Delhi High Court Orders Income Tax Exemption for NOIDA under Section 10(46) of the IT Act
By: Admin Date: July 15, 2024 Categories: Income Tax News | News
The Delhi High Court has instructed the income tax department to grant an income tax exemption to the New Okhla Industrial Development Authority (NOIDA) under Section 10(46) of the Income Tax Act, 1961. A division bench, comprising Justices Yashwant Varma and Purushaindra Kumar Kaurav, overturned the Central Board of Direct Taxes’ (CBDT) decision to deny NOIDA’s request for tax exemption. The bench found that the revenue department erred in classifying NOIDA’s loans and advances as commercial activities. The court emphasized that NOIDA should not be seen as a corporation established for profit or commercial motives.
Section 10(46) exempts a government-established trust that benefits the general public and does not engage in commercial activities from income tax. The tax department had argued that NOIDA’s activities were commercial and profit-driven. However, the court disagreed, stating that some loans were meant to support and supplement development activities.
The judgment highlighted that NOIDA acts as a government agent responsible for the planned development of areas under its control, as per the Uttar Pradesh Industrial Area Development Act, 1976 (UPID Act). NOIDA’s counsel praised the decision as a landmark judgment aligned with the objectives of Section 10(46), beneficial for state industrial development authorities seeking tax exemptions, and a guiding precedent for other statutory authorities with non-commercial public utility functions.
NOIDA had applied for the necessary certification under Section 10(46) in November 2011. The CBDT had argued that NOIDA’s substantial investments in bonds, shares, and interest-yielding fixed deposits were not directly connected to its role under the UPID Act and violated Section 20(2) of the Act. The CBDT concluded that NOIDA was engaging in commercial activities aimed at earning profit, including advancing loans to various entities, including private parties, and earning significant interest. The department noted that NOIDA’s financial statements showed loans exceeding Rs. 5,000 crore in both FY 2018-19 and FY 2017-18 to various entities, including private parties.
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