TaxTMI 
TaxTMI 
2018 (10) TMI 2045
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....appeal being general in nature does not require adjudication. In ground no. 2 assessee has challenged the decision of the Departmental Authorities in holding the assessee as not to be existing for charitable purpose by applying the proviso to section 2(15) of the Act. Briefly the facts are, the assessee is a corporation formed under the Maharashtra Industrial Development Corporation (MIDC) Act. 1961 and is engaged in development of industrial assets by providing basic infrastructural facilities like land, road, street light, drainage system, water supply etc. The assessee is maintaining facilities such as water supply, drainage and also providing certain facilities to the occupants of industrial assets and collects charges for the same. Industrial plots are allotted by the assessee to various entities on receipt of lease premium, rent etc. It is also a fact that the assessee has been granted registration under section. 12AA of the Act by the DIT(E) Mumbai vide order dated 01.04.2002. For the assessment year under dispute assessee filed its return of income on 25.09.2012 declaring a deficit of Rs.34,39,60,131/-. On the strength of the registration granted under section 12AA of the A....
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....deration before the Tribunal in assessee's own case for A.Y. 2011-12. The co-ordinate bench after exhaustively dealing with the contentions raised by both the parties has decided the issues against the assessee while disposing off assessee's appeal in ITA No. 6552/Mum/2015 dated 27.03.2018. The relevant observations of the bench both on the issue of nature of activity carried out by the assessee and applicability of proviso to section 2(15) of the Act as well as assessee's claim of immunity from taxation of 289(1) of constitution of India are extracted hereunder for convenience:- "17. We have heard the rival contentions and perused the record. The main contention of the assessee was that it is an agent or instrumentality of Government of Maharashtra Government, since it is performing Sovereign functions of development and allotment of industrial plots for public purposes. Accordingly, it was contended that the assessee's income is immune from Union Taxation. In this regard the assessee placed reliance on various case laws, mainly Ramatanu Co-operative Housing Society Ltd (supra) and MD., H.S.I.D.C. and others (supra). However, as submitted by the Ld D.R, these dec....
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....vis the Income tax provisions. Further, the Hon'ble Apex Court has examined the provisions of MID Act and not actual functioning of the assessee. 18. In the case with M.D., H.S.I.D.C. (supra), following facts narrated by the Hon'ble Apex Court are relevant:- "4. Appellant-Corporation is public sector undertaking. Its principal function is allotment of industrial plots belonging to the State of Haryana. It was set up as a catalyst for promoting economic growth and accelerating the pace of industrialization. It not only provides financial assistance to the industrial concerns by way of term loans; it also develops infrastructure for setting up of industrial units. The Corporation also invests money in developing the industrial estates at strategic locations. In exercise of its functions, it also allots industrial plots to entrepreneurs for setting up their industries on "no profit no loss" basis. The entrepreneurs, according to the Corporation, must be the deserving ones. For the said purpose, it keeps in mind the principle that allotment of land should not be made to speculators who invest in property for getting high returns on escalation of price." ....
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....rents and profits will by themselves neither be the indicia nor the decisive attributes of trading character of the Corporation.......The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates I and developing industrial areas ...... Receipts of these moneys arise not out of any business or trade, but out of the sole purpose of establishment, growth and development of industries." It can be noticed that the Hon'ble Apex Court has made all the above said observations, mainly, taking into account the purpose and object of the Act, viz., establishment, growth and organisation of industries. Since the State Government has to take the initiative for the same and since the assessee was incorporated with the said purpose, the Hon'ble Apex Court has observed that the real role of the Corporation was to act as "Agency of the Government in carrying out the purpose and object of the Act which is the development of industries. In some other place, the Hon'ble Supreme Court observed that the assessee Corporation was set up as "one of the limbs or agencies" of the Government. By pla....
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.... undertaking the development work as an agency function on behalf of Government and further the Corporation will act as an agent of Government for development of industrial area and other infrastructural facilities under the provisions of the Maharashtra Industrial Development Act, 1961. In our view, the provisions of MID Act shall have supremacy over the resolutions passed by the Government of Maharashtra. We have already noticed that the Hon'ble Supreme Court has also considered various provisions of the MID Act only in the case of Shri Ramatanu Cooperative Housing Society Ltd (supra). Hence, we are of the view that the resolutions passed by the State Government should not be considered to determine the status of the assessee. The Ld D.R has already placed reliance on the decision of Hon'ble Supreme Court rendered in the case of Ramana Dayaram Shetty Vs. The International Airport Authority of India Ltd (supra), wherein the Hon'ble Apex Court has listed out certain criteria to ascertain the nature or status of a Corporation. The Ld D.R also contended that the assessee failed to satisfy all the criteria prescribed by the Hon'ble Apex Court and accordingly contended ....
