In Brief
The Supreme Court held that an Urban Improvement Trust constituted under the Rajasthan Urban Improvement Act, 1959 is not a local authority entitled to tax exemption under Section 10(20) of the Income Tax Act, 1961. Although the Trust performs statutory urban development functions, it does not qualify as a \"Municipal Committee\" under the exhaustive definition of \"local authority\" added by Finance Act, 2002. The Court rejected the High Court's reasoning based on statutory functions and public benefit, holding that Parliament deliberately deleted Section 10(20A) (which previously exempted development authorities) and adopted a narrow, exhaustive definition. The Trust remains a specialized development entity, distinct from traditional municipalities.
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