Local authority hoarding licence receipts treated as income from other sources, with exemption upheld under the tax law.

Income earned by a local authority from granting hoarding licences was treated as income from other sources, not business income, because the activity was regulatory rather than commercial. The licensing power was linked to statutory control over public safety, convenience, morality, projections and encroachments, and not to a trade or business carried on for profit. The limited quantum of receipts also supported their character as incidental licence income. On that basis, the income was held to fall within the exemption framework under section 10(20) of the Income-tax Act, 1961.

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Issues: Whether income derived by a local authority from granting licences for hoardings was assessable as business income or as income from other sources, and whether such income fell within the exemption under section 10(20) of the Income-tax Act, 1961.

Analysis: The relevant exemption provision protects income of a local authority chargeable under the head income from house property, capital gains or income from other sources, and also income from trade or business carried on by it only where it accrues from the supply of a commodity or service within its jurisdiction. The Corporation's receipt from hoardings was examined in the context of its statutory powers and duties under the municipal law. The licensing activity was found to be regulatory in nature, connected with public safety, convenience, morality and control of projections and encroachments, and not a commercial venture carried on as business. The limited quantum of such receipts also supported the character of the income as incidental licence income rather than business profit.

Conclusion: The income from hoardings was correctly treated as income from other sources and not as business income, and the claimed exemption was sustained.

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