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TMI Blog2018 (1) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... ggesting that there is no income to the assessee as such, and whatever is, generated, it gets deposited in the Consolidated Fund of the State. We also cannot ignore the fact that the department has been assessing the assessee as a State Government undertaking for the last three years, therefore, even this cannot be called as an afterthought and applying the ‘rule of consistency’, we hold that the department cannot be allowed to take a distinctive approach in the current year The revenue authorities were thus, clearly in error, in assessing the business income in the hands of the assessee at ₹ 63,786.58 lacs. We delete this income, as not belonging to the assessee - Decided in favour of assessee. - ITA NO.1234/MUM/2016 - - - Dated: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y trade activity of its own and the entire income of the assessee gets deposited in the consolidated fund of the State and therefore the Revenue Authorities were in error in assessing business income in the hands of the assessee. 3. Ld. Counsel for the assessee submits that following the order of the Coordinate Bench for the Assessment Year 2006-07 similar view has been taken for the Assessment Years 2003-04, 2004-05 and 2005-06 in DCIT v. M/s. CIDCO Ltd. in ITA.Nos. 4378, 4379 and 4383/MUM/2013 dated 18.12.2014. Ld. Counsel for the assessee further submits that this position has been accepted by the Revenue in the subsequent Assessment Years. 4. The Ld.DR fairly submits that issue has been decided in favour of the assessee by the Coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 therewith or any property issued or occupied for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an (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 all doubt and that is that the property as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. 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 work under the control and supervision of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nashik, Nagpur etc. This, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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