The ITO, Ward-2(4),, Surat v. M/s. Sachin Notified Area, Surat

ITA 1315/AHD/2007 | 2003-2004
Pronouncement Date: 16-07-2010 | Result: Dismissed

Appeal Details

RSA Number 131520514 RSA 2007
Assessee PAN EGIDA1962I
Bench Ahmedabad
Appeal Number ITA 1315/AHD/2007
Duration Of Justice 3 year(s) 3 month(s) 14 day(s)
Appellant The ITO, Ward-2(4),, Surat
Respondent M/s. Sachin Notified Area, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 16-07-2010
Date Of Final Hearing 24-06-2010
Next Hearing Date 24-06-2010
Assessment Year 2003-2004
Appeal Filed On 02-04-2007
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MUKUL SHRAWAT JM AND D.C.AGRAWAL AM THE INCOME-TAX OFFICER WARD 2(4) SURAT. VS. M/S SACHIN NOTIFIED AREA PLOT NO.5719 UNNATI BUILDING ROAD NO.6 GIDC SACHIN DIST. SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI GAURAV BATHAM DR REVENUE BY:- SHRI M. K. PATEL A.R. O R D E R PER D. C. AGRAWAL ACCOUNTANT MEMBER . THIS AN APPEAL FILED BY THE REVENUE AGAINST THE O RDER OF LD. CIT(A) DATED 29/1/2007. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHE R ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 10(20) OF THE I .T. ACT 1961. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A NOT IFIED AREA IN SURAT FOR THE INDUSTRIAL DEVELOPMENT. IT FILED RETURN OF INCO ME AT NIL BY CLAIMING EXEMPTION U/S 10(20). IT WAS CLAIMED BY THE ASSESSE E THAT IT IS A LOCAL AUTHORITY NOTIFIED BY THE STATE GOVERNMENT UNDER TH E GUJARAT INDUSTRIAL DEVELOPMENT ACT 1962 (GIDA IN SHORT). IT HAS BEEN ENTRUSTED WITH THE WORK OF DEVELOPMENT AND COLLECTION OF TAX UNDER THE NOTIFICATION DATED ITA NO.1315/AHD/2007 ASST. YEAR :2003-04 2 21.11.1997 INSTITUTED UNDER THE GUJARAT MUNICIPALIT IES ACT 1963. THE ASSESSEE FURTHER CLAIMED THAT IT IS A LOCAL AUTHORI TY INASMUCH AS IT IS A DEEMED MUNICIPALITY AS IT HAS BEEN CREATED UNDER TH E GUJARAT INDUSTRIAL DEVELOPMENT ACT 1962 (GIDA IN SHORT) AND UNDER THA T ACT ALL THE PROVISIONS OF MUNICIPALITIES ACT 1963 HAVE BEEN MA DE APPLICABLE. HOWEVER THE AO WAS OF THE VIEW THAT WITH THE DELET ION OF SECTION 10(20A) THE ASSESSEE IS NO LONGER A LOCAL AUTHORITY AND IT IS ALSO NOT A MUNICIPALITY AS DEFINED U/S 10(20) OF THE ACT. HE R EFERRED TO THE FOLLOWING DEFINITION OF LOCAL AUTHORITY AS CONTAINE D IN SECTION 10(20) AS UNDER :- (I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTICLE 2 43 OF THE CONSTITUTION; OR (II) MUNICIPALITY AS REFERRED TO IN CLAUSE (E) OF ARTICL E 243P OF THE CONSTITUTION; OR (III) MUNICIPAL COMMITTEE AND DISTRICT BOARD LEGALLY ENT ITLED TO OR ENTERED BY THE GOVERNMENT WITH THE CONTROL OR MANA GEMENT OF A MUNICIPAL OR LOCAL FUND; OR (IV) CANTONMENT BOARD AS DEFINED IN SECTION 3 OF THE CAN TONMENTS ACT 1924(2 OF 1924). ACCORDING TO THE AO ASSESSEE IS NOT ENTITLED TO EXE MPTION UNDER SECTION 10(20) AS IT IS NOT A MUNICIPALITY OR PANCHAYAT OR MUNICIPAL COMMITY OR DISTRICT BOARD OR CANTONMENT BOARD. HE THEREFORE DISALLOWED THE PAYMENT MADE BY THE ASSESSEE TO DISTRICT RURAL DEVE LOPMENT AGENCY (DRDA (IN SHORT) WHICH WAS PAID AT THE DIRECTION OF THE STATE GOVERNMENT AND ALSO ADDED THE INTEREST EARNED