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Karnataka State Small Industries Development Corpn. Ltd. Versus Assistant Commissioner of Income-tax, Range -11 (5) , Bangalore

2012 (9) TMI 1103 - KARNATAKA HIGH COURT

Denial of exemption under Section 10(20A) - Held that:- In the instant case, the object and function of incorporating the appellant-company is totally for different purpose. The appellant was incorporated pursuant to the resolution of the Government of Karnataka, but not constituted under any law. It was incorporated for the purpose of achieving certain objects and cannot be equated with the authority constituted in India by or under any law enacted. Looking at the object of the appellant-compan .....

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the Appellant. G. Kamaladhar for the Respondent. JUDGMENT B. Manohar, J- The Karnataka State Small Industries Development Corporation has filed this appeal challenging the legality and correctness of the order dated 26.05.2006 made in ITA Nos.1015, 1269/Bang/2003 and No.1557/Bang/2004 passed by the Income Tax Appellate Tribunal confirming the order passed by the Appellate Authority and the Assessing Authority for the assessment years 1998-1999 to 2000-2001 insofar as the denial of exemption unde .....

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ppellant filed return of income for the assessment years 1998-1999 to 2000-2001 declaring NIL income on the ground that it is eligible for exemption under Section 10(20A) of the Act. For the assessment years 2000-2001 returns were filed showing NIL income which was processed under Section 143(3) of the Act. The case was selected for the scrutiny notice as required under Section 143(2) was issued for all the above said years. During the course of reassessment proceedings, the representative of th .....

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ed to grant exemption under Section 10(20A) of the Act. The Assessing Authority held that the appellant-company is not an authority constituted in India by or under any law and the appellant-company is a Corporation incorporated under the Companies Act. Further, the Assessing Authority held that the appellant has not fulfilled the provisions contained under Section 10(20A) of the Act to avail exemption and they are not dealing in housing accommodations for the purpose of planning, development an .....

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ail and also considering the various judgments of the Hon'ble Supreme Court and other High Courts held that the appellant does not fall within the purview of Section 10(20A) of the Assistant Commissioner and hence they are not entitled for any exemption under Section 10(20A) of the Act by its order dated 26-5-2006 dismissed the appeals. Being aggrieved by the said order, the appellant has preferred this appeal. 4. Sri. S. Parthasarathi, learned counsel appearing for the appellant contended t .....

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ance and marketing the products of the Small Industries. The appellant has effected development of villages and towns after setting up of industrial estates and carrying out the objects for its incorporation. It is a local authority within the meaning of article 12 of the Constitution of India and entitled for exemption under Section 10(20A) of the Act. Further the learned counsel contended that the Hon'ble Supreme Court in Gujarat Industrial Development Corpn. v. CIT [1997] 227 ITR 414, the .....

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ate Tribunal and contended that though the appellant-company is a Government undertaking, it will not come under the purview of Section 10(20A) of the Act. The main purpose of incorporation of the appellant is for formation of the industrial layouts, granting assistance to the Small Scale Industries and marketing their products. To claim exemption under Section 10(20A) of the Act, the authority should be constituted in India by or under any law enacted either for the purpose of dealing with and .....

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ed in the promotion of industrial activities and making provisions for infrastructure to industries, hence it is not entitled for exemption under Section 10(20A) of the Act and sought for dismissal of the appeal. 6. The appeal was admitted for considering the following substantial questions of the law: "(i) Whether the appellant which is a company incorporated under the Companies Act, 1956 and a Government Company as defined in Section 617 of the Companies Act, having 100% shareholding in t .....

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ion 10(20A) is Constitution by or under any law? (iii) Whether the decision of Apex Court in the case of Mysore Paper Mills Ltd., a Government of Karnataka Undertaking registered under the Companies Act, 1956 (a general law) holding the company as "an authority" within the meaning of Article 12 of the Constitution of India and under company is nothing but a instrumentality and agency of the State Government and physical form of a company is merely a cloak or cover for the Government eq .....

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le industries; (b) Constructing and managing industrial estates; (c) Granting financial assistance to small scale industrialists; (d) Marketing products of small scale industries. 9. The appellant-company consisting of seven Directors of whom three are the non-official Directors and four are the officials of the Government. The non-official Directors to be nominated by the Government. The functions of the appellant-corporation are as follows: 1. Taking over the construction of Industrial Estates .....

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the extent of ₹ 10,000/- and place sums as are necessary for purposes of loans about ₹ 10,000/- with the State Finance Corporation for assistance to small industries; 5. Run and operate raw materials depots and generally perform duties of acquisition of indigenous and imported raw materials which are required by the small scale industries in the State and to receive moneys from the Government of Mysore as deposit with or without interest, for operating the raw materials depots; 6. T .....

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authority within the meaning of article 12 of the Constitution of India and it is established by or under the law enacted by the State Government. It was established for the purpose of developing small scale industries, constructing and managing industrial sheds. The object of the appellant is non-profit making business, hence, they are entitled for exemption under Section 10(20A) of the Act. 11. Section 10 of the Act provides that income which do not form part of the total income in computing t .....

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r that to claim exemption, the aforesaid clause has to be satisfied. The person must be an authority and the said authority should be constituted in India by order under any law, such law should be enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both. In the instant case, the object and function of incorporating the appellant-company is totally for diff .....

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