Q.A Municipality earned income during the year from house property it owns within its own jurisdiction. Discuss whether this income is chargeable to tax, with reference to Section 10(20).

A local authority's own income, earned within its own jurisdiction, is generally kept outside the tax net.

Under Section 10(20), the income of a local authority — which includes a Panchayat, a Municipality, a Municipal Committee, a District Board, and a Cantonment Board — is exempt from tax where it falls under specified heads, namely Income from House Property, Capital Gains, Income from Other Sources, or income arising from the supply of water or electricity within its own jurisdiction, or from a trading activity connected with such supply, subject to conditions specified in the section. A Municipality is expressly named as a local authority for this purpose, and income from house property is one of the specified categories, so the Municipality's …

Assuming EVERY kind of income earned by a local authority is exempt without limit — Section 10(20) exempts only specified categories of income (house property, capital gains, other sources, and water/electr …