Law:

Section:

Article 289(1) of the constitution of india-Union taxation-Exemption from-Whether, a state industrial corporation, a statutory authority, is a 'state' within the meaning of article 289(1) for the purpose of exemption from union taxation-Held, no Section 10(20A) of the income-tax act, 1961-Exemption-Statutory authority for planning, development of cities, etc.-Whether an authority set up to secure orderly establishment of industries in industrial areas would qualify for exemption under section 10(20A)-Held, no. Facts The assessee was State Industrial Development Corporation established under the Gujarat Industrial Development Act, 1962, to establish industries in towns, villages and other places in the Gujarat State. It filed 'nil' returns, claiming its income to be exempt under section 10 (20A) of the Income-tax Act and also under article 289(1) of the Constitution of India. The ITO rejected the assessee's claim on both the counts. The AAC, however, held that the corporation was an agent of the State Government and, therefore, entitled to exemption under both the provisions. On appeal by the revenue, the Tribunal reversed the AAC's orders. On reference : Held Per Talati, J.-A corporation is created by a statute for different and distinct purposes and it is not a department of the State. It may be that the State may have some or other form of control over it, it may be by way of contribution to share capital,, it may be control or supervision or audit but that would not mean that a particular corporation, over which the State has control, would become the State. The State is something entirely different. The State enters into contracts with different parties in entirely different manner as provided by the Constitution. The State itself may carry on trading activities and for the trading activities which the Slate carries on, the Skate may be sued as in respect of other cause of action after notice under section 80 of the Code of Civil Procedure. Therefore, if the Slate carries on such trading activities, it does not cease to be the State and if the corporation does not carry on trading activities, it does not become the State. Therefore, carrying on such trading…

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