BY TH E AUTHORITY ON FDRS. 4. THE LD. CIT(A) HOWEVER ALLOWED THE CLAIM OF TH E ASSESSEE THROUGH A DETAILED AND REASONED ORDER. HE HELD THAT STATE GOVERNMENT HAS EMPOWERED THE NOTIFIED AREAS SO CREATED WHEREIN TAX WOULD BE LEVIED AND 3 COLLECTED. THIS POWER IS GIVEN UNDER SECTION 246A B C D & E OF THE GUJARAT MUNICIPALITIES ACT AND ALSO U/S 16 OF GIDA. THE LD. CIT(A) REFERRED TO THE DECISION OF HON. APEX COURT IN CIVI L APPEAL 364 OF 1999 ARISING OUT OF SLP(C) NO.3765 OF 1998 WHEREIN HON. APEX COURT HELD THAT SECTION 16 OF GIDA 1962 ENABLES THE STATE GOV ERNMENT TO CREAT AND NOTIFY AREAS AND EQUATE THEM WITH NOTIFIED AREAS CR EATED UNDER GUJARAT MUNICIPALITIES ACT. ACCORDING TO HIM NOTIFIED AREAS SO CREATED UNDER GIDA WOULD BE GOVERNED BY THE PROVISIONS OF GUJARAT MUNICIPALITIES ACT 1963 AS APPLICABLE TO NOTIFIED AREAS CREATED U NDER THAT ACT. THUS ACCORDING TO THE LD. CIT(A) ASSESSEE IS A NOTIFIED AREA AND A DEEMED MUNICIPALITY. THEREFORE IT IS A LOCAL AUTHORITY WI THIN THE MEANING OF SECTION 10(20). HE FINALLY HELD AS UNDER :- 5.6 THUS AS PER THE OBSERVATIONS OF HON. SUPREME COURT A NOTIFIED AREA UNDER THE GIDA 1962 IS AN INDUSTRIAL TOWNSHIP. AFTER THE AMENDMENT TO SECTION 264 OF THE GUJARAT MUNICIPALIT IES ACT SUCH NOTIFIED AREA WOULD ALSO BECOME A NOTIFIED AREA UNDER THE GU JARAT MUNICIPALITIES ACT AND WOULD BE DEEMED TO BE AN INDUSTRIAL TOWNSHI P UNDER THE PROVISIONS OF CLAUSE (1) OF ARTICLE 243Q OF THE CON STITUTION OF INDIA. IN OTHER WORDS SUCH INDUSTRIAL TOWNSHIPS ARE DEEMED A S A MUNICIPALITY AS DEFINED IN THE EXPLANATION BELOW SECTION 10(2) OF T HE I.T.ACT. THIS WOULD MEAN THAT THE INCOME OF SUCH NOTIFIED AREAS WOULD B E EXEMPT FROM TAXATION UNDER THE PROVISIONS OF SECTION 10(20) OF THE I.T.ACT. THE INCOME OF THE MUNICIPALITY IS FROM TAXES COLLECTED ON VARI OUS FACILITIES PROVIDED TO THE RESIDENTS WITHIN THE SPECIFIED AREA. IN THE CASE OF THE ASSESSEE AS PER THE DIRECTIONS OF THE STATE GOVERNMENT THE SUM OF RS.1 02 80 888/- WAS TO BE PAID TO THE DRDA FOR THE DEVELOPMENT OF T HE GRAM AND NAGAR PANCHAYAT WHOSE LAND HAD BEEN TAKEN AWAY TO FORM S UCH AREA. THEREFORE I AM OF THE VIEW THAT WHERE THE INCOME O F THE ASSESSEE WAS TO BE EXEMPT U/S 10(20) OF THE I.T. ACT SUCH EXPENDIT URE BEING IN ACCORDANCE WITH THE STATUTORY PROVISIONS APPLICABLE TO THE FUNCTIONING OF THE ASSESSEE COULD NOT BE DISALLOWED AND TREATED AS INCOME. ON THE SAME GROUND THE INTEREST EARNED ON FIXED DEPOSITS OF TH E SUM OF RS.8 95 711/- ALSO CANNOT BE TREATED AS INCOME AND TAXED. THE AO IS THEREFORE DIRECTED TO DELETE SUCH ADDITIONS. 4 5. AGAINST THIS THE REVENUE IS AGGRIEVED AND IT HA S RAISED FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN TREATING THE INCOME OF THE ASSESSEE SACHIN NOTIFIED AREA IS EXEMPT FROM TAXATION UNDE R THE PROVISIONS OF SECTION 10(20) OF THE I.T. ACT AND TH EREBY DELETING THE ADDITION IN RESPECT OF PAYMENT MADE TO DISTRICT RURAL DEVELOPMENT AGENCY AT RS.1 02 80 711/- AND INTEREST INCOME ON FIXED DEPOSIT AT RS.8 95 711/-. 