# U.P. State Industrial Development Corp. Ltd. (Upsidc) v. Commissioner Of Income-Tax-II, Kanpur

- **Citation:** (2016) 7 ILRA 147
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-07-05
- **Bench:** Sudhir Agarwal, Prabhat Chandra Tripathi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/u-p-state-industrial-development-corp-ltd-upsidc-v-commissioner-of-income-tax-43991
- **Pages:** 9

## Text

7 All. U.P. State Industrial Development Corp. Ltd. (Upsidc) Vs Commissioner Of Income-
 Tax-II, Kanpur

147
preparing a lay out, carving out roads, leaving open space, plotting out smaller plots, waiting
for purchasers (meanwhile the invested money will be blocked up) and the hazards of an
entrepreneur. The factor can be discounted by making a deduction by way of an allowance at
an appropriate rate ranging approximately between 20 percent to 50 percent to account for
land required to be set apart for carving out lands and plotting out small plots. The
discounting will to some extent also depend on whether it is a rural area or urban area, whether
building activity is picking up, and whether waiting period during which the capital of the
entrepreneur would be looked up, will be longer or shorter and the attendant hazards.

(16) Every case must be dealt with on its own fact pattern bearing in mind all these
factors as a prudent purchaser of land in which position the Judge must place himself.

(17) These are general guidelines to be applied with understanding informed with
common sense."

 (Emphasis supplied by me)

19. In view of the above discussion, all the appeals filed by the Claimants-appellants
deserve to be allowed to the extent that the appellants shall be entitled to receive compensation @
130/- per Sq. yard along with all statutory benefits and interest after adjustment of the amount
already received by them. The deficiency in Court fees shall be recovered from the Claimantsappellants at the time of preparation of final decree.

20. In result, all the first appeals succeed and are hereby allowed to the extent indicated
above, with cost of Rs. 5,000/- to each appellant which the respondents shall pay to the appellants
within one month from today.
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APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 05.07.2016

BEFORE

THE HON'BLE SUDHIR AGARWAL, J.
THE HON'BLE PRABHAT CHANDRA TRIPATHI, J.

Income Tax Appeal No.- 231 Of 2006
&
Connected With Other Cases

U.P. State Industrial Development Corp. Ltd. (Upsidc) ...Appellant
Versus
Commissioner Of Income-Tax-II, Kanpur ...Respondent

Counsel for Appellant:
S.K. Garg
148 INDIAN LAW REPORTS ALLAHABAD SERIES

Counsel for Respondent:
A.N. Mahajan, B.Agrawal

Present appeal has been filed by the UPSIDC claiming exemption from Income Tax Act, 1961 (hereinafter
referred to as 'Act, 1961') on the ground that it is a "local authority" within the meaning of Section 10(20) or
an authority constituted by or under an enactment in India under Section 10(20A) but it was not accepted by
Income Tax Authorities.

Learned counsel for appellant though has argued that UPSIDC may also be treated as a "local authority"
under Section 10(20) of Act, 1961 but it does not appear that any such issue was raised before the court
below. In the present appeals, thus, the claim of UPSIDC about its origin under UPID Act, 1962 cannot be
accepted.

Court has considered the questions by excluding the applicability of UPID Act, 1962. Unless appellant is an
authority constituted in India by or under any law enacted, Section 10 (20A) of Act, 1961 shall not be
attracted.

Thereafter referring to Section 10(20A) of Act, 1961, Court said that in order to qualify exemption under
aforesaid provision one must satisfy two requirements (i) it is an authority constituted by or under any
enacted law (ii) the authority is constituted by law for dealing with the need to provide housing
accommodation. There is another alternative of this second limb that if first alternative is not available, then
authority must show that it is constituted by law for the purpose of planning development or improvement of
cities, towns and villages or both.

The provision has been considered by Supreme Court in Gujarat Industrial Development Corporation
vs. CIT (1997) 227 ITR 414. Therein "Gujarat Industrial Development Corporation" (hereinafter referred to
as 'GIDC') claimed benefit under Section 10(20A) of Act, 1961 on the ground that it is an authority constituted
under Gujarat Industrial Development Act, 1962 (hereinafter referred to as 'GID Act, 1962').

Court observed the present case in the light of aforesaid case and held that the first limb of requirement to
attract Section 10(20A) of Act, 1961 that one who is claiming exemption thereunder must be "an authority"
constituted by or under any law enacted in India, is not satisfied. Therefore, even if second limb of Section
10(20A) of Act, 1961 is satisfied, appellant- UPSIDC will not qualify for exemption since satisfaction of both
requirement is must.

