TaxTMI 
TaxTMI 
2014 (12) TMI 1311
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....'s own case for the assessment year 2006-07, dated 8-8-2012, wherein it was held that assessee is a State Government undertaking. We found that the assessee company is a government of Maharashtra Undertaking having 100% beneficial ownership of equity shares. It is entrusted with the work of development of city viz. in Navi Mumbai, New Aurangabad, Nashi, Nanded, Nagpur, Tarapur and Oros, from time to time. The Government of Maharashtra has issued separate Resolutions in respect of each of these projects. The development of city includes providing physical infrastructures like sewerage, water supply, social infrastructure like construction of schools, primary health centers, hospitals etc. there are similar number of activities/objectives lai....
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....overnment or State, or any operation connected therewith, or any property used or occupied for the purpose of such trade or business, or any income accruing or arising in connection therewith" and Article 289(3) reads, "Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by Law declare to be incidental the ordinary functions of Government". 39. To our mind, the entire case of the assessee in the instant case, hinges on clause (2) or clause (3) of Article 289 of the Constitution of India. The basic purport of Article 289(2) is to neutralize clause (1), but with a rider that, if there is any "trade or business" , done on behalf of the Government or any operations connected t....
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....f Rashtriya Ispat Nigam Ltd. vs Dewan Chand Ram Saran (CA No. 3905 of 2012). This is only possible where there is an activity of "trade or business", but, if, confined towards development, either of a new township or betterment of the functions of the local authority, 289(2) shall remain in the oblivion and shall not come into play. In this context when in the case of APRTC, reported in 52 ITR 524 (SC), the Advocate General sought to include activities in clause (2) in clause (1), the Hon'ble Apex Court negated the same by saying "no exception can be taken". Therefore, the functions and / or activity has to be seen primarily. The Hon'ble Supreme Court, thus observes, "Reading the three clauses together, one consideration emerges beyond al....
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....irar, Waluj and such other places. 40. We cannot agree with the argument of the DR that there is no document which has drawn out the Agent-Principal relationship, because the very first Resolution dated 18th March, 1970 mention in para no. 2 that "............... which would act as an "agent" of Government for the development of the areas with a view to secure the above objective", and in para no. 3 of this Resolution clearly say, "The subsidiary company will work under the control and supervision of the State Government in the General Administrative Department". In our opinion, the first Resolution itself makes it clear that the assessee is to be an agent, but functions as an arm of the State Government, because, if the assessee can only....
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.... itself shows that the assessee is acting totally on behalf of the Government. Another distinguishing feature that can be seen in that as soon as the "Project" is complete, the project gets handed back to the State, i.e. when there is a development project, as per phases, and in the case of local authority, as and when the authorizing committee is satisfied, the reins are transferred to the municipal boards, from whom, the project was taken over, as we have seen from Resolution no. 10375 dated 06/08/2010. 43. In tune with these observations, read with sections 113 & 113A of MR&TP Act along with Articles 289(1) & 289(3) and holding that the assessee corporation is not doing any trade activity on its own accord, we hold, relying on the deci....
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....es incurred by the assessee whether capital or revenue are on behalf of the State Government of Maharashtra and which are reimbursed to the assessee. In these circumstances, there cannot be any capital expenditure incurred by the assessee on physical and social infrastructure. In that case, all the impugned grounds become infructuous, hence these are dismissed. 47. Ground no. XXV The ground is taken on contingency that in case grounds no. 3 to 9 were not allowed. Since we have seen from the records and also held that the assessee did not own any assets, pertaining to the development projects, the ground is rendered infructuous. 48. We however, are aware that there is an income to the assessee by way of remuneration received from the S....