6. THE LD. DR SUBMITTED THAT AFTER THE AMENDMENT IN INCOME-TAX ACT W.E.F. 1.4.2003 SECTION 10(20A) WHICH PROVIDED EXEM PTION TO INCOME TO LOCAL AUTHORITY HAS BEEN OMITTED AND IN PLACE OF IT SECTION 10(20) HAS BEEN INSERTED. THEREFORE OLD CONCEPT OF LOCAL AUTHORIT Y AS CONTAINED IN SECTION 10(20A) CANNOT BE BORROWED TO HOLD THE ASSE SSEE AS LOCAL AUTHORITY. THE SCOPE OF LOCAL AUTHORITY HAS BEEN SE VERELY CURTAILED AND IS CONFINED ONLY TO ITEMS MENTIONED THEREIN SUCH AS PA NCHAYATS AS REFERRED TO IN ARTICLE 243(D) OF THE CONSTITUTION MUNICIPAL ITY AS REFERRED TO IN ARTICLE 243P(E) OF THE CONSTITUTION MUNICIPAL COMM ITTEE AND DISTRICT BOARD AND CANTONMENT BOARD AS DEFINED IN SECTION 3 OF THE CANTONMENT ACT 1924. THE ASSESSEE IS NEITHER PANCHAYAT NOR MU NICIPAL COMMITTEE NOR DISTRICT BOARD NOR CANTONMENT BOARD. THE ASSESS EE IS ALSO NOT A MUNICIPALITY AS REFERRED TO IN CLAUSE(E) OF ARTICLE 243P OF THE CONSTITUTION. LD. DR THEN REFERRED TO ARTICLE 243P (E) AND SUBMITTED THAT AS PER THAT ARTICLE MUNICIPALITY MEANS AN INSTITUTI ON OF SELF-GOVERNMENT CONSTITUTED UNDER ARTICLE 243Q. HE THEN TOOK US TO ARTICLE 243Q AND SAID THAT PROVISO CONTAINED THEREIN DOES NOT PROVIDE THE STATUS OF MUNICIPALITY TO AN INDUSTRIAL ESTABLISHMENT. SINCE ACCORDING TO THE LD. DR PROVISO TAKES AWAY THE STATUS OF MUNICIPALITY FROM THE INDU STRIAL ESTABLISHMENT 5 WHICH THE ASSESSEE IS THE ASSESSEE CANNOT THEREFO RE BE TREATED AS MUNICIPALITY WITHIN THE MEANING OF SECTION 10(20). 7. AGAINST THIS THE LD. AR ELABORATELY SUPPORTED T HE ORDER OF LD. CIT(A). HE SUBMITTED THAT PROVISO UNDER ARTICLE 243 Q DOES NOT CARVE OUT AN EXCEPTION FOR INDUSTRIAL ESTABLISHMENT TAKING IT OUT FROM THE CONCEPT OF MUNICIPALITY BUT IN FACT IT CREATES A CLAUSE IN ITSELF LIKE ANY OTHER CLAUSE OF MUNICIPALITY DEFINED IN ARTICLE 243Q. THEREAFTER HE REFERRED TO SECTION 264A OF GUJARAT MUNICIPALITIES ACT 1963 WHICH PROVI DED THE DEFINITION OF NOTIFIED AREA BEING AN URBAN AREA SPECIFIED AS I NDUSTRIAL TOWNSHIP AREA UNDER PROVISO TO CLAUSE (I) OF ARTICLE 243Q OF THE CONSTITUTION. THUS ACCORDING TO HIM PROVISO TO CLAUSE (I) OF ARTICLE 2 43Q OF THE CONSTITUTION PROVIDES FOR CONCEPT OF NOTIFIED AREA BEING AN INDU STRIAL TOWNSHIP. THEREFORE ACCORDING TO HIM IT IS INCORRECT TO SAY THAT NOTIFIED AREAS AS PER THE PROVISO TO CLAUSE (I) OF ARTICLE 243Q CARVES OU T AN EXCEPTION FROM BEING A MUNICIPALITY. HE THEN REFERRED TO SECTION 1 6 OF GIDA WHICH PROVIDED FOR EXTENSION OF ALL THE PROVISIONS OF GUJ ARAT MUNICIPALITIES ACT 1963 TO NOTIFIED AREAS UNDER GIDA OR UNDER MUNICIPA LITIES ACT 1963. HE THEN REFERRED TO SECTION 264 OF GUJARAT MUNICIPALIT IES ACT 1963 FOR THE PROPOSITION THAT ALL THE PROVISIONS OF MUNICIPALITI ES ACT WOULD BE APPLICABLE TO SUCH NOTIFIED AREAS. BY TAKING US TO THESE PROVISIONS LD. AR SUBMITTED THAT NOTIFIED AREAS CREATED UNDER GIDA AR E TREATED AT PAR WITH NOTIFIED AREAS CREATED UNDER MUNICIPALITIES ACT 19 63 BY VIRTUE OF SECTION 264B OF THAT ACT. THUS THERE ARE TWO POWERS GIVEN T O THE STATE GOVERNMENT TO DECLARE AN INDUSTRIAL TOWNSHIP AS NOT IFIED AREA. ONE POWER IS GIVEN UNDER SECTION 16 OF GIDA AND THE OTH ER POWER IS GIVEN UNDER SECTION 264B OF MUNICIPALITIES ACT. BOTH THE NOTIFIED AREAS ARE TREATED