2021 (6) TMI 131 - AT - Income Tax

Accrual of income - sums collected by the assessee from the leases entered into by it would have to be treated as its income - assessee had treated the receipts as its liability in its balance sheet, on the ground that the sums were received by it and held by it on behalf of the Government of Maharashtra - Whether CIT(A) is right in holding that ownership of land vested with the state government and also that the income arising from viz. lease premiums, rent, development activities, interest income on funds parked as deposits with the bank etc cannot be assessed as the income of the assessee corporation following the decision of Hon'ble ITAT in the assessee's own case? - HELD THAT - Assessee is acting as an agent of the Government of Maharashtra and thus, the income in question in the form of lease premium, rent, interest on bank deposits, etc. does not belong to the assessee but to the Government of Maharashtra. We have heard both the parties and perused the record. Both the parties fairly agreed that the grounds raised are covered in favour of the assessee by the order of the Tribunal 2018 (11) TMI 778 - ITAT MUMBAI . We further note that Hon'ble Jurisdictional High Court has not yet reversed the aforesaid order of the ITAT. Hence, we uphold the order of learned CIT(A). Revenue appeals are dismissed.

Issues Involved:
1. Ownership of land and its implications on income assessment.
2. Validity of following prior ITAT decisions.
3. Interpretation of MIDC Act provisions regarding land ownership and income.
4. Relevance of Supreme Court decision in Digamber & Ors. vs. State of Maharashtra & Ors.
5. Treatment of money generated from land-related activities.
6. Supremacy of MIDC Act over State Government resolutions.
7. Status of the assessee as an agent of the State Government.
8. Classification of the transfer of land as "revocable transfer."
9. Compliance with ITAT directions for bifurcation of activities.
10. Overall correctness of the CIT(A)’s decision.

Detailed Analysis:

1. Ownership of Land and Income Assessment:
The primary issue revolves around whether the ownership of land vests with the state government or the assessee corporation, and consequently, whether income from lease premiums, rent, development activities, and interest income should be assessed as the income of the assessee corporation. The Tribunal upheld the CIT(A)'s decision, which followed the ITAT's previous ruling that the land is held by the assessee on behalf of the State Government, and thus, the income does not belong to the assessee corporation.

2. Validity of Following Prior ITAT Decisions:
The CIT(A) followed the ITAT's decision from the assessee's own case for A.Y. 2011-12. The Tribunal agreed with this approach, emphasizing that there was no change in the facts or legal position that would warrant a different decision for the current assessment year.

3. Interpretation of MIDC Act Provisions:
The Tribunal extensively reviewed the provisions of the MIDC Act, particularly Sections 3(2), 14(ii), 15, 17, 19, 32, and 43-1A. It concluded that the scheme of the MIDC Act and the absence of any instrument of transfer indicate that the ownership of the land remains with the State Government, and the assessee corporation merely holds and manages the land for the state's purposes.

4. Relevance of Supreme Court Decision:
The Revenue argued that the Supreme Court's decision in Digamber & Ors. vs. State of Maharashtra & Ors. indicated that the land belonged to the MIDC. However, the Tribunal found that this decision did not alter the fundamental conclusion that the land is held by the assessee on behalf of the State Government, and thus, the income arising from it should not be assessed as the assessee's income.

5. Treatment of Money Generated from Land-Related Activities:
The Tribunal upheld the CIT(A)'s decision that money generated from the sale/lease of plots, development activities, and interest income belongs to the State Government. The Tribunal noted that the MIDC Act provides that such funds are to be used for the purposes of the Act and are not part of the state budget.

6. Supremacy of MIDC Act Over State Government Resolutions:
The Tribunal agreed with the CIT(A) that the MIDC Act has supremacy over resolutions passed by the State Government. Therefore, the resolutions cannot determine the status of the agency or the ownership of the land.

7. Status of the Assessee as an Agent of the State Government:
The Tribunal upheld the CIT(A)'s decision that the assessee acts as an agent of the State Government. This conclusion was based on the ITAT's previous ruling and the provisions of the MIDC Act, which indicate that the assessee manages the land on behalf of the state.

8. Classification of the Transfer of Land as "Revocable Transfer":
The Tribunal found that the transfer of land by the State Government to the assessee was a "revocable transfer" within the meaning of Sections 61 to 63 of the Income-tax Act, based on the provisions of the MIDC Act. This means that the ownership of the land remains with the State Government, and the income from the land cannot be assessed as the income of the assessee corporation.

9. Compliance with ITAT Directions for Bifurcation of Activities:
The Tribunal noted that the assessee failed to comply with the ITAT's directions to provide a bifurcation of activities done on its own account and those done on behalf of the government. However, this non-compliance did not alter the fundamental conclusion that the income from the land belongs to the State Government.

10. Overall Correctness of the CIT(A)’s Decision:
The Tribunal upheld the CIT(A)'s decision in its entirety, finding that it correctly followed the ITAT's previous ruling and properly interpreted the provisions of the MIDC Act and other relevant legal principles.

Conclusion:
The Tribunal dismissed the appeals, affirming that the income arising from the land held by the assessee corporation on behalf of the State Government cannot be assessed as the income of the assessee corporation. The decision was pronounced in the open court on 21.5.2021.

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