Friday, April 4, 2014

Income from hoardings earned by Municipal Corporation is taxable under sec. 56

Where assessee, a Municipal Corporation, granted licences for putting up hoardings in its property, income from hoardings was in nature of 'income from other sources' and, therefore, it was exempt under section 10(20).
a)  The assessee, a Municipal Corporation, granted licences for putting up hoardings in its properties. It had received income from hoardings and claimed that the same was exempted under section 10(20) as it was in the nature of 'income from other sources'.
b)  The Assessing Officer treated the income from hoardings as 'income from business' and accordingly disallowed the assessee's claim for exemption under section 10(20).
c)  On appeal, the CIT (A) held in favour of assessee. Further, the Tribunal upheld the order of the CIT (A).
The High Court held in favour of assessee as under:
1)  The Corporation was granting licenses for putting up hoardings in its properties and it was merely charging license fees to regulate such activities;
2)  In terms of its function, it would also be necessary for the Corporation to regulate such activities. It is the duty of the Corporation to regulate the offensive trades or practices and to construct, maintain, alter and improve public streets, bridges, sub-ways, etc;
3)  Further, it is the duty of the Corporate to remove obstructions and projections in or upon the streets, bridges and other public places. It may undertake any measure not specifically hereinbefore named, likely to promote public safety, health, convenience or instruction;
4)  Thus, if the Corporation permits hoardings to be put up in its property by issuing licenses, for which it was charging license fees, the same could not be deemed as its business activity;

5)  The collection from such licence fees is less than 1 per cent of the total revenue of the Corporation. Therefore, such income was not 'business income' and to be held as 'income from other sources'.-  CIT v. Rajkot Municipal Corporation [2014] 43 99 (Gujarat)