AT PAR FOR THE APPLICABILITY OF MUNICIPALIT IES ACT AND THEREFORE THE NOTIFIED AREA SO CREATED BY THE STATE GOVERNMEN T UNDER SECTION 16 OF 6 GIDA WOULD BE A MUNICIPALITY AND THEREFORE WOULD BE ENTITLED TO EXEMPTION UNDER SECTION 10(20). HE THEN REFERRED TO THE JUDGMENT OF HON. APEX COURT IN THE CASE REFERRED TO BY LD. CIT(A) AN D SUBMITTED THAT ARTICLE 243Q OF THE CONSTITUTION AND PROVISO TO CLA USE (I) THERETO HAS BEEN ELABORATED IN DETAIL AND THEREFORE THERE IS NO AM BIGUITY WHICH CAN BE PERCEIVED ON ITS INTERPRETATION. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ORDER OF LD. CIT(A) DESERVES TO BE UPHELD. NO DOUBT PROVISIONS OF SECTION 10(20A) OF I T ACT HAS BEEN OMITTED W.E.F. 1.4.2003 AND THEREBY LAW RELATING TO LOCAL AUTHORITY AS CONTAINED THEREIN COULD NOT BE BORROWED TO FIND OUT WHETHER ASSESSEE IS A LOCAL AUTHORITY WITHIN THE MEANING OF SECTION 10(20 ). IT IS TO BE INDEPENDENTLY SEEN WHETHER THE ASSESSEE IS COVERED UNDER SECTION 10(20) OF THE ACT AS A MUNICIPALITY. AS PER CLAUSE (II) OF SECTION 10(20) A MUNICIPALITY AS REFERRED TO IN CLAUSE (E) OF ARTIC LE 243P OF THE CONSTITUTION WOULD BE A LOCAL AUTHORITY. IN ARTICLE 243P (E) THE MUNICIPALITY IS DEFINED AS UNDER :- 243 (E) MUNICIPALITY MEANS AN INSTITUTION OF SELF-GOVERNM ENT CONSTITUTED UNDER ARTICLE 243Q. FROM THIS DEFINITION MUNICIPALITY IS AN INSTITUTION OF SELF-GOVERNMENT. THEREFORE ANY INSTITUTION WHICH IS CREATED FOR SEL F-GOVERNANCE OF ANY AREA COULD BE A MUNICIPALITY. THE CONSTITUTION OF S UCH INSTITUTION OF SELF- GOVERNMENT HAS BEEN LAID UNDER ARTICLE 243Q WHICH R EADS AS UNDER :- ARTICLE 243Q (1) THERE SHALL BE CONSTITUTED IN EVERY STATE - (A) A NAGAR PANCHAYAT (BY WHATEVER NAME CALLED) FOR A T RANSITIONAL AREA THAT IS TO SAY AN AREA IN TRANSITION FROM A RURAL AREA TO AN URBAN AREA; (B) A MUNICIPAL COUNCIL FOR A SMALLER URBAN AREA; AND 7 (C) A MUNICIPAL CORPORATION FOR A LARGER URBAN AREA IN ACCORDANCE WITH THE PROVISIONS OF THIS PART: PROVIDED THAT A MUNICIPALITY UNDER THIS CLAUSE MAY NOT BE C ONSTITUTED IN SUCH URBAN AREA OR PART THEREOF AS THE GOVERNMENT MAY HAVING REGARD TO THE SIZE OF THE AREA AND THE MUNICIPAL SERVICES BEING PROVIDED OR PROPOSED T O BE PROVIDED BY AN INDUSTRIAL ESTABLISHMENT IN THAT AREA AND SUCH OTHER FACTORS A S HE MAY DEEM FIT BY PUBLIC NOTIFICATION SPECIFY TO BE AN INDUSTRIAL TOWNSHIP. (2) IN THIS ARTICLE A TRANSITIONAL AREA A SMAL LER URBAN AREA OR A LARGER URBAN AREA MEANS SUCH AREA AS THE GOVERNOR MAY HA VING REGARD TO THE POPULATION OF THE AREA THE DENSITY OF THE POPULATION THEREIN THE REVENUE GENERATED FOR LOCAL ADMINISTRATION THE PERCENTAGE OF EMPLOYMENT IN NON -AGRICULTURAL ACTIVITIES THE ECONOMIC IMPORTANCE OR SUCH OTHER FACTORS AS HE MAY DEEM FIT SPECIFY BY PUBLIC NOTIFICATION FOR THE PURPOSES OF THIS PART. 9. THE ABOVE ARTICLE CLEARLY DEFINES VARIOUS INSTIT UTIONS OF THE NATURE OF MUNICIPALITY BASED ON SELECTED AREAS OF THE URBA N AREA. THE SELF- GOVERNING INSTITUTION WHICH IS IN THE STATE OF TRAN SITION FROM A RURAL AREA TO AN URBAN AREA IS CALLED NAGAR PANCHAYAT. THE SELF-G OVERNING INSTITUTION IN SMALL URBAN AREA IS