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The Delhi High Court has exempted the Greater Noida Industrial Development Authority (GNIDA) from paying income tax, saying it was not carrying out any commercial activity with any profit motive
The Delhi High Court has held that their “specified income” is eligible for exemption under the Income Tax Act, 1961. The activities of GNIDA were held to be not “commercial activities” under section 10(46) of the IT Act. Central Board of Direct Taxes (CBDT) has been directed to issue the necessary notification within a period of three months, a press statement said.
The authority had contended before the high court that the CBDT had on June 8, 2015, arbitrarily rejected its plea to declare the income of GNIDA under 'specified income' on the ground that it was making huge profits out of its activities, which are commercial in nature.
Section 10(46) of the IT Act stipulates that “specified income” of a notified Authority is exempt from the purview of Income Tax. In order to be notified (by CBDT) the Authority should satisfy the twin tests being, (i) it should be constituted under a Central/State Act for regulating and administering any activity for the benefit of general public, and (ii) it is not engaged in any commercial Activity.
GNIDA, through its counsels, pleaded that they are an Authority constituted under the UP Industrial Area Development Act, 1976 for administering general municipal public functions and have not been doing any commercial activity, and hence CBDT ought to have notified GNIDA under Section 10(46) of the IT Act.
"This judgment comes as a huge relief for Greater NOIDA and other industrial authorities constituted under the State/Central Act. They would now be in a position to invest their funds more efficiently for general public utilities. We foresee the judgment to be challenged by the Department before the Hon’ble Supreme Court and will take appropriate steps as per law get our rights enforced. The judgment would be a landmark precedent on the interpretation of 10(46) of the IT Act,” said Jasmeet Singh, Advocate on Record.
The tax department had contended that GNIDA was involved in commercial activities, including giving properties on rent, taking premiums and business administrative charges etc. Further, Allahabad High Court has held that GNIDA is neither “local authority” nor “municipality” and hence, GNIDA is not eligible for an exemption.
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