2012 (7) TMI 8 - HC - Income Tax

Temporary stay granted on substantial tax demand for development authority pending appeal.

City and Industrial Development Corporation of Maharashtra Ltd. Versus Assistant Commissioner of Income-tax

The court granted a temporary stay on the recovery of a substantial tax demand for the assessment year 2006-07 to the petitioner, a development authority ... Stay - demand - assessee - claim of the petitioner is that he is acting as an agent of the Government for the Navi Mumbai project - assessment order issued holding the petitioner to be chargeable to tax for all its projects including the Navi Mumbai – (i) the land for Navi Mumbai project was acquired by the State Government ; (ii) compensation was paid by the State Government ; and (iii) the lands have been registered in the name of CIDCO for and on behalf of the State Government – Held that:- Under sub-section (3) of section 40(1B), the provisions of Chapter VI of the Act apply mutatis mutandis to the special planning authority as they apply to the development authority as if the notified area were to be a new town, subject to certain modifications including the deletion of section 113A. Under section 160, upon dissolution of the special planning authority or new town development authority, all properties, funds and dues vest in the State Government and all liabilities are enforceable against the State Government - stay is granted of the recovery of the dues Issues:1. Grant of stay on recovery of demand for assessment year 2006-07.Analysis:The petitioner challenged the Commissioner of Income-tax's order denying a stay on the recovery of a demand for the assessment year 2006-07 under Article 226 of the Constitution. The primary issue before the court was whether a case for granting a stay pending appeal against the assessment order was established. The petitioner, appointed as the New Town Development Authority for various regions by the State Government, argued that it is only liable for tax on agency commission received from the State Government. The Assessing Officer had accepted this contention for previous assessment years, but for 2006-07, the petitioner was held chargeable to tax for all projects, leading to a substantial demand. The petitioner filed an appeal with an application for stay, which was rejected by the Commissioner of Income-tax. The petitioner contended that it acts as an agent of the State Government for various projects, emphasizing statutory obligations and the nature of its operations. On the other hand, the Revenue argued against financial hardship and for partial payment of the demand.The court considered the petitioner's submissions regarding its role as an agent of the State Government under relevant statutory provisions. It noted that for previous years, the Assessing Officer had accepted the petitioner's status as an agent for the Navi Mumbai project. Sections 113(3A) and 40(1B) of the Maharashtra Regional and Town Planning Act, 1966, empower the State Government to appoint agencies or authorities as special planning authorities or new town development authorities, with dissolution provisions ensuring liabilities are enforceable against the State Government. A previous judgment had recognized the petitioner as an agent of the State Government for development work in New Bombay. The court directed the appellate authority to expedite the appeal hearing for 2006-07 and granted a stay on recovery of the demand for six weeks post-appeal decision, emphasizing the petitioner's legislative enactment status and the security of Revenue dues.In conclusion, the court disposed of the petition by issuing directions for expediting the appeal hearing and granting a temporary stay on recovery post-appeal decision. The judgment aimed to ensure justice by allowing due process while safeguarding the petitioner from coercive recovery measures during the specified period.