2017 (2) TMI 286 - SC - Indian Laws

Supreme Court: No Tax Exemption without Proper Notification

MGR Industries Association And Another Versus State of U.P. And Others

The Supreme Court upheld the High Court's decision, ruling that the appellants were not entitled to tax exemption under Section 12A of the U.P. Industrial ... Industrial area under U.P. Indusrial Area Development Act, 1976 - claim exemption from taxation - exemption under Article 12A of the 1976 Act - Held that:- Section 12A specifically contemplates issuance of notification under proviso to clause (1) of Article 243Q and exclusion from Panchayat area is consequent and dependent upon such notification. Notification under proviso to clause (1) of Article 243Q has to be subsequent to declaration of an area as industrial development area, which itself indicates that declaration of development area under 1976 Act is not sufficient to treat an area as an industrial township. As noted above, industrial township as contemplated by Article 243Q( 1) proviso has to be specifically a public notification after consideration of relevant statutory ingredients referred therein. The exclusion of industrial development area from Panchayat has a serious consequence since persons residing within the industrial development area are immediately deprived of facilities and benefits extended to them by the respective Panchayats. The deprivation of the said benefits has to be thus a conscious decision in accordance with condition as contained in Article 243Q. In the case before us, it has not been pleaded that any notification referable to proviso to Article 243(Q)(1) has yet been issued. Thus it was rightly held by the High Court that exemption under Article 12A of the 1976 Act was not available in the facts of the above case. Issues Involved:1. Entitlement to tax exemption under Section 12A of U.P. Industrial Area Development Act, 1976.2. Requirement of notification under Article 243Q(1) of the Constitution for exemption.3. Validity of Zila Panchayat's tax realization in an industrial area.Detailed Analysis:1. Entitlement to Tax Exemption under Section 12A of U.P. Industrial Area Development Act, 1976:The appellants argued that the area in question, having been declared as an industrial area under Section 2(d) of the U.P. Industrial Area Development Act, 1976, should be exempted from taxation by the Zila Panchayat under Section 12A of the same Act. They contended that once an area is declared an industrial development area and taxes are levied under Section 11 of the 1976 Act, the industries are exempt from liability of any tax under the 1976 Act, thereby preventing double jeopardy.2. Requirement of Notification under Article 243Q(1) of the Constitution for Exemption:The State Government, in its order dated 23rd June 2014, stated that the provisions of Section 12A of the 1976 Act are not applicable unless the area is notified as an industrial township under the proviso to Article 243Q(1) of the Constitution. The High Court, relying on a previous judgment in Rishipal & Ors. vs. State of U.P. & Ors., upheld this view, stating that without such a notification, the exemption claimed under Section 12A is misconceived.3. Validity of Zila Panchayat's Tax Realization in an Industrial Area:The High Court dismissed the writ petition, holding that the area had not been declared as an industrial township, and thus, the Zila Panchayat was entitled to realize tax. It was noted that Section 12A specifically requires a notification under the proviso to Article 243Q(1) for an area to be excluded from the Panchayat's jurisdiction. The absence of such a notification means that the Zila Panchayat's tax realization is valid.Conclusion:The Supreme Court upheld the High Court's decision, stating that the appellants were not entitled to the claimed exemption as no notification under Article 243Q(1) had been issued. The declaration of an area as an industrial development area under the 1976 Act alone does not suffice to treat it as an industrial township. The appeal was dismissed, affirming that the Zila Panchayat's tax realization was lawful.