Income Tax Act, 1961:
Section 10(2) Explanation clause (iii) (as amended by Fiance Act, 2002) – Whether Urban Improvement Trust (assessee) constituted under Rajasthan Improvement Act is a local authority within meaning of clause (iii) of Explanation to s. 10(2) – Plea of assessee that it is a “Municipal Committee” under clause (iii) of Explanation to s. 10 (2) – Held: Scheme of the Urban Improvement Act, under which the assessee was constituted, does not permit acceptance of the plea that assessee is a “Municipal Committee” within meaning of clause (iii) of Explanation to s. 10(20) – Rajasthan Improvement Act, 1959 – ss. 47, 48, 61 to 64 and 105.
Allowing the appeals, the Court
HELD: 1. A perusal of the Scheme of the Rajasthan Urban Improvement Act, 1959 as well as the Rajasthan Municipalities Act, 1959 indicate that Urban Improvement Trust undertakes development in the urban area included in municipality/municipal board. Urban Improvement Trust is not constituted in place of the municipality/municipal board rather it undertakes the act of improvement in urban areas of a municipality/municipal board under the Rajasthan Urban Improvement Act, 1959. It may also perform certain limited powers of the municipal board as referred to in Sections 47 and 48 of Urban Improvement Act but on the strength of such provision Urban Improvement Trust does not become a municipality or municipal board. [Para 27][861-A-B]
2. After the insertion of Part IXA in the Constitution by the Constitution (Seventy-fourth)Amendment Act, 1992 w.e.f. 01.06.1993, Articles 243Q deals with constitution of Municipalities. Section 10(20) Explanation, Clause (ii) relates to Municipalities; the assessee has not based its claim on the basis of Clause (ii) of Explanation rather it has confined its claim to only Clause (iii). Under Clause (iii) claim of the assessee is that it is a “Municipal Committee”. [Paras 27 and 28][861-C-D]
3. The provisions of Sections 47 and 48 of Rajasthan Improvement Act, 1959 are to permit certain powers of the municipal boards to be performed by the Trust which does not transform the Trust into a Municipal Committee. Sections 61 to
64 are the provisions empowering levy of betterment charges, which is again in reference to and in context of carrying out improvement by the Improvement Trust in urban areas. The Municipal Board, Kota performs its functions, in areas where Municipal Board still exists. There is no reason to accept that Urban Improvement Trust is a Municipal Committee within the meaning of Section 10(20)Explanation Clause (iii). Section 105, which provides for ultimate dissolution of Trust and transfer of its assets and liabilities to the Municipal Board, does not in any manner improve the case of the assessee. When the Trust is dissolved or at dissolution, properties and funds and dues vested in or realisable by the Trust shall vest in and be realisable by the Municipal Board, which is a provision for different purpose and object. The above provision does not support the plea that Improvement Trust is a Municipal Committee as referred to in Clause (iii) of Explanation to Section 10(20) of the I.T. Act. Thus, the scheme of the Rajasthan Urban Improvement Act, 1959 does not permit acceptance of the contention of the appellant assessee that Urban Improvement Trust is a Municipal Committee within the meaning of Section 10(20) Explanation (iii). [Paras 35, 36 and 37][865-D-H; 866-A-B]
New Okhla Industrial Development Authority v. Chief Commissioner of Income Tax & Ors. (2018) 8 SCALE 365; Agricultural Produce Market Committee Narela, Delhi v. Commissioner of Income Tax and Another (2008) 9 SCC 434 : [2008] 12 SCR 387 – relied on. Union of India v. R.C. Jain (1981) 2 SCC 308 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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