As per Section 2(31) Person for the purpose of Income Tax Act includes inter alia a Local Authority.
Meaning:
For the purpose of section 10(20) which provides for exemption of income of Local Authority subject to certain conditions, the expression Local Authority means—
(i) Panchayat as referred to in clause (d) of Article 243 of the Constitution; or
(ii) Municipality as referred to in clause (e) of Article 243P of the Constitution; or
(iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; or
(iv) Cantonment Board as defined in Section 3 of the Cantonments Act, 1924 (2 of 1924)
Exemption / Income not included in total income u/s 10(20):
The income of a Local Authority which is chargeable under the head Income from House Property, Capital Gains or Income from Other Sources or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area.
It Means following income of a local authority is exempt from tax:
a) Income which is chargeable under the head “Income from house property”, “Capital gains” or “Income from other sources” or
b) Income from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or
c) Income from business of supply of water or electricity within or outside its own jurisdictional area.
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