Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4
PETITIONER:
GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME TAX
DATE OF JUDGMENT: 20/08/1997
BENCH:
B. N. KIRPAL, K. T. THOMAS
ACT:
HEADNOTE:
JUDGMENT:
(With C.A Nos. 3482/90 & 2267/91)
J U D G M E N T
THOMAS, J
The question raised, in its broad parameters, is
whether industrial development could be enveloped within the
expression "planning, development or improvement of cities,
towns and villages or for both" in Section 10(20A) of the
Income-tax Act, (for short ’the I.T. Act),
Appellant, Gujarat Industrial Development Corporation,
(for short ’the Corporation’) claimed exemption from
taxation under the I.T Act on two alternative premises, one
under Article 289(1) of the Constitution and the other under
clause (20A) of Section 10 of the I.T. Act A Division Bench
of High Court of Gujarat disallowed the claim under both.
Hence the Corporation has filed this appeal by special
leave.
Corporation has been created under the Gujarat
Industrial Development Act, 1962, (for short ’the Gujarat
Act’) with the right to hold properties and the right to sue
and be sued in its own name. The Income tax Officer
concerned repelled the claim of the Corporation for
exemption from tax on both grounds, but the Appellate
Assistant Commissioner (AAC) on appeal, upheld their claim
on both counts. When the Revenue challenged the said
decision in second appeal the Income Tax Appellate Tribunal
reversed the view taken by the AAC on both counts. Two
questions were thereupon formulated to be answered by the
High Court, one relating to Article 289(1) of the
Constitution and the other relating to Section 10(20A) of
the I.T. Act. Answers were given by the High Court, as
mentioned above, against the Corporation.
Learned counsel for the appellant Corporation stated,
at the outset, that he does not press the claim under
question under Article 289(1) of the Constitution. His
arguments were confined entirely to the scope of Section
10(20A) of the I.T. Act. Therefore, we need not vex our mind
with the former question.
Section 10(20A) of the I.T. Act reads thus:
"Any income of an authority
constituted in India by or under
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4
any law 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."
Any income falling within the ambit of said sub-section
would automatically slip out of exigibility under I.T. Act.
The sub-section pertains to any income of an authority
constituted by or under any enacted law. This first limb of
the sub-section is squarely available to the Corporation as
it has been constituted under the Gujarat Act.
The second limb of the sub-section consists of law
alternatives, of which the first is that the authority
constituted by law should be for dealing with the need to
provide housing accommodation. That alternative is obviously
not available to the appellant corporation as nobody has a
case that appellant Corporation has anything to do with the
obligation to provide housing accommodation. It is the
second alternative in the sub-section under which appellant
seeks shelter to be absolved from the liability to pay
income tax. As per that alternative, if the Authority is
constituted for the purpose of planning or development or
improvement of any city or town or village or combination of
them, the income of such Authority is not exigible to income
tax.
The Division Bench of the High Court while agreeing
that "industrial activity is one of the facets of general
development" adopted a reasoning that since development of
an area would require roads, buildings, sanitation, parks,
sports, educational institutions and several other amenities
"a city or town or village could be well developed without
any industry". The Division Bench posed a question and
answered it in the following manner:
"The question, therefore, is
whether when a particular
Corporation is established for the
purpose of developing or
establishing industries in any
particular area, can any one say
that it is for the purpose of
planning, developing or improving a
particular city, town village or a
particular area? One may establish
an industry in a given area. That
area for the purpose of industry
may develop. But it does not
necessarily mean that particular
area develops by that industry
alone. There may be advantages and
disadvantages. On the one hand,
because there are industrial
activities in the area, some trade
and commerce may grow, but that
does not necessarily mean that it
would develop that particular area.
It may also create pollution and
several other problems. Apart from
that, the question which is
required to be considered is as to
whether the purpose of the
Corporation or the object of the
Corporation is to develop any city,
any town or any particular area.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4
The answer would be in the
negative."
The Gujarat Act was enacted "to make special provision
for securing the orderly establishment of industries in
industrial areas and industrial estates in the State of
Gujarat, and to assist generally in the organisation thereof
and for that purpose to establish an Industrial Development
Corporation, and for purposes connected with the matters
aforesaid as can be discerned from the preamble thereof.
