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The Supreme Court Bench comprising Justice AK Sikri and Justice Ashok Bhushan observed that the New Okhla Industrial Development Authority (NOIDA) is not a local authority within the meaning of Section 10(20) of the Income Tax Act as per the amendment of the Finance Act, 2002. The court further remarked that for the purposes of exemption from income tax payment, NOIDA couldn’t be treated as a “municipality”. These observations were made while dismissing the civil appeal filed by the appellant against the judgement of the Allahabad High Court.
When income tax notices were issued to the appellant in 1998, they refused to pay contending that they were a local authority entitled to the benefits of Section 10(20) of the Income Tax Act, 1961. They further argued that they were entrusted with performing the municipal services and thus, they should be exempted from paying taxes as per the provisions of the act. The court rejecting the contention observed that mere performance of municipal functions by an authority cannot grant it the status of a municipality. It further relied on the apex court judgment given in Gujarat Industrial Development Corporation v. Commissioner of Income Tax, 1997 to discuss the distinction between an industrial township and a municipality as provided in the proviso of Article 243(Q) of the act.
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