CALLED MUNICIPAL COUNCIL AND SE LF-GOVERNING INSTITUTION IN LARGER URBAN AREA IS CALLED MUNICIPA L CORPORATION. THE PROVISO TO CLAUSE (1) IN THE ABOVE ARTICLE ENABLES THE GOVERNOR NOT TO CONSTITUTE MUNICIPALITY UNDER THIS CLAUSE IF MUNICI PAL SERVICES ARE PROVIDED OR PROPOSED TO BE PROVIDED BY AN INDUSTRIA L ESTABLISHMENT IN THAT AREA. IN OTHER WORDS MUNICIPALITY OF THE NATUR E OF NAGAR PANCHAYAT MUNICIPAL COUNCIL OR MUNICIPAL CORPORATION MAY NOT BE CONSTITUTED IN THAT URBAN AREA WHERE MUNICIPAL SERVICES ARE ALREAD Y BEING PROVIDED OR PROPOSED TO BE PROVIDED BY AN INDUSTRIAL ESTABLISHM ENT. FOR DECIDING AS TO WHETHER MUNICIPALITY UNDER THIS CLAUSE IS REQUIR ED TO BE CONSTITUTED IN AN URBAN AREA OR NOT THE GOVERNOR MAY TAKE INTO CON SIDERATION THE SIZE OF AREA OR MUNICIPAL SERVICES ALREADY PROVIDED OR PROP OSED TO BE PROVIDED AND OTHER FACTORS AS HE MAY DEEM FIT. FROM BARE REA DING OF ABOVE ARTICLE WE INFER THAT WHERE MUNICIPAL SERVICES ARE PROVIDED BY INDUSTRIAL 8 ESTABLISHMENT THEN FURTHER OTHER TYPES OF MUNICIPAL ITY NEED NOT BE CONSTITUTED IN SUCH URBAN AREA. IN OTHER WORDS THER E CANNOT BE DUPLICATION OF MUNICIPALITIES ONE LIKE NAGAR PANCHAYAT MUNICIP AL COUNCIL OR MUNICIPAL CORPORATION AND OTHER LIKE INDUSTRIAL EST ABLISHMENT (LIKE NOTIFIED AREAS AS THE ASSESSEE IS) IF ONE TYPE IS A LREADY PROVIDING MUNICIPAL SERVICES. THE BASIC FACTOR IS THE PROVIDI NG OF MUNICIPAL SERVICES. THIS MAY BE PROVIDED BY GRAM PANCHAYAT M UNICIPAL COUNCIL OR MUNICIPAL CORPORATION OR BY AN INDUSTRIAL ESTABL ISHMENT I.E. NOTIFIED AREA. IT IS NOT A CASE OF CARVING OUT AN EXCEPTION FROM THE GENERAL CATEGORIES OF DIFFERENT MUNICIPALITIES AS LISTED IN SUB-CLAUSE (A) (B) & (C) OF CLAUSE (1) OF ARTICLE 243Q BUT A CASE OF AVOIDIN G DUPLICATION AND THEREFORE AN ADDITIONAL CLASS OF MUNICIPALITY CALL ED INDUSTRIAL ESTABLISHMENT OR NOTIFIED AREA PROVIDING MUNICIP AL SERVICES OR PROPOSED TO PROVIDE SUCH MUNICIPAL SERVICES IS CREA TED BY THE PROVISO. THEREFORE WE UPHOLD THE CONTENTION OF LD. AR THAT PROVISO TO CLAUSE (1) TO ARTICLE 243Q CREATES ANOTHER CLASS OF INSTITUTIO N OF SELF-GOVERNANCE IN ADDITION TO NAGAR PANCHAYAT MUNICIPAL COUNCIL AND MUNICIPAL CORPORATION. HONBLE SUPREME COURT IN THE CASE OF S AIJ GRAM PANCHAYAT VS. THE STATE OF GUJARAT & ORS. IN CIVIL APPEAL NO. 364 OF 1999 [ARISING OUT OF SLP (C) NO.3765 OF 1998] RENDERED ON 27.1.19 99 HAS CONSIDERED THE DEFINITION OF MUNICIPALITY AS CONTAINED IN ARTICLE 243Q WHICH IS ALREADY REFERRED ABOVE. 10. THUS THE HON. APEX COURT HELD THAT NOTIFIED ARE AS UNDER SECTION 16 OF GIDA WOULD ALSO BECOME NOTIFIED AREAS U/S 264A O F GUJARAT MUNICIPALITIES ACT AND THEREFORE WOULD MEAN AN I NDUSTRIAL TOWNSHIP AREA AS PER PROVISO TO CLAUSE (1) OF ARTICLE 243Q O F THE CONSTITUTION OF INDIA. HON. APEX COURT REFERRING TO THE DECISION IN THE SOLAPUR MIDC 9 INDUSTRIES ASSOCIATION ETC. VS. STATE OF MAHARASHTR A AND OTHERS (JT 1996 (7) SC 14) HAS HELD THAT INDUSTRIAL TOWNSHIP CREATED UNDER GI DA WOULD BE DEEMED TO BE THE INDUSTRIAL TOWNSHIP FOR THE PUR POSES OF LOCAL SELF- GOVERNMENT BY OBSERVING AS UNDER :- AS HELD BY THIS COURT IN SOLAPUR