Section 2 (g) of the Act defines "industrial area" as
any area declared to be an industrial area by the State
Government by notification in the Official Gazette which is
to be developed and where industries are to be accommodated.
Section 2(n) defines "industrial estate" as any site
selected by the State Government where the Corporation
builds factories and other buildings and makes them
available for any industries or class of industries. Section
13 of the Gujarat Act enumerate the functions of the
Corporation and they contain, inter alia, "to promote and
assist in the rapid and orderly establishment, growth and
development of industries in the State of Gujarat."
We have no doubt that a proper planning is absolutely
necessary for creation of an industrial area. Inside roads,
sub-roads buildings, sanitation, parks and other amenities
have also to be provided in a planned industrial area as per
the modern concept of any industrial complex. Even
educational institutions may have to be provided in such
complex. Therefore, development of industrial area would
have its direct impact on the development or improvement of
that part of the city or town or village where such area is
located. Delinking industrial area from the scope of
development of any area is, thus, without any practical
sense.
In this context a reference to Maharashtra Industrial
Development Act, 1962, which is almost analogous to the
Gujarat Act, is of some use. While examining issues relating
to the validity of the Maharashtra Act a Division Bench of
this court has said in Shri Bamtanu Co-operative Housing
Society Ltd. and another vs. State of Maharashtra Housing
Society Ltd. and another vs. State of Maharashtra and others
(1970 3 SCC 323):
"The functions and powers of the
Corporation indicate that the
Corporation government in
establishing industrial estates and
developing industrial areas,
acquiring property for those
purposes, constructing property for
those purposes, constructing
building, allotting building,
factory sheds to industrialists or
industrial undertakings. It is
obvious that the Corporation will
receive moneys for disposal of
lands buildings and other
properties and also that the
Corporation would receive rents and
profits in appropriate cases.
Receipts of these moneys arise not
out of any business or trade but
out of sole purpose of
establishment growth and
development of industries. The
Corporation has to provide
amenities and facilities in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4
industrial estates and industrial
areas. Amenities of road,
electricity, sewerage and other
facilities in industrial estates
and industrial areas are within the
programme of work of the
Corporation."
The scheme to the Gujarat Act, as is seen from a survey
of the relevant provisions referred to above, would indicate
that the Corporation set up thereunder is to chalk out plans
for development of industrial area and industrial estate in
different places which may locate in cities or towns or
villages. Such schemes would normally involve planning and
development of such areas.
The word "development" in Section 10(20A) of the I.T.
Act should be understood in its wide sense. There is no
warrant to exclude all development programmes relating to
any industry from the purview of the word "development" in
the said sub-section. There is no indication in the Act that
development envisaged therein should confine to non-
industrial activities. Development or a place can be
accelerated through verieties of schemes and establishment
of industries is one of the modes of developing an area.
One of the reasons for incorporating a specific
provision of exemption from income tax such as subsection
10(20A) is to protect public bodies created under law for
achieving the purpose of developing urban or rural areas for
public good. When the object is such, an interpretation
which would preserve it should be accepted even if the
provision is capable of more than one interpretation. That
principle of interpretation is very much applicable to
fiscal statutes also. [vide State of Tamil Nadu vs. M. K.
Kandaswami, 1976 (1) SCR 38]. This Court has reiterated the
said principle in Calcutta Jute manufacturing Co. & another
vs. Commercial Tax Officer & Other [JT 1997 (5) SC 690]
The position is, therefore, clear that authorities
constituted by law for facilitating all kinds of development
of cities, towns and villages for public purposes shall not
be subjected to the liability to pay income tax. The
Division Bench of the High Court seems to have interpreted
the exemption clause too rigidly and narrowly which resulted
in the anomaly of bringing authorities like appellant
Corporation within the tentacles of income tax liability
while the authorities dealing with housing schemes which
provide houses to private individuals would stand outside
the taxing sphere.
In the result, we allow these appeals, set aside the
judgment under challenge. The answer to the question will,
therefore, be in favour of the assessee and against the
Revenue.