Court had admitted the appeal on three substantial question of law which has been answered by the court
against appellant- assessee and in favour of Revenue by holding that since UPSIDC is a company incorporated
under Act, 1956 and not an authority constituted by or under any enactment in India, therefore, is not
entitled for claiming exemption under Section 10(20A) of Act, 1961.

All appeals are dismissed. No costs.

(Delivered by Hon'ble Sudhir Agarwal, J.
&
Hon'ble Prabhat Chandra Tripathi, J.)

1. Heard learned counsel for the parties.
7 All. U.P. State Industrial Development Corp. Ltd. (Upsidc) Vs Commissioner Of Income-
 Tax-II, Kanpur

149
2. These appeals are connected having arisen from common judgment and order dated
17.11.2005 passed by Income Tax Appellate Tribunal (Lucknow) in five connected appeals i.e
I.T.R. Nos. 1216, 1217, 1218, 1219 and 1220 relating to assessment years 1977-78, 1978-79, 198182, 1985-86 and 1987-88.

3. The appeals were admitted on the following three substantial questions of law:-

(i) Whether the ITAT, was legally correct in holding that UPSIDC did not have the
status of "Authority" as stipulated in section 10(20A) of the Act and in rejecting its claim for
exemption, thereunder ?

(ii) Whether the Tribunal was legally correct in holding that in the absence of a
specific notification having been issued by the State Government to create UPSIDC, it cannot be
treated to be an "Authority" constituted in India "for the purposes of planning, development or
improvement of cities, towns or villages or both" as stipulated under Section 10(20A) of the Act so
as to be entitled to avail exemption thereunder ?

(iii) Whether on a true and correct interpretation of the preamble of U.P. Industrial
Development Act (Act No.19), 1962 and various provisions as appearing therein, as are related to
setting of a requisite type of corporation and defining its area of operation, UPSIDC was liable to
be treated as an 'authority' for the purposes of its claim for exemption under Section 10(20A) ?

4. The undisputed facts are that U.P. State Industrial Development Corporation (hereinafter
referred to as 'UPSIDC') is a company incorporated under the Companies Act, 1956 (hereinafter
referred to as 'Act, 1956') and is a State Government undertaking incorporated inter-alia to
promote, establish and execute industries, works, projects and enterprises and/or to provide aid or
assistance to industrial undertakings, and/or to establish industries in Industrial Areas and Industrial
Estates in State of U.P.

5. UPSIDC claimed exemption from Income Tax Act, 1961 (hereinafter referred to as 'Act,
1961') on the ground that it is a "local authority" within the meaning of Section 10(20) or an
authority constituted by or under an enactment in India under Section 10(20A) but it was not
accepted by Income Tax Authorities, hence these appeals.

6. Learned counsel for appellant though has argued that UPSIDC may also be treated as a
"local authority" under Section 10(20) of Act, 1961 but it does not appear that any such issue was
raised before the court below. Even otherwise during the course of argument it has not been
disputed before us that the term "local authority" has not been defined under Act, 1961. It has been
defined under Section 3 (31) of The General Clauses Act, 1897 which reads as under :-

"3(31). "local authority" shall mean a municipal committee, district board, body of
port Commissioners or other authority legally entitled to, or entrusted by the Government with, the
control or management of a municipal or local fund"
150 INDIAN LAW REPORTS ALLAHABAD SERIES

7. Counsel for appellant fairly conceded that considering aforesaid definition of "local
authority" it is difficult to advance any submission so as to claim status of local authority for
UPSIDC.

8. Thereafter, he proceeded and confined his arguments with respect of Section 10(20A) of
Act, 1961, founded whereunder three substantial questions of law as noted above were formulated
and appeals have been admitted.

9. Though in memo of appeals, appellant has claimed its existence under U.P. Industrial
Development Act, 1962 (hereinafter referred to as "UPID Act, 1962') but learned counsel for
appellant fairly stated that neither before Tribunal nor before this Court, appellant could produce
any notification showing its creation or existence under UPID Act, 1962.

10. In fact, learned counsel for appellant fairly admits that there is no notification issued
under Section 3 of UPID Act, 1962 resulting in creation of UPSIDC thereunder, therefore, claim of
appellant that it has been constituted under UPID Act, 1962 is not founded on any material on
record. On the contrary, it is an admitted case of appellant that it is a company incorporated under
Act, 1956.

