Home Judgments & Orders Supreme Court No Income Tax Exemption to Urban Improvement Trusts : SC

No Income Tax Exemption to Urban Improvement Trusts : SC

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The Supreme Court on Friday held that Urban Improvement Trusts constituted under the Rajasthan Urban Improvement Act, 1959 would not be entitled to tax benefit under section 10(20) of the Income Tax Act as the same would not constitute a local authority within the meaning of Explanation to the said section.

The bench comprising Justice AK Sikri and Justice Ashok Bhushan in Income Tax Officer Vs. Urban Improvement Trust, set aside a Rajasthan High Court division bench ruling that had accepted the claim of the assessee that it is local authority which is entitled for exemption under Section 10(20) of the Act.

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The bench held: “The High Court based its decision on the fact that functions carried out by the assessee are statutory functions and it is carrying on the functions for the benefit of the State Government for urban development. The said reasoning cannot lead to the conclusion that it is a Municipal Committee within the meaning of Section 10(20) Explanation Clause (iii).”