Exemption under section 10(20A) fails where the entity is a company, not an authority constituted by law.

Exemption under section 10(20A) of the Income-tax Act, 1961 was unavailable because the claimant was not itself an authority constituted by or under an enactment in India. The entity was incorporated as a company under the Companies Act, 1956, and no notification under section 3 of the U.P. Industrial Development Act, 1962 was produced to show constitution under that law. The requirement under section 10(20A) is cumulative: the body must both be constituted by law and be established for planning, development or improvement of cities, towns or villages. Although industrial development activities may satisfy the public-purpose limb, incorporation as a company was insufficient. The exemption claim therefore failed.

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Issues: Whether the assessee, a company incorporated under the Companies Act, 1956, could claim exemption under section 10(20A) of the Income-tax Act, 1961 on the footing that it was an authority constituted by or under an enactment in India for the purpose of planning, development or improvement of cities, towns and villages.

Analysis: The claim based on status as a local authority was not pursued, as the statutory definition under section 3(31) of the General Clauses Act, 1897 did not support the assessee's case. The assessee also failed to establish that it had been created under the U.P. Industrial Development Act, 1962, since no notification under section 3 of that Act was produced and the record showed that it was in fact incorporated as a company under the Companies Act, 1956. The requirement in section 10(20A) is cumulative: the claimant must be an authority constituted by or under law, and that law must be one enacted for the specified public purpose. Although the object and activities of industrial development corporations may satisfy the public-purpose limb, exemption cannot follow unless the entity itself answers the description of an authority constituted by law. On that footing, the assessee did not satisfy the first essential condition.

Conclusion: The assessee was not entitled to exemption under section 10(20A) of the Income-tax Act, 1961.

Ratio Decidendi: Exemption under section 10(20A) is available only if the claimant is itself an authority constituted by or under an enactment in India and is established for the specified development purpose; incorporation as a company under the Companies Act, 1956 is insufficient.

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