Village development authority exemption under tax law applied where statutory formation and functions showed qualifying public purpose.

Section 10(20A) exempts the income of an authority constituted in India by or under law for housing accommodation or for planning, development or improvement of cities, towns or villages. A body formed under section 30 of the U.P. Panchayat Raj Act, 1947, by written instrument among several gaon sabhas, was treated as such an authority because its bye-laws and the statutory scheme showed village-development functions, including sanitation, water supply, schools, roads and related works. On that basis, the entity fell within the exemption and its income was not taxable.

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Issues: Whether the assessee-udyog was an authority constituted in India by or under law for the purpose of planning, development or improvement of villages so as to qualify for exemption under section 10(20A) of the Income-tax Act, 1961.

Analysis: Section 10(20A) exempts income of an authority constituted in India by or under a law enacted for housing accommodation or for planning, development or improvement of cities, towns and villages. The assessee was formed under section 30 of the U.P. Panchayat Raj Act, 1947 by a written instrument among multiple gaon sabhas, and its bye-laws showed that one of its objects was the all-round development of the block area. Read with the scheme of the 1947 Act, including the powers and functions of gaon sabhas and gram panchayats in relation to village administration, sanitation, water supply, schools, roads and other developmental work, the body was held to be an authority constituted under the statute for village development purposes.

Conclusion: The assessee satisfied the conditions of section 10(20A) and its income was exempt from tax.

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