Broad meaning of development under tax exemption law extended to industrial development corporations and their income

Section 10(20A) of the Income-tax Act was read broadly so that "development" includes planned industrial development, not only non-industrial activity. Industrial estates and planned industrial areas were treated as contributing to the development and improvement of the locality because they require roads, buildings, sanitation, parks and other civic amenities. A construction preserving exemption for public bodies created to promote urban or rural development for public good was preferred, including in fiscal legislation. On that reasoning, the industrial development corporation was held to fall within section 10(20A), and its income was treated as exempt from tax.

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Issues: Whether an industrial development corporation constituted under a State enactment is an authority established for the purpose of planning, development or improvement of cities, towns and villages within section 10(20A) of the Income-tax Act, 1961, so as to make its income exempt from tax.

Analysis: The expression "development" in section 10(20A) was held to bear a wide meaning and not to be confined to non-industrial activity. Planned industrial areas and industrial estates require roads, buildings, sanitation, parks and other amenities, and their establishment directly contributes to the development and improvement of the place where they are located. The Court further held that a construction which preserves the exemption for public bodies created to promote urban or rural development for public good should be preferred, including in fiscal statutes.

Conclusion: The Corporation fell within section 10(20A) of the Income-tax Act, 1961, and its income was exempt from tax; the answer was in favour of the assessee and against the Revenue.

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