MIDC INDUSTRIES A SSOCIATION ETC. VS. STATE OF MAHARASHTRA & ORS. (JT 1996 (7) SC 14) A MUNICIPAL CORPORATION ACT AND AN INDUSTRIAL DEVELOPMENT ACT H AVE DISTINCT FIELDS OF OPERATION AND THERE IS NO INTER SE CONFLICT BETWEEN THE TWO. BY REASON OF THE NOTIFICATIONS OF 7.9.1993 THE INDUSTRIAL AREA DEVELOPED UNDER THE GUJARAT INDUSTRIAL DEVELOPMENT ACT IS ALSO DEEMED T O BE AN INDUSTRIAL TOWNSHIP FOR THE PURPOSES OF LOCAL SELF-GOVERNMENT. ANY POSSIBLE CONFLICT IS ALSO REMOVED BY THE SECOND NOTIFICATION OF 7.9.1 993 REMOVING THIS AREA FROM THE AMBIT OF THE GUJARAT PANCHAYATS ACT 1961 CANNOT BE A NOTIFIED AREA UNDER THE GUJARAT MUNICIPALITIES ACT LOSES ALL FORCE. REGARDING INTERPRETATION OF ARTICLE 243Q AND TREATM ENT TO BE GIVEN TO AN INDUSTRIAL ESTABLISHMENT AS DEEMED MUNICIPALITY HON . APEX COURT IN THAT CASE HELD AS UNDER :- ARTICLE 243Q DEALS WITH CONSTITUTION OF MUNICIPALI TIES. MUNICIPALITY IS DEFINED UNDER ARTICLE 243P(E) TO MEAN AN INSTITUT ION OF SELF-GOVERNMENT CONSTITUTED UNDER ARTICLE 243Q. ARTICLE 243Q CONSTI TUTES THREE TYPES OF MUNIPALITIES (A) A NAGAR PANCHAYAT (B) A MUNICIPAL COUNCIL AND (C) A MUNICIPAL CORPORATION. THE PROVISO TO ARTICLE 243Q DEALS WITH ALL THREE TYPES OF MUNICIPALITIES CONSTITUTED UNDER CLAUSE (1 ). IT PROVIDES THAT A MUNICIPALITY UNDER CLAUSE (1) MAY NOT BE CONSTITUTE D IN CERTAIN CIRCUMSTANCES. THIS WOULD REFER TO ANY OF THE THREE TYPES OF MUNICIPALITIES. ALTHOUGH THE PROVISO REFERS TO SUCH URBAN AREA OR PART THEREOF THIS URBAN AREA ALSO COVERS A TRANSITION AL AREA IN TRANSITION FROM RURAL TO URBAN. IT IS BECAUSE THIS AREA IS ALS O IN THE PROCESS OF TURNING INTO AN URBAN AREA THAT IT IS PUT UNDER PAR T IXA WHICH DEALS WITH MUNICIPALITIES IN URBAN AREAS. THEREFORE IN RESPEC T OF ANY OF THESE THREE TYPES OF AREAS SET OUT IN CLAUSE (1) OF ARTICLE 243 Q HAVING REGARD TO THE SIZE OF THE AREA THE MUNICIPAL SERVICES BEING PROV IDED OR PROPOSED TO BE PROVIDED BY AN INDUSTRIAL ESTABLISHMENT IN THAT ARE A AND SUCH OTHER FACTORS AS THE GOVERNOR WILL DEEM FIT TO CONSIDER HE MAY BY PUBLIC NOTIFICATION SPECIFY SUCH AREA TO BE AN INDUSTRIAL TOWNSHIP. ALL THESE 10 RELEVANT FACTORS WOULD BE IN OPERATION IN AN INDUST RIAL AREA ALREADY NOTIFIED MANY YEARS BACK UNDER AN INDUSTRIAL DEVELO PMENT CORPORATION ACT AS IN THE PRESENT CASE. THEREFORE THERE IS NO BREACH OF ARTICLE 243Q IF SUCH AN AREA IS UNDER THE PROVISIONS OF AN INDUSTR IAL DEVELOPMENT ACT EQUATED WITH AN INDUSTRIAL TOWNSHIP UNDER ARTICLE 2 43Q. 11. THUS WE ARE OF THE VIEW THAT ONCE HON. APEX COU RT HAS INTERPRETED THAT NOTIFIED AREAS WOULD BE INDUSTRIAL ESTABLISHME NTS WITHIN THE MEANING OF ARTICLE 243Q AND PROVISO THEREOF THEN SUCH NOTIF IED AREAS WOULD BE DEEMED AS INDUSTRIAL TOWNSHIP FOR THE PURPOSES OF L OCAL SELF-GOVERNMENT. 12. NOW WE REFER TO VARIOUS SECTIONS OF GUJARAT MUN ICIPALITIES ACT AS REFERRED TO BY LD. AR AND LD. DR. THEY ARE AS UNDER :- 264A (AS AMEN -DED) (1) FOR THE PURPOSE OF THIS CHAPTER NOTIFIED AREA MEANS AN URBAN AREA OR PART THEREOF SPECIFIED TO BE AN INDUSTRIAL TOWNSHIP AREA UNDER THE PROVISO TO CLAUSE (1) OF ARTICLE 243Q OF THE CONSTITUTION OF INDIA. 