therein was not constituted under any law as required under Section 10(20A) of the Act and it was set up pursuant to a resolution of the Government of Karnataka. The respondent -assessee-Corporation in the instant case is a statutory Corporation established under the VIDC Act. The judgment in the case of State Industries Promotion Corporation of Tamil Nadu (supra) is also inapplicable because the assessee therein was incorporated under the Companies Act and it was not an authority constituted under a law, as contemplated under Section 10(20A) of the Act. Thus the judgments relied upon by the appellant-Revenue do not support its claim that the respondent-assessee is not entitled for exemption under Section 10(20A) of the Act. (xi) In view of the interpretation of Section 10(20A) of the Act in a wide sense, specifically laid down by the Hon ble Supreme Court in the case of Gujarat Industrial Development Corporation (supra), it is evident that the Tribunal was correct in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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