TaxTMI 
TaxTMI 
2022 (5) TMI 1389
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....e Principles of State Policy under Part-Iv of the Constitution? b. Whether the collection of levies in the nature of fees, charges, tax etc. imposed by the State through an enactment, namely U.P. Urban Planning and Development Act, 1973, by the statutory authorities (appellant development authority in the present case) can be said to be the income of such authority to be taxed under the Income Tax Act, 1961? c. Whether the amount of receipts by the development authority (appellant in the present case) under specified heads of levies to be collected in a separate account under the orders of the Government of Uttar Pradesh (G.O. dated 15.01.1998, as adopted by the State of Uttarakhand) and to be spent by the State Government through a Committee to be constituted by it, for the purposes of residential infrastructure strictly as per the orders of the State Government issued from time to time, would be governed by the doctrine of diversion of income by overriding title so as to get excluded from the income of the Development Authority?" 3. Facts of both the cases are that the appellant, Mussoorie Dehradun Development Authority, was assessed for the income tax for th....
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....er in appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as "CIT (A)"]. The First Appellate Authority, took into consideration the Office Memorandum issued by the Uttar Pradesh Government, as well as the provisions of the U.P. Urban, Planning & Development Act, 1973, which brought the assessee into existence. After a detailed analysis, the learned First Appellate Authority observed that there is no overriding title over the alleged infrastructure fund account by the State Government, and this amount deserves to be included in the income of the assessee. The learned CIT (A) further observed that the assessee is a body corporate. It does not enjoy the status of a State Government which is exempt from taxation. Accordinly, the appeals of the assessee have been rejected in both the assessment years. Both such orders passed by the learned CIT (A) were again challenged before the Income Tax Appellate Tribunal (Delhi Branch 'E' New Delhi). The Tribunal, after careful discussion of the provisions of law, as well as taking into consideration different provisions of different statutes, came to the conclusion that the First Appellate Authority did not commit any e....
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....perty used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. (3) 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 to the ordinary functions of government." 9. In the case of Adityapur Industrial Area Development Authority (supra), a similar question arose regarding interpretation of Article 289 of the Constitution of India, as well as Section 17 of the Bihar Industrial Area Development Authority Act, 1974. The Hon'ble Supreme Court at Paragraph Nos. 8 and 9 has dealt with this matter. It is appropriate to take note of the exact words used by the Hon'ble Supreme Court, which are as under:- "8. A mere perusal of Article 289(1) discloses that a claim of exemption under it must proceed on the foundation that the exemption is claimed in respect of property and income of a State. Once it is held that the property and income is that of the State, a question may well arise whether it is still taxable in view of the provision of Clause (2) of Article 289 which dominantly is in the nature of a proviso. Clau....
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.... its own. It is, therefore, futile to contend that the income of the appellant/ Authority is the income of State Government, even though the Authority is constituted under an Act enacted by the State Legislature by issuance of a Notification by the Government thereunder." 10. In that view of the matter, the matter is settled as far as Substantial Question Nos. 'a' and 'b' are concerned, as mentioned hereinabove. 11. It is further appropriate to take note of the exact words under by the Statute which was under consideration before the Hon'ble Supreme Court in the aforesaid reported case, i.e. Section 17 of the Bihar Industrial Area Development Authority Act, 1974. It reads as under:- "17. When the State Government is satisfied that the purpose for which the Authority was established under this Act has been substantially achieved so as to render the continuance of the Authority unnecessary, the Government may by notification in the official Gazette, declare that the Authority shall be dissolved with effect from such date as may be specified in the notification and the authority shall be deemed to be dissolved accordingly from the said date and all the properties, funds....
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.... its own assets, liabilities. But only when the State Government decides that the purpose of the Development Authority has been achieved, and there is no need for continuance of such Authority, then it may pass the order of dissolution of the same. In that event, the income, assets, liabilities of the Authority will vest with the State Government, and not otherwise. Thus, it is apparent from the record that the Hon'ble Supreme Court has already dealt with this matter, and we, are in deference to the observations made by the Hon'ble Supreme Court in the case of Adityapur Industrial Area Development Authority (supra), come to the conclusion that substantial Question Nos. 'a' and 'b' are already covered, and there is no need to further agitate with the issue. 15. As far as substantial Question No. 'c' is concerned, the learned counsel for the appellant, would argue that the amount that has been collected for infrastructure development is being spent on infrastructure development, and it should also be excluded from the income o the basis of doctrine of diversion of income by overriding title. 16. We make it clear that the earlier observations regarding substantial Question Nos. ....