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2. The assessee, in her capacity as an authorised agent under the Scheme, received a cash prize of Rs. 20,000 from State Government and claimed exemption under Section 10(17B) of I.T. Act (the Act) in respect thereof. The I.T. Authorities however rejected her said claim mainly on the ground that the said scheme is not approved by the Central Government as being in "public interest".

3. The contention of Mr. N.M. Ranka, Advocate is that the provisions of Section 10(17B) are required to be given liberal construction in the matter of carrying out an object of public interest and once it is found that a work done in public interest has been rewarded, the requirement of formal approval by the Central Government should not be over stressed. Under such circumstances the approval accorded to the Scheme by the State Government on 28-1-83 and 22-6-87 should be read as approval by the Central Government.

4. The learned Departmental Representative opposed the arguments of Mr. Ranka on the ground that official act required to be done by an authority must be done by that authority unless there is expressed delegation of authority to do that act by another person or such delegation of authority can be impliedly inferred in a given case. It was submitted that the Income-tax Act, 1961 was a Central Legislation and only the Central Government is empowered to relax the rigours of its provisions and for that reason the instructions, directions, letters, circulars issued by the Central Government through Central Board of Direct Taxes (CBDT) may be taken benefit of by an assessee and the notification by a State Government notifying an act work as being of or in the public interest would not amount to a notification by the Central Government under the provisions of Section 10(17B) of the Act. We find force in Departmental Representative's arguments. Section 10(17B) runs as under: -

Section 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included (17B) any payment made, whether in cash or in kind, as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest.

5. Three things may be noted in the language of the above provisions. First, payment, whether in cash or in kind, may be made as a reward either by Central Government or State Government. Two, the payment as reward must be approved as being in the public interest. Third, it is the approval of the Central Government and of no other authority which is to be made for the purposes of Section 10(17B) of the Act. The question, in the context of administration of the Act, is not whether the act or work done is in the public interest but whether the payment made as reward has been approved of as being in the public interest for the purposes of administration of the I.T. Act. And the Act being a Central Legislation the approval exemption certain rewards from the regours of taxation may be given by the Central Government in the exercise of its powers under the provisions of the Act. To grant exemption from tax in respect of certain income is within the power of Central Legislative body-the Parliament and not the State Government. The State Government may at most declare an Act or work as done in the public interest and hence the payment made as reward in respect thereto as also being in the public interest. But that does not fulfil the requirement of approval by Central Government as required by Section 10(17B) as it stood at the relevant time.

6. The Notification No. F. 6(14)FD/R&Al/82 dated 28-1 -83 and 22-6-87 by the State Government were issued in its Finance (R&A1) Department and such notifications had nothing to do with the provisions of Section 10(17B) of the Act. It has not been brought to our notice or knowledge that the Central Government had ever delegated its authority to the State Government to accord, on its behalf, approval to a payment as reward as being in the public interest for the purposes of Section 10(17B) of the Act.