Exemption under industrial incentive scheme: mode of land acquisition held directory, preserving eligibility for tax benefit.

Under Section 4-A of the U.P. Trade Tax Act, the requirement that a new industrial unit have land available for its factory was treated as substantive, but the source or mode of acquiring that land was held to be merely directory unless the notification expressly made it mandatory. Acquisition of land by lease from a private person therefore did not defeat exemption, because the exemption scheme's object was industrial development and the acquisition mode had no direct nexus with that purpose. A restriction limiting benefit only to land allotted by a Government agency was found to lack rational connection with the scheme and to be arbitrary. The entitlement to exemption was accordingly preserved.

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Issues: Whether the condition requiring allotment of land for a new unit under the exemption notification was mandatory, or whether the mode of acquisition of land was merely directory so that acquisition by lease from a private person would not defeat exemption under Section 4-A.

Analysis: Section 4-A of the U.P. Trade Tax Act, 1948 is intended to promote industrial development and increase production. The condition that the new unit must have land available for its factory is substantive, because possession of land is necessary for setting up the unit. However, the particular mode by which such land is acquired does not bear the same nexus with the object of the exemption. The later notification removing the restriction on the source of land reinforced that the mode of acquisition was not essential to the exemption. A classification that denies benefit merely because the land was not allotted by a Government agency would have no rational connection with the object of the scheme and would be arbitrary.

Conclusion: The mode of acquisition of land was directory and not mandatory; non-compliance with that requirement did not destroy entitlement to exemption. The question was answered in favour of the assessee.

Ratio Decidendi: Where an exemption scheme aims to promote industrial development, possession of land for the unit may be a substantive eligibility requirement, but the mode of acquiring that land is not essential unless the notification expressly makes it so.

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