Strict construction of "local authority" under income-tax law denied exemption to an agricultural produce marketing committee.

For assessment year 2003-04, the amended section 10(20) was construed strictly and its exhaustive definition of "local authority" could not be expanded by reference to section 3(31) of the General Clauses Act, 1897. An agricultural produce marketing committee did not fit within the enumerated categories of panchayat, municipality or cantonment board, and overlapping municipal functions were insufficient to treat it as a municipal committee. In a taxing provision, no exemption can be implied beyond the statutory text. The CBDT circular was consistent with this view, and the committee was held ineligible for exemption from income-tax.

---

---

Issues: Whether, for the assessment year 2003-04, an agricultural produce marketing committee was a "local authority" within the meaning of section 10(20) of the Income-tax Act, 1961, and thereby entitled to exemption from income-tax.

Analysis: The earlier decision on the pre-amendment version of section 10(20) did not govern the later year because the amended provision introduced an exhaustive definition of "local authority". The expression had to be construed strictly within the four corners of the amended clause, and recourse to section 3(31) of the General Clauses Act, 1897, could not expand the meaning beyond the entities specifically enumerated in the Explanation. The committee did not fall within the categories of panchayat, municipality or cantonment board, and it could not be treated as a municipal committee merely because some of its functions overlapped with municipal functions. In a taxing statute, nothing can be read in by implication, and similarity of certain functions does not make two statutory bodies interchangeable. The CBDT circular also supported the view that agricultural marketing boards and societies were outside the exemption.

Conclusion: The committee was not a local authority for purposes of section 10(20) of the Income-tax Act, 1961, and the claim to exemption failed.

---