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....tally, or is it a trading activity carried on by a State through its agents appointed in that behalf" The observations made by Lord Denning, viz., "It is, of course, a public authority and its purposes, no doubt, are public purposes, but it is not a government department nor do its powers fall within the province of government" are very much relevant here and, in our view, they squarely apply to the assessee herein. We notice that the Hon'ble Gujarat High Court in the case of Gujarat Industrial Development Corporation V/s CIT [1985] 151 ITR 255 (Guj) has considered an identical issue and has held as under: 11. Having considered as to whether the assessee-Gujarat Industrial Development Corporation, Ahmedabad-is entitled or is not entitled to exclude its income from liability under the 1922 Act, we are clearly of the opinion that from their total income, no exclusion could be made on the ground that it is a State, as contemplated by article 289(1). The State is entirely different from the corporations, which are created by laws which are enacted either by the Parliament or by the State Legislatures for different and distinct purposes. They are separate entities ....
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....ributes of the trading character of the Corporation......Receipt of these moneys arise not out of any business or trade, but out of the sole purpose of establishment, growth and development of industries." It was submitted that the meaning of the term "Commerce" is the activity of buying and selling, especially on large scale or the exchange of goods and services on a large scale involving transportation between cities, states and nations. Accordingly, it was contended that the assessee is not carrying on any trade or business or commerce. 24. A perusal of paragraph 16 of the decision rendered in the case of Shri Ramtanu Co-operative Housing Society Ltd and Anr. (supra) would show that the petitioners contended that the assessee Corporation was a trading one for the reasons that the Corporation could sell property, namely, transfer land; that the Corporation had borrowing powers, and that the Corporation was entitled to moneys by way of rents and profits. Thus, it can be seen that the claim of the petitioners was that the assessee corporation was engaged in "trading activity" and the same has been negated by the Hon'ble Supreme Court, mainly, taking into accou....
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....of large and indefinite import. Section 2(13) defines business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the Legislature is to make the definition extensive as the term "inclusive" has been used. The Legislature has deliberately departed from giving a definite import to the term "business" but made reference to several other general terms like "trade", "commerce", "manufacture" and "adventure or concern in the nature of trade, commerce and manufacture". In Black's Law Dictionary, Sixth Edition, the word "business" has been defined as under: "Employment, occupation, profession or commercial activity engaged in for gain, or livelihood. Activity or enterprise for gain, benefit, advantage or livelihood. Union League Club V/s Johnson 18 Cal 2d 275. Enterprise in which' person engaged shows willingness to invest time and capital on future outcome. DoggettV/s Surnet 62 App DC 103; 65 F. 2D 191. That which habitually busies or occupies or engages the time, attention, labour and effort of persons as a principal serious concern or interest or for livelihood or profit." ....
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....gs to the context in which they are found. Five tests propounded in Customs & Excise Commissioner V/s Lord Fisher [1981] 'S.T.C. 238 and decision in Commissioner Of Sales Tax V/s Sal Publication Fund 12002] 252 ITR 701122 Taxman 437 (SC) was quoted. 19. The final and determining factors, it was observed was consequential profit motive or purpose behind the activity and when an activity is trade, commerce or business was elucidated in Institute of Chartered Accountants of India (supra) in the following words(page 123): 'Section 2(15) defines the term charitable purpose. Therefore, while construing the term business for the said Section, the object and purpose of the Section has to be kept in mind. We do not think that a very broad and extended definition of the term business is intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally the profit motive test should be satisfied but in a given case activity may be regarded as busin....
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....e present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. The quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it business? 26. Now, let us discuss about the facts prevailing in the case under consideration. When the assessee corporation was originally incorporated, the activity of promotion of industrialization all over the State of Maharashtra should have been the avowed objective of the State Government. Hitherto, th....