11. We also find that status of UPSIDC has been discussed by this Court in I.T.A. No. 191
of 2006 connected with I.T.A. No. 192 of 2006 decided on 9.3.2015 and some observations made
therein, relevant for the purpose of present appeals, may be reproduced as under:

"11..........From the facts noticed by Tribunal, in the impugned judgment, it is said
that Assessee M/s U.P. State Industrial Development Corporation Ltd. (hereinafter referred to as
'UPSIDC'), is a company registered under the Companies Act, 1956 and wholly owned by State of
Uttar Pradesh, therefore, it is a State undertaking. The objects and purposes incorporating the
aforesaid company is to acquire and develop land for the purposes of promoting industrialisation
in State of Uttar Pradesh. UPSIDC, got the land acquired through State of Uttar Pradesh for
developing industrial area, allot land to entrepreneurs and receives premium and lease rent etc., in
instalments from such Entrepreneurs"

"15............UPSIDC was incorporated under the Companies Act, 1956 on 29th
March, 1961. The object of incorporation, mentioned in the said letter was to provide loan, term
advances to Industrial Entrepreneurs, by providing developed land on deferred payment basis and
also loans. However, from the aforesaid order, we find that there is also some contradictory facts
and in paragraph 7, it is mentioned that UPSIDC was formed under U.P. Industrial Development
Act, 1962 (hereinafter referred to as 'UPID Act, 1962'), but paragraph 11 shows that UPSIDC was
already incorporated on 29th March, 1961. Once UPSIDC was already incorporated on 29th
March, 1961, it is not possible to claim that it could have been established under UPID Act, 1962,
which came into existence after more than a year since when UPSIDC was already incorporated as
a State Government Company under the provisions of Companies Act, 1956.
7 All. U.P. State Industrial Development Corp. Ltd. (Upsidc) Vs Commissioner Of Income-
 Tax-II, Kanpur

151

16. We have also gone through the UPID Act, 1962, Section 3 thereof reads as
under:

"Establishment and Constitution of the Corporation

3. (1) For the purposes of securing and assisting in the rapid and orderly
establishment, and organisation of industries in the State of U.P. there shall be established by the
State Government notification in the Official Gazette, a Corporation by the name of the U.P.
Industrial Development Corporation.

(2) The Corporation shall be a body corporate with perpetual succession and a
common seal, and may sue and be sued in its corporate name, and shall be competent to acquire,
hold and dispose of property, both movable and immovable, and to contract, and do all things
necessary for the purposes of this Act."

17. Term 'corporation' is also defined in Section 2(d) of UPID Act, 1962, and reads
as under :

"2(d) "Corporation" means the U.P. Industrial Development Corporation
established under Section 3;

18. Therefore, what was contemplated in Act, 1962, is a 'Corporation' named 'U.P.
Industrial Development Corporation, while, Assessee in question was incorporated as "U.P. State
Industrial Development Corporation Ltd." and came into existence much before the enactment of
UPID Act, 1962. Whether there was any change in the name of Corporation at any subsequent
point of time is not known.

19. Section 12 of UPID Act, 1962, on the contrary shows that 'Corporation' under
the aforesaid Act, shall take over and employ all the existing staff serving for the purposes in U.P.
State Industrial Development Corporation etc. who would give their willingness to serve in the
Corporation.

20. Section 13 of UPID Act, 1962, which discusses the functions and powers of
Corporation, further provides that Corporation would take over and manage industrial areas
owned and managed by UPSIDC. It is thus clear that Corporation to be set up under UPID Act,
1962, is different then UPSIDC and the said legislation in fact intended for complete take over of
UPSIDC by the Corporation, who would work to give effect to the objectives of UPID Act, 1962.

21. Therefore, aforesaid Act would not provide any assistance for the purposes of
understanding functions and objectives for which UPSIDC was incorporated in 1961."

12. In the present appeals, thus, the claim of UPSIDC about its origin under UPID Act,
1962 cannot be accepted.
152 INDIAN LAW REPORTS ALLAHABAD SERIES

13. Now we come to consider the above questions by excluding the applicability of UPID
Act, 1962. Unless appellant is an authority constituted in India by or under any law enacted,
Section 10 (20A) of Act, 1961 shall not be attracted. This is evident from a bare reading of the
aforesaid provision which reads as under:-

"10(20A). any income of an authority constituted in India by or under any law
enacted either for the purpose of dealing with and satisfying the need for housing accommodation
or for the purpose of planning, development or improvement of cities, towns and villages, or for
both;"

14. This provision has been considered by Supreme Court in Gujarat Industrial
Development Corporation vs. CIT (1997) 227 ITR 414. Therein "Gujarat Industrial
Development Corporation" (hereinafter referred to as 'GIDC') claimed benefit under Section 10
(20A) of Act, 1961 on the ground that it is an authority constituted under Gujarat Industrial
Development Act, 1962 (hereinafter referred to as 'GID Act, 1962'). Court recorded a finding to
this effect by accepting this claim as is evident from para 3 of judgment:-

"3. Corporation has been created under the Gujarat industrial Development Act,
1962, (for short 'the Gujarat Act') with the right to hold properties and the right to sue and be sued
in its own name.............."

