HC tax relief to Greater Noida authority

In massive tax relief for the Greater Noida Industrial Development Authority, the Delhi High Court has held that it was not carrying out any commercial activity with profit motive.

Exempting the Authority from paying income tax, the court said it was eligible for exemption under Section 10 (46) of the Income Tax Act, 1961. The order is expected to be challenged in the Supreme Court.

The income tax department had issued notices to the Authority to pay ~100 billion in taxes between 2004 and 2015.

Section 10(46) of the Act stipulates “specified income” of a notified authority is exempt from income tax. The authority should be constituted under a central or state Act, for regulating and administering any activity for benefit of the general public and not be engaged in commercial activity.

The court directed the Central Board of Direct Taxes (CBDT) to issue the necessary notification within three months.

In the court, the Authority said it was constituted under the UP Industrial Area Development Act, 1976, for administering general municipal functions and was not involved in commercial activity.

The tax department claimed the Authority had carried out commercial activities, including giving of properties on rent, as well as taking premiums and business administrative charges.

In June 2015, the CBDT had rejected the Authority’s plea to notify its income under the specified income category, claiming it was making a huge profit from its activities, which were commercial in nature.

“The judgment would be a landmark precedent on interpretation of 10(46) of the I-T Act,” said Jasmeet Singh, one of the advocates representing the Authority. Industrial development authorities would now be in a position to invest their funds more efficiently for general public utility, he added.

Exempting the Authority from paying income tax, the court said it was eligible for exemption under Section 10 (46) of the Income Tax Act