Delhi HC allows plea by Greater NOIDA seeking tax exemption

The Delhi High Court has delivered a landmark judgment holding that the ‘specified income’ of Greater NOIDA is eligible for exemption under the Income Tax Act, 1961..The finding came in the writ Petition filed by Greater NOIDA assailing the order of the Central Board of Direct Taxes (CBDT),`which had declined their application for exemption under Section 10(46) of the Income Tax Act, 1961 (IT Act)..The said section of the IT Act stipulates that a ‘specified income’ of a notified authority is exempt from the purview of Income Tax. In order to be notified by the CBDT, the authority should satisfy the following two conditions:.It should be constituted under a Central/ State Act for regulating and administering any activity for the benefit of general public;It should not be engaged in any commercial Activity..Appearing for Greater NOIDA, Senior Advocate Balbir Singh along with Advocate Jasmeet Singh and SARC Associates had submitted that Greater NOIDA is an authority constituted under the UP Industrial Area Development Act, 1976..It was further stated that it was constituted for administering general municipal public functions and has not been involved in any commercial activity. Therefore, the CBDT ought to have notified it under Section 10(46) of the IT Act..The Income Tax department, on the other hand, had contended that Greater NOIDA, in fact, carries out commercial activities, which include renting properties, levying premiums and and other business administrative charges..It was further contended that the Allahabad High Court had held that Greater NOIDA is neither a ‘local authority’ nor is it a ‘municipality’, hence it is not eligible for any exemption..After hearing arguments from both sides, the Division Bench of Justices Sanjiv Khanna and Pratibha M Singh held that the activities of Greater NOIDA were not ‘commercial activities’ under section 10(46) of the IT Act..The Court also laid down a test for certain activities to be exempted from the ambit of Section 10 (46). It was held that activities which are intrinsically associated and have an immediate nexus with the object of regulation and administration for the benefit of the general public would qualify for such exemption..The Court quashed the order of the CBDT and directed it to issue the necessarynotification within a period of three months..Speaking on the judgment, Advocate for Greater NOIDA Jasmeet Singh said,.‘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 interpretation of 10(46) of the IT Act’