15. Thereafter referring to Section 10(20A) of Act, 1961, Court said that in order to qualify
exemption under aforesaid provision one must satisfy two requirements (i) it is an authority
constituted by or under any enacted law (ii) the authority is constituted by law for dealing with the
need to provide housing accommodation. There is another alternative of this second limb that if
first alternative is not available, then authority must show that it is constituted by law for the
purpose of planning development or improvement of cities, towns and villages or both.

16. This Court finds that in Gujarat Industrial Development Corporation vs. CIT
(supra) that GIDC was created under a provincial enactment for the purpose of planning or
development or improvement of cities, towns or villages or in combination of them. Court also
negated the view taken by High Court that the second limb of the requirement was not satisfied
since GIDC was established for the purpose of developing or establishing industries in any
particular area and not for the purpose of planning developing or improving a particular city, town
or a particular area. This view taken by High Court was not approved by Supreme Court and
referring to the provisions of GID Act, 1962, Court held that second alternative of second limb of
Section 10(20A) of Act, 1961, as noticed above is satisfied. Relevant observations, in this regard,
as contained in para 9, 10 and 11 of judgment are reproduced as under:-

"9. The Gujarat Act was enacted "to make special provision for securing the orderly
establishment of industries in industrial areas and industrial estates in the State of Gujarat, and to
assist generally in the organisation thereof, and for that purpose to establish an Industrial
7 All. U.P. State Industrial Development Corp. Ltd. (Upsidc) Vs Commissioner Of Income-
 Tax-II, Kanpur

153
Development Corporation, and for purposes connected with the matters aforesaid as can be
discerned from the preamble thereof.

10. Section 2 (g) of the Act defines "industrial area" as any area declared to be an
industrial area by the State Government by notification in the Official Gazette which is to be
developed and where industries are to be accommodated. Section 2(n) defines "industrial estate" as
any site selected by the State Government where the Corporation builds factories and other
buildings and makes them available for any industries or class of industries. Section 13 of the
Gujarat Act enumerate the functions of the Corporation and they contain, inter alia, "to promote
and assist in the rapid and orderly establishment, growth and development of industries in the State
of Gujarat.

11. We have no doubt that a proper planning is absolutely necessary for creation of
an industrial area. Inside roads, sub-roads buildings, sanitation, parks and other amenities have
also to be provided in a planned industrial area as per the modern concept of any industrial
complex. Even educational institutions may have to be provided in such complex. Therefore,
development of industrial area would have its direct impact on the development or improvement of
that part of the city or town or village where such area is located. Delinking industrial area from
the scope of development of any area is, thus, without any practical sense."

17. The Court also relied on its earlier decision in Sri Ramtanu Cooperative Housing
Society Ltd. vs. State of Maharashtra (1971) 1 SCR 719 which was in respect of Maharashtra
Industrial Development Corporation (hereinafter referred to as 'MIDC') created under Maharashtra
Industrial Development Act, 1962 (hereinafter referred to as 'MID Act, 1962') and reproduced
following observations made in judgment in the context of MID Act, 1962 and Corporation created
thereunder :-

"The functions and powers of the Corporation indicate that the Corporation
government in establishing industrial estates and developing industrial areas, acquiring property
for those purposes, constructing property for those purposes, constructing building, allotting
building, factory sheds to industrialists or industrial undertakings. It is obvious that the
Corporation will receive moneys for disposal of lands buildings and other properties and also that
the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys
arise not out of any business or trade but out of sole purpose of establishment growth and
development of industries. The Corporation has to provide amenities and facilities in industrial
estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in
industrial estates and industrial areas are within the programme of work of the Corporation."

18. It was also held that the word "development" under Section 10(20A) of Act, 1961
should be understood in its wide sense. There is no warrant to exclude all development
programmes relating to an industry from purview of the word "development" in the said subsection. There is no indication in Act, 1961 that development envisaged should confine to nonindustrial activities. Development of a place can be accelerated through varieties of schemes and
154 INDIAN LAW REPORTS ALLAHABAD SERIES

establishment of an industry is one of the modes for developing an area. Court also observed that
the purpose of granting exemption from income-tax to certain authorities under Section 10(20A) of
Act, 1961 is to protect public bodies, created under law, for achieving the purpose of developing
urban or rural areas, for public good. When object is such, an interpretation which would preserve
it should be accepted even if the provision is capable of more than one interpretation.

