CBDT Notification Grants S.10(46) Exemption to WB Construction Workers Board: Calcutta HC Declares Demand & Penalty under IT Act Inconsequential [Read Order]

The Calcutta High Court has declared the income tax demand and penalty imposed on the petitioner under the Income Tax Act, 1961, as inconsequential, holding that the Central Board of Direct Taxes (CBDT) notification grants exemption for specified incomes under section 10(46) to the petitioner, West Bengal Building & Other Construction Workers Welfare Board.

The petitioner, constituted by the Government of West Bengal, had approached the High Court seeking a writ of mandamus directing the Central Board of Direct Taxes (CBDT) to notify it under Section 10(46) and grant an exemption for specified incomes for financial years 2021‑22 to 2025‑26.

The Board challenged a demand notice dated February 26, 2025, for AY 2023‑24 and a penalty order under Section 270A, contending that its statutory income sources were exempt.

During the proceedings, the Revenue Authorities placed on record Notification S.O. 194(E) dated January 14, 2026, issued by the Ministry of Finance, Department of Revenue.

The notification, issued under Section 10(46), formally recognised the petitioner Board and exempted specified incomes, including:

(a)Cess collected under the Building and Other Construction Workers Welfare Cess Act, 1996 (28 of 1996) and the rules thereunder;

(b) Registration fees and yearly subscription collected from construction workers registered with the Board as beneficiaries;

(c) Amount received in the form of grants-in-aid and loans fromthe Government;

(d) Interest income received from investment

The exemption was made applicable for AYs 2022‑23 to 2026‑27, covering financial years 2021‑22 to 2025‑26.

The notification also mentions that,

2. This notification shall be effective subject to the conditions that West Bengal Building & Other Construction Worker Welfare Board-

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

Failure to comply with these conditions may result in the initiation of penal actions under the provisions of the Income-tax Act, 1961 and withdrawal of the exemption granted u/s 10(46) of the Act.

3. This notification shall be deemed to have been applied for assessment years 2022-23, 2023-24, 2024-25, 2025-26, relevant to financial years 2021-22, 2022-23, 2023-24, 2024-25, and shall be applicable for assessment years 2026-27 relevant to financial years 2025-26.”

Justice Om Narayan Rai observed that the notification directly addressed the petitioner’s prayer for exemption.

Consequently, the demand notice for AY 2023‑24 and the penalty order under Section 270A became inconsequential and could not be enforced. The Court disposed of the writ petition and connected application, noting that the petitioner was now entitled to exemption under the notification.

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