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....te government had set up several state-of the-art IT parks in some select cities across Maharashtra, including the one in Nashik. The IT park building, which was built by MIDC at Rs. 2.23 crore, was inaugurated in 2002. But since then, it has been lying idle because of poor response from industry. The MIDC tried to auction the IT park twice in the past one-and-a-half years, but failed miserably as not a single industry filed any bid on both the occasions. Speaking to TOT, a senior MIDC official said, "There is no response from the industry to the IT perk in the Ambad MIDC areas. In March last year, we had invited bids from industrial houses for the auction of shops at the IT park. But we did not receive a single bid. Our second attempt was in August this year. This time, we had reduced the minimum bid rate by 10% from Rs. 24,530 per Sq. m to Rs. 22,300 per Sq. mt keeping in minds demands from the industry. Nevertheless, we did not receive any response from the industries. We are now planning to change the reservation of the IT park and allot the shops to industrial houses from other sectors. We are preparing the proposal for the change of IT reservation of t....
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....mmercial in nature and hence would be hit by the proviso to sec. 2(15) of the Act." 6. In view of the aforesaid decision of the co-ordinate bench in assessee's own case and considering that there is no difference in facts in the impugned assessment year, respectfully following the aforesaid decision of the coordinate bench we hold that the assessee is not entitled to claim under section 11 of the Act as the activities carried out are of commercial nature, hence, is hit by the proviso to section 2(15) of the Act. Further, we hold that the assessee cannot be regarded as a part of the Government of Maharashtra so as to claim immunity under Article 289 (1) of Constitution of India. Accordingly, ground no. 2 is dismissed. 7. Ground no. 3 being consequential to ground no. 2 is accordingly dismissed. 8. Ground no. 4 is with regard to assessee's claim that lease premium, rent, interest on bank deposits etc. having been received on behalf of Govt. of Maharashtra are not taxable as income at the hands of the assessee. Facts relating to this issue are, during the assessment proceedings the Assessing Officer while examining the accounts of the assessee found that receipts from lease p....
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....ands of the assessee. 11. The learned Departmental Representative drawing our attention to the ground raised by the assessee in this regard submitted, the assessee has not claimed any specific relief in the said ground. Without prejudice to the aforesaid submission the learned Departmental Representative submitted, since, the latest order of the Tribunal for the A.Y. 2011-12 was neither available before the Assessing Officer nor Commissioner (Appeals), the issue may be restored to the Assessing Officer for fresh examination in the light of the order passed by the Tribunal for A.Y. 2011-12. 12. We have considered rival submissions and perused material on record. Facts emerging from record clearly indicate that during the assessment proceedings the Assessing Officer noticing that the assessee has shown receipts from lease premium, rents, interest etc. in the liability side of the balance sheet without offering them as income, has show caused the assessee to explain why such receipts should not be treated as its income. In response, the assessee has taken a categorical stand that, since, it is not the owner of the land, the lease premium, rent and interest arising out of deposit....
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....appreciated in the backdrop of the scheme of the "Maharashtra Industrial Development Corporation Act, 1961" [for short "MIDC Act"]. We find from a perusal of the MIDC Act that the assessee corporation viz. MIDC had been established for securing and assisting rapid and orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Maharashtra. On a perusal of Sec. 3(2) of the MIDC Act, it emerges that the assessee corporation viz. MIDC is competent to acquire, hold and dispose off property, both moveable and immovable, and to contract and do all things necessary for the purposes of the Act. Still further, a perusal of the functions of the assessee corporation as contemplated in Sec. 14(ü) of the MIDC Act reveals that the same particularly includes viz. (i). establishing and managing industrial estates at places selected by the state government; (ii). developing industrial areas selected by the State Government for the purpose and make them available for undertakings to establish themselves; and (iii). undertaking schemes or works, either jointly with other corporate bodies or institutions, or with Government or local authorities,....
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....viding amenities or common facilities viz, maintenance of roads, drainage, water supply, providing of street lighting etc. in such industrial estates and industrial areas on the plot holders or other persons receiving benefit of said services or amenities. Further, perusal of Sec. 19 of the MIDC Act reveals that the property, fund and other assets vesting in the assessee corporation shall be held and applied by it, subject to the provisions and the purposes of the said Act. 14. We further find from a perusal of Sec. 32 of the MIDC Act that in case the State Government is of the opinion that any land is required for the purpose of development by the assessee corporation, or for any other purpose in furtherance of the objects of the said Act, then after putting the owner of the land or any other person interested therein to notice as regards its decision of acquiring such land, calling for his objections and disposing off the same after affording an opportunity of being heard to such person, the State Government shall acquire such land by publishing a notice in the official gazette. On a perusal of sub-section (4) of Sec. 32 of the MIDC Act, it emerges that when a notice und....
