GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION versus THE COMMISSIONER OF INCOME TAX

Citation: [1997] SUPP. 3 S.C.R. 466 · Decided: 20-08-1997 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION 
v. 
THE COMMISSIONER OF INCOME TAX 
AUGUST 20, 1997 
B 
[B.N. KIRPAL AND K.T. THOMAS, JJ.] 
Income Tax Act, 1961-Section 10(20A)-Gujarat Industrial Develop-
ment Act, 1962-Section 2(9)(n) & 13-lncome of Appellant from industrial 
development-Whether falls within ''planning, development or improvement 
C of cities, towards villages or both''-Held, yes. 
The Appellant Corporation was formed under the Gujarat In-
dustrial Development Act, 1962, for the the purpose of securing the orderly 
establishment of industries in the State of Gujarat. The Appellant claimed 
exemption from payment of Income Tax under Sec. 10(20A) of the Act of 
D 1961. 
E 
The claim of the Appellant was disallowed by the Income Tax Officer 
but allowed by the Appellate Commissioner. On second Appeal the 
Tribunal reversed the view taken by Appellate Commissioner. The High 
Court dismissed the claim of the Appellant and held that since develop-
ment of an area would require roads, buildings, sanitation, parks, sports, 
educational institutions and several other amenities, a city or town or 
village could be well developed without any industry. 
On appeal, the Appellant contended that as per Section 10(20A) if 
F an Authority is constituted for the purpose of planning or development or 
improvement of any city or town or village or a combination of them, the 
income of such Authority is not exigible to Income Tax. 
Allowing the Appeal, the Court 
G 
HELD : 1.1. The development of industrial area would have its direct 
impact on the development or improvement of that part of the city, town 
or village where such area is located. Delinking industrial area from the 
scope of development of any area is, without any practical sense. [ 470-F-G] · 
1.2. The word "development" in Section 10(20A) for the I.T. Act should 
H be understood in its wide sense. These is no warrant to exclude all develop· 
466 
GUJARAT INDL. DEVELOPMENT CORPN.v. C.l.T. 
467 
ment programmes relating to any industry from the purview of the word A 
"development" in the said sub-section. There is no indication in the Act that 
development envisaged therein should confine to non-industrial activities. 
Development of a place can be accelerated through varieties of schemes and 
establishment of industries is one of the modes of developing an area. 
[471-E-F] B 
Shri Ramtanu Co-operative Housing Society Ltd. & Anr. v. State of 
Maharashtra and Ors., [1970) 3 SCC 323, relied on. 
1.3. One of the reasons for incorporating a specific provision of 
exemption from income tax such as sub-section 10(20A) is to protect public 
bodies created under law for achieving the purpose of developing urban or C 
rural areas for public good. When the object is such, an interpretation 
which would preserve it should be accepted even if the provision is capable 
of more than one interpretation. That principle of interpretation is very 
much applicable to fiscal statutes also. [471-G] 
State of Tamil Nadu. v. M.K Kandaswami, [1976) 1 SCR 38; Calcutta D 
Jute Manufacturing Company & Anr. v. Commercial Tax Officer & Ors., JT 
(1997) 5 SC 690, referred to. 
1.4. The authorities constituted by law for facilitating all kinds of 
development of cities, towns and villages for public purposes shall not be E 
subjected to the liability to pay income tax. The High Court interpreted 
the exemption clause too rigidly and narrowly which result in the anomaly 
of bringing authorities like appellant Corporation within the tentacles of 
income tax liability while the authorities dealing with housing schemes 
which provide houses to private individuals would stand outside the taxing 
sphere. [ 472-B-C] 
F 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2950 of 
1985 Etc . 
. From the Judgment and Order dated 28.6.84 of the Gujarat High 
Court in l.T.R. No. 37 of 1976. 
G 
Sameer Parekh, Ms. Musharaf Chawdhary for P.H. Parekh for the 
appellants. 
Ranbir Chandra, Arun K. Sharma and B.K. Prasad for the Respon-
~ 
H 
468 
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R. 
A 
The Judgment of the Court was delivered by 
B 
THOMAS, J. The question raised, in its broad parameters, is whether . 
industrial development could be enveloped within the expression "planning, 
development or improvement of cities, towns and villages or for both" in 
Section 10(20A) of the Income- tax Act, (for short 'the I.T. Act'). 
Appellant, Gujarat Industrial Development Corporation, (for short 
'the Corporation'

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