2018 (8) TMI 2038 - HC - Income Tax

Liability to Income tax under Article 289 of the Constitution of India - Appellant not carrying on its activities on behalf of the Government of Maharashtra - HELD THAT - This issue is no longer res integra as it stands concluded by the decision of the Supreme Court in Aditya Industrial Area Development Authority 2006 (5) TMI 61 - SUPREME COURT wherein an identical / similar entity to the appellant herein was not extended the benefit of Article 289 of the Constitution of India in the context of Bihar Industrial Development Authority Act 1974 (Authority Act 1974). Our attention was particularly drawn to similar / identical provisions in Authority Act 1974 and the Maharashtra Industrial Development Act 1961 to point out the identical nature of the two entities. Therefore the decision of the Tribunal in CIDCO (supra) was per incurim as the above decision of the Apex Court was not brought to its notice. Further on facts this case stands concluded by the decision of the Supreme Court in Aditya Industrial Area Development Authority (supra). Thus the admission of the appeal in the case of CIDCO (supra) by this Court would not on facts of this case warrant admission of this appeal. (e) Therefore in face of the Supreme Court decision in Aditya Industrial Area Development Authority (supra) which concludes the issue in the present facts the question as proposed does not give rise to any substantial question of law. Thus not entertained. Charitable activities - Appeal admitted on the substantial question of law at question no.(ii) above - Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that the activities of the appellant is hit by the proviso to Section 2(15) of the Act?

Summary

Issues:
1. Whether the appellant was exempt from Income Tax under Article 289 of the Constitution of India?
2. Whether the activities of the appellant were affected by the proviso to Section 2(15) of the Income Tax Act, 1961?

Analysis:

Issue 1:
The Tribunal held that the appellant was not considered a part of the Government Department, thus not exempt from Income Tax under Article 289 of the Constitution of India. The Tribunal relied on the decision in Andhra Pradesh State Road Corporation Vs. ITO. The appellant contested this decision, citing the case of CIDCO (Mah) Ltd. Vs. ACIT, where a similar entity was exempt from income tax as an agent of the State Government. It was noted that the State had appealed the CIDCO case to the High Court, which was admitted for consideration. However, the Court referenced the decision in Aditya Industrial Area Development Authority Vs. Union of India, where a similar entity was not granted the benefit of Article 289. The Court concluded that the issue was settled by the Supreme Court's decision and declined to entertain the question raised by the appellant.

Issue 2:
The appeal was admitted on the substantial question of law related to whether the activities of the appellant were affected by the proviso to Section 2(15) of the Income Tax Act, 1961. The Court directed the Registry to inform the Tribunal to keep the relevant papers and proceedings available for future reference. The learned ASG waived service for the respondents, indicating their cooperation in the legal proceedings.

In conclusion, the High Court of Bombay dismissed the appeal on the first issue as it was settled by a Supreme Court decision, while admitting the appeal on the second issue for further consideration. The judgment highlighted the importance of legal precedents and the application of relevant laws in determining the tax liability of the appellant.