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....ng. Rather, a thoughtful deliberation of the context in which the term 'transfer' had been used in sub-sec. (7) of Sec. 32 reveals that the same is in reference to advancing of the purpose for which such land was acquired, with a further mention of application of the provisions of Sec. 43-1A of the MIDC Act to the land acquired by the State Government. In the backdrop of our aforesaid observations, we are of the considered view that now when Sec. 43-1A [application of which is referred to in sub-sec. (7) of Sec. 32] contemplates placing of the land vested in the State Government at the disposal of the assessee corporation for developing by, or under the control and supervision of the corporation, and thereafter to be dealt with for the furtherance of the objects of the MIDC Act in accordance with the regulations made and directions given by the State Government in this behalf, hence the claim of the revenue of there being an absolute transfer of the ownership of the land to the assessee corporation can safely be ruled out. We have given a thoughtful consideration to the issue under consideration and are of a strong conviction that a perusal of the scheme of the MIDC Act rev....
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....rought to tax at the hands of the assessee. In view of the aforesaid and considering the fact that the aforesaid decision was not available before the Departmental Authorities when they decided the issue in the impugned assessment year, we are inclined to restore the issue to the Assessing Officer with a direction to examine the facts and decide the issue following the observations of the Tribunal in ITA No. 4474/Mum/2017 dated. 07.09.2018. Of course, the Assessing Officer must decide the issue after affording reasonable opportunity of being heard to the assessee. Ground raised is allowed for statistical purposes. 14. Ground no. 5 being general in nature does not require adjudication. 15. Grounds raised in ITA Nos. 4475/Mum/18 & 4476/Mum/2017 for Assessment Years 2013-14 and 2014-15 respectively being identical, our decision in ITA No. 4332/Mum/2017 will apply mutatis mutandis to these two appeals also. 16. Accordingly, all these appeals are partly allowed for statistical purposes ITA No. 4326/Mum/2017-A.Y.2007-08 17. In ground no. 1 of both these appeals the assessee has challenged the validity of reopening of assessment under section 147 of the ....
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....opinion that there is escapement of income. Thus, he submitted, there being no failure on the part of the assessee to disclose fully and truly all material facts required for assessment, reopening of assessment after expiry of four years from the end of the relevant assessment year is invalid. The learned counsel submitted, assessee being a statutory corporation of Govt. of Maharashtra has to maintain its accounts as per the MIDC Act and is not required to maintain accounts as per Companies Act. He submitted, accounts of the assessee are subjected to audit by the CAG and there is no chance of any manipulation or suppression of income. He submitted, during the original assessment proceeding the Assessing Officer has thoroughly examined the books of account and all other relevant material and document and thereafter completed the assessment. Thus, he submitted, reopening of assessment on a mere change of opinion, that too, after expiry of four years from the relevant assessment year is invalid. 19. The learned Departmental Representative strongly supporting the observations of the learned Commissioner (Appeals) submitted, though, the original assessment was completed under section....
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....material before him to form a prima facie belief that income has escaped assessment. In view of the aforesaid, we do not find any reason to interfere with the decision of learned Commissioner (Appeals) on the issue of validity of reopening of assessment under section 147 of the Act. Ground no. 1 is dismissed. 21. In ground no. 2 assessee has challenged the addition made on account of lease premium, rent, interest etc. as income of the assessee. This ground is identical to ground no. 4 of ITA No. 4332/Mum/2017. Following our decision therein we restore the issue to the Assessing Officer for deciding afresh in terms with our direction therein. Ground raised is allowed for statistical purposes. ITA No. 4327/Mum/17-A.Y.2008-09 22. Grounds raised in the aforesaid appeal are more or less identical to ITA No. 4326/M/2017. Following our decision therein we dismiss ground no. 1. Whereas, ground no. 2 is allowed for statistical purposes. ITA no. 4329/Mum/ 2017 A.Y.2009-10 23. Ground no. 1 is on reopening of assessment under section 147 of the Act. The facts relating to this ground are almost similar to facts involved in respect of similar ground in ITA No. ....