HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Adityapur Industrial Area Development Authority v. Union of India and Others
Civil Appeal No. 6382 of 2003
[2006] Supp. 1 SCR 757 ·
Income-tax Act, 1961: section 10(20), Explanation, and omitted section 10(20A) · Constitution of India: Article 289 · Bihar Industrial Areas Development Authority Act, 1974: sections 7 and 17
Holding and result. The Authority was a distinct body corporate whose income, assets and liabilities were its own until dissolution. It was not one of the local authorities exhaustively listed in the amended section 10(20), former section 10(20A) had been omitted, and Article 289(1) did not exempt its income as State income. The Revenue notice was valid and the appeal was dismissed.
Sources & disclosures includedDownload original judgment / order
Two-judge bench; judgment delivered by B. P. Singh, J. · B. P. Singh, J. · S. H. Kapadia, J.
01 · Facts of the case
The Deputy Commissioner of Income Tax notified the Authority's banker that, after the Finance Act, 2002 omitted section 10(20A) and inserted an explanation into section 10(20), the bank had to deduct tax from interest on the Authority's fixed deposits. The Jharkhand High Court upheld the notice. The Authority, constituted under the Bihar Industrial Areas Development Authority Act, 1974, argued that it was a local authority and an agency of the State entitled to Article 289 immunity.
Source: Primary judgment: facts, statutory framework and submissions
02 · Discussion by the Hon’ble Court
The Court treated ownership of the income as the threshold question under Article 289. The Authority maintained its own fund, could hold and dispose of property, contract, sue and be sued, and possessed a legal personality distinct from the State. Section 17 provided that assets, funds, dues and liabilities devolved on the State only upon dissolution, confirming that they remained the Authority's beforehand. The amended section 10(20) exhaustively listed qualifying local authorities and did not include this Authority; Parliament had simultaneously withdrawn the former development-authority exemption in section 10(20A). The absence of a profit-oriented trade did not convert the Authority's income into State income.
Source: Primary judgment: statutory identity and Article 289 reasoning; Primary judgment: separate legal personality analysis
03 · Judicial decision
The Authority could not claim the former section 10(20A) benefit after its omission, did not fall within the amended section 10(20) explanation, and could not invoke Article 289(1) because its income was not the State's income. The banker-directed TDS notice was therefore valid.
Source: Primary judgment: application of the post-2002 exemption text; Primary judgment: final holding
04 · Outcome / in whose favour
The civil appeal was dismissed without costs. The challenged notice requiring the banker to deduct tax at source from fixed-deposit interest was sustained.
05 · AKHB REVIEW POINT
AKHB analysis: begin with the entity and the applicable-year exemption text. A statutory development mandate, government appointment power or public purpose does not itself satisfy an exhaustive local-authority definition or Article 289. Examine who owns the funds and liabilities before dissolution, whether the body can sue and hold property in its own name, and whether another specific exemption applies. Do not use the repealed section 10(20A) as a current exemption.
Source: Primary judgment: ownership and legal-personality test
Source & verification
Download original judgment / order · Open cited source rendition
Complete 15-page Supreme Court Reports rendition, including the statutory scheme, Article 289 analysis and final dismissal.
- The complete 15-page report was read and its SHA-256 matched the reconciliation catalogue.
- The Authority's statutory personality, fund and dissolution provisions, amended tax text, Article 289 reasoning and operative dismissal were checked against the judicial text.
- No assessment year is supplied because the report frames the dispute through the 2003 notice and statutory amendment without identifying a specific assessment year.
Statutory scope
The ruling concerns the Finance Act, 2002 changes effective 1 April 2003: omission of former section 10(20A) and the exhaustive explanation to section 10(20). Verify later legislation and any separate exemption route for the relevant year.
Later treatment
Source checked 2026-10-12. Later judicial treatment has not been comprehensively checked. The related 2018 New Okhla and later local-authority notes in the AKHB corpus discuss Adityapur in applying the exhaustive post-2002 section 10(20) definition. No comprehensive citator clearance is represented.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Related reviewed notes
AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from the identified primary report and has not been represented as independently human-reviewed.
General legal and tax research only; not legal or tax advice. Verify the complete judgment, governing statutory version and subsequent judicial treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court's holding, and no current-law clearance is claimed.