19. If we examine the present case in the light of aforesaid exposition of law laid down in
Gujarat Industrial Development Corporation vs. CIT (supra) we find that the first limb of
requirement to attract Section 10(20A) of Act, 1961 that one who is claiming exemption thereunder
must be "an authority" constituted by or under any law enacted in India, is not satisfied. Therefore,
even if second limb of Section 10(20A) of Act, 1961 is satisfied, appellant- UPSIDC will not
qualify for exemption since satisfaction of both requirement is must.

20. A similar question was considered by a Division Bench of Karnataka High Court in
M/s Karnataka State Small Industries Development Corporation Ltd vs. The Assistant
Commissioner of Income Tax in I.T.A. No. 1281 of 2006 decided on 3rd September, 2012.
Therein also Karnataka State Small Industries Development Corporation (hereinafter referred to as
'KSSIDC') claimed exemption under Section 10(20A) of Act, 1961. It was negated by assessing
authority holding that KSSIDC is not an authority constituted in India by or under any law but is a
creation incorporated under Companies Act. The appeal of KSSIDC also failed before
Commissioner of Income Tax (Appeals) (hereinafter referred to as 'CIT (A)') and further appeal
was rejected by Income Tax Appellate Tribunal at Bangalore. Like UPSIDC, KSSIDC was also
promoted as Government Company incorporated under Companies Act. Karnataka High Court
found that KSSIDC was incorporated for the purposes of (a) developing small scale industries; (b)
constructing and managing of industrial estates; (c) granting financial assistance to small scale
industrialists; (d) marketing products of small scale industries.

21. Examining Section 10(20A) of Act, 1961 and the functions and manner in which
KSSIDC came into existence, Karnataka High Court said that one, in order to claim exemption,
must be an 'authority' and said authority should be constituted in India by or under any law and
such law should be enacted either for the purpose of dealing with and satisfying the need for
housing accommodation or for the purpose of planning, development or improvement of cities,
towns and villages or for both. KSSIDC was not constituted under any law. It was incorporated
pursuant to a resolution of Government of Karnataka. The objectives and purposes for which it was
incorporated and manner of its creation under Companies Act, cannot be equated with the authority
constituted in India by or under any law enacted. Moreover, KSSIDC is not discharging functions
of housing accommodation and also planning and development of cities, towns and villages or
both. Hence, KSSIDC was not held entitle to claim exemption under Section 10(20A) of the Act,
1961.

22. Some part of observations and findings of Karnataka High Court with regard to purpose
and objective for which KSSIDC was created is not consistent with the law laid down in Gujarat
Industrial Development Corporation vs. CIT (supra) and to that extent we find ourselves in
7 All. Govind Singh Tyagi Vs State Of U.P. & Ors.

155
respectful disagreement thereto but the first part that KSSIDC was a 'company' incorporated under
Act, 1956 and not an 'authority' constituted under any law enacted in India is fully applicable in the
present case and consistent with what has been said above by Supreme Court in Gujarat
Industrial Development Corporation vs. CIT (supra) and only to that extent we find ourselves
in agreement therewith.

23. To the same extent is the law laid down by Madras High Court in CIT vs. State
Industrial Promotion Corporation of Tamil Nadu (2009) 311 ITR 197, wherein Court said as
under:-

"It was admitted that the assessee was not an authority constituted in India by or
under any law enacted. It was also admitted that the assessee had been incorporated under the
provisions of the Companies Act, 1956. Hence, the assessee could not claim the benefit under
Section 10(20A)"

24. In view of above discussion, we answer all the three questions against appellant-
assessee and in favour of Revenue by holding that since UPSIDC is a company incorporated under
Act, 1956 and not an authority constituted by or under any enactment in India, therefore, is not
entitled for claiming exemption under Section 10(20A) of Act, 1961.

25. The judgment of Tribunal is confirmed in so far as it denies exemption to appellantassessee but in the manner and for the reasons as discussed above.

26. In the result, all appeals are dismissed. No costs.
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APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 04.07.2016

BEFORE

THE HON'BLE ARUN TANDON, J.
THE HON'BLE MRS. SUNITA AGARWAL, J.

Special Appeal No.- 822 Of 2015

Govind Singh Tyagi ...Appellant
Versus
State Of U.P. & Ors. ...Respondents

Counsel for Appellant:
Mohd. Afzal, A.K. Rai

Counsel for Respondents:
C.S.C.