CBDT grants retrospective income tax exemption to BBNDA under Section 10(46)

The Central Board of Direct Taxes (CBDT) has notified a retrospective income tax exemption for the Baddi Barotiwala Nalagarh Development Authority (BBNDA) under Section 10(46) of the Income-tax Act, 1961, exempting specified sources of income for three assessment years, subject to certain conditions.

The notification comes despite the repeal of the Income-tax Act, 1961, by the Income-tax Act, 2025, with the government clarifying that the provisions of the old law continue to apply to pending proceedings and earlier assessment years. This allows notifications issued under the repealed Act to remain legally valid.

Grants, planning revenue and bank interest

According to the notification, the tax exemption applies to specified income earned by the Himachal Pradesh government authority, including:

Grants received from the Central Government or the Government of Himachal Pradesh.
Revenue receipts under the Himachal Pradesh Town and Country Planning Act, 1977.
Interest earned on bank deposits.

The BBNDA is a statutory authority constituted by the Government of Himachal Pradesh for the planned development of the Baddi-Barotiwala-Nalagarh industrial region.

Conditions attached to exemption

The exemption will remain valid only if the authority complies with the conditions laid down in the notification.

The CBDT said BBNDA must not engage in any commercial activity, and its functions and the nature of its exempt income must remain unchanged during the relevant financial years. It is also required to file its income tax return in accordance with Section 139(4C)(g) of the Income-tax Act, 1961.

The notification states that failure to comply with these conditions could lead to withdrawal of the exemption and initiation of penal action under the provisions of the repealed Income-tax Act.

Applicable for three assessment years

The notification has been given retrospective effect and will apply to Assessment Years 2024-25, 2025-26 and 2026-27, corresponding to Financial Years 2023-24, 2024-25 and 2025-26.

The government also clarified that granting retrospective effect does not adversely affect the interests of any person.

Why the notification remains valid

The notification cites provisions of Section 536 of the Income-tax Act, 2025, which preserve rights, obligations and proceedings initiated under the repealed Income-tax Act, 1961.

Under these transitional provisions, pending assessments, reassessments, appeals, revisions and other tax proceedings relating to tax years beginning before April 1, 2026, will continue to be governed by the 1961 Act.

As a result, the Central Government retains the power to issue notifications under Section 10(46) of the repealed law for eligible authorities in relation to earlier assessment years.

Section 10(46) provides income tax exemption to specified statutory bodies, authorities, boards, trusts and commissions notified by the Central Government in respect of specified income, subject to prescribed conditions.