264B (2) AN AREA IN REGARD TO WHICH A NOTIFICATION HAS BEEN ISSUED UNDER SUB- SECTION (1) IS HEREINAFTER CALLED A NOTIFIED AREA. (1) THE STATE GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE - (A) APPLY TO ADAPT TO ANY NOTIFIED AREA THE PROV ISION OF ANY SECTION OF THIS ACT OR PART OF ANY SUCH SECTION OR OF ANY RULES IN FORCE OR WHICH CAN BE IMPOSED IN ANY MUNICIPAL BOROUGH UNDER THE PROVISIO NS OF THIS ACT SUBJECT TO SUCH RESTRICTIONS AND MODIFICATIONS IF ANY. AS IT MAY THINK FIT; (B) IMPOSE IN ANY SUCH AREA ANY TAX WHICH MIGHT BE IMPOSED THEREIN UNDER THE PROVISION OF THIS ACT IF THE SAID AREA WERE A M UNICIPAL BOROUGH (C) APPOINT A PERSON OR A COMMITTEE FOR THE PUR POSES OF THE ASSESSMENT AND RECOVERY OF ANY TAX IMPOSED UNDER CLAUSE (B) AND I N ORDER TO ARRANGE FOR THE DUE EXPENDITURE OF THE PROCEEDS OF SUCH TAXES AND FOR THE PREPARATION AND MAINTENANCE OF PROPER ACCOUNTS AND GENERALLY FOR E NFORCING THE PROVISIONS OF ANY SECTIONS OR RULES APPLIED OR ADOPTED UNDER CLAU SE (A). 11 (2) THE PROCEEDS OF ANY LAX LEVIED IN ANY NOTIFIED AREA UNDER THIS SECTION SHALL BE EXPENDED ONLY IN SUCH MANNER IN WHICH IF THE NO TIFIED AREA WERE A MUNICIPAL BOROUGH THE MUNICIPAL FUND THEREOF MIGHT BE EXPENDED. 264C FOR THE PURPOSES OF ANY SECTION OF THIS ACT W HICH MAY BE APPLIED TO A NOTIFIED AREA THE PERSON OR COMMITTEE APPOINTED FOR SUCH AR EA UNDER SECTION 264B SHALL BE DEEMED TO BE A MUNICIPALITY UNDER THIS ACT AND THE AREA SHALL BE DEEMED TO BE A MUNICIPAL BOROUGH. FURTHER SECTION 16 OF GIDA 1962 READS AS UNDER :- SECTION 16 OF GID ACT 1962- NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISION S FOR THE TIME BEING IN FORCE RELATING TO NOTIFIED AREAS IN THE GUJARAT MUNICIPALITIES ACT 1963 THE STATE GOVERNMENT BY NOTIFICATION IN THE OFFICI AL GAZETTE- A) DECLARE THAT THE PROVISIONS RELATING TO NOTIFIED AR EAS AND ANY OTHER PROVISIONS OF THAT ACT SHALL EXTEND TO AND BE BROUGHT INTO FORCE IN ANY INDUSTRIAL AREA AND THEREUPON SUCH AR EA SHALL BE DEEMED TO BE A NOTIFIED AREA UNDER THAT ACT. B) APPOINTS THE CORPORATION OR ANY OFFICER OR COMMITTE E THEREOF FOR THE PURPOSES OF THE ASSESSMENT AND RECOVERY OF ANY TAXES WHEN IMPOSED UNDER THE PROVISIONS SO EXTENDED AND F OR ENFORCING SUCH PROVISIONS; C) PROVIDE THAT THE PROVISIONS OF ANY OTHER LAW RELATI NG TO LOCAL AUTHORITIES WHICH IS IN FORCE IN THAT AREA SHALL CE ASE TO APPLY AND THEREUPON SUCH PROVISIONS SHALL CEASE TO APPLY THERETO; D) MAKE SUCH OTHER PROVISION AS IS NECESSARY FOR THE P URPOSES OF THE ENFORCEMENT OF THE PROVISIONS SO EXTENDED TO TH AT AREA. 13. A COMBINED READING OF THESE SECTIONS INDICATES THAT THE STATE GOVERNMENT CAN CREATE BY NOTIFICATION IN OFFICIAL GAZETTE A NOTIFIED AREA AND PROVISIONS OF GUJARAT MUNICIPALITIES ACT WOULD BE APPLICABLE TO SUCH NOTIFIED AREAS UNDER SECTION 16 OF GIDA. NOTIFIED A REAS CREATED UNDER SECTION 264B OF MUNICIPALITIES ACT AND NOTIFIED ARE AS DECLARED UNDER SECTION 16 OF GIDA WOULD BE TREATED AT PAR AS THERE IS NO CONFLICT BETWEEN THE TWO PROVISIONS. NO DISTINGUISHING FEATU RE HAS BEEN PROVIDED 12 IN THE GIDA OR UNDER MUNICIPALITIES ACT. FURTHER IT IS PROVIDED THAT THE PROVISIONS OF GUJARAT MUNICIPALITIES ACT WOULD BE A PPLICABLE TO ALL NOTIFIED AREAS WHETHER CREATED UNDER SECTION 16 OF GIDA OR UNDER SECTION 264B OF MUNICIPALITIES ACT. ONCE PROVISIONS OF MUNI CIPALITIES ACT ARE APPLICABLE TO NOTIFIED AREA AND THEY ARE TREATED AS A SEPARATE A CLASS OF SELF-GOVERNING INSTITUTION THEN THEY HAVE ALL THE I NGREDIENTS OF A MUNICIPALITY AND THEREFORE THEY ARE COVERED BY CL AUSE (II) OF SECTION 10(20). WE FURTHER NOTE THAT SUCH NOTIFIED AREAS HA VE BEEN GIVEN POWER TO IMPOSE TAXES UNDER THE PROVISIONS OF MUNICIPALITIES ACT 1963 AND COLLECT TAXES BY APPOINTING A PERSON OR COMMITTEE FOR THAT PURPOSE. THE NAGAR PANCHAYAT MUNICIPAL COUNCIL MUNICIPAL CORPORATION HAVE ALSO BEEN ENTRUSTED WITH THE POWER TO LEVY ASSESS AND COLLEC T TAXES. IT IS NOT THE CASE THAT NAGAR PANCHAYAT MUNCIPAL COUNCIL OR MUNI CIPAL CORPORATION ARE ALSO FUNCTIONING SIMULTANEOUSLY ALONG WITH ADMI NISTRATION BY NOTIFIED AREA. THE JURISDICTION OF NAGAR PANCHAYAT MUNICIPA L COUNCIL OR MUNICIPAL CORPORATION AND NOTIFIED AREA ARE DIFFERE NT AND DEFINED AND THEY DO NOT OVERLAP. THE URBAN OR TRANSITIONAL URB AN AREAS GIVEN FOR SELF GOVERNANCE TO THESE BODIES ARE CLEARLY DEMARCATED. AT LEAST NO CASE HAS BEEN MADE OUT THAT THEY OVERLAP. THE NOTIFIED AREA LIKE THE ASSESSEE HAS BEEN GIVEN THE SAME POWER UNDER THE MUNICIPALITIES ACT AS IS GIVEN TO NAGAR PANCHAYAT MUNICIPAL COUNCIL OR MUNICIPAL COR PORATION. THE MUNICIPALITIES ACT IS APPLICABLE TO ALL CLASSES OF URBAN AREA EITHER NAGAR PANCHAYAT MUNICIPAL COUNCIL OR MUNICIPAL CORPORATI ON. IT IS ALSO APPLICABLE WITH EQUAL FORCE UPON THE ASSESSEE FUNCT IONING UNDER DEMARCATED AND SEPARATE AREAS CALLED NOTIFIED AREAS WHICH ARE INDEPENDENT OF ANY NAGAR PANCHAYAT MUNICIPAL COUNC IL OR MUNICIPAL CORPORATION. THE POWER TO CONSTITUTE SUCH NOTIFIED AREAS OR MUNICIPAL COUNCIL OR NAGAR PANCHAYAT OR MUNICIPAL CORPORATION ARE DERIVED FROM ARTICLE 243Q OF THE CONSTITUTION AND THEREFORE WE CANNOT SEE ANY 13 DISTINCTION AS TO HOW NOTIFIED AREAS WOULD NOT BE A SELF-GOVERNING INSTITUTION LIKE OTHER THREE BODIES. WE MAY FURTHER ADD THE WORD MUNICIPALITY AS USED IN ARTICLE 243P OF THE CONST ITUTION AND ALSO IN SECTION 10(20)(II) OF I.T. ACT IS A GENERIC TERM AN D HAS NO EXISTENCE AS SUCH EXCEPT IN THE FORM PROVIDED IN ARTICLE 243Q. N O SEPARATE INSTITUTION LIKE MUNICIPALITY CAN BE CONCEIVED AS SUCH. WHAT IS CREATED IS A NAGAR PANCHAYAT OR MUNICIPAL COUNCIL MUNICIPAL CORPORATI ON WHICH ARE MUNICIPALITY AND SO IS THE NOTIFIED AREAS OF INDUST RIAL ESTABLISHMENT WHICH IS ALSO A MUNICIPALITY BECAUSE OF THE POWERS AND PR OVISIONS CONTAINED IN GUJARAT MUNICIPALITIES ACT EQUALLY APPLICABLE TO AL L OF THEM. THUS WE UPHOLD THE ORDER OF LD. CIT(A) THAT ASSESSEE IS A M UNICIPALITY UNDER SECTION 10(20) OF THE ACT AND THEREFORE ITS INCOM E IS EXEMPT UNDER THAT SECTION. THE APPEAL OF REVENUE IS DISMISSED. 14. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 16/7/2010 SD/- SD/- (MUKUL SHRAWAR) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 16/7/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD