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TMI Blog2014 (12) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and direct the AO to decide the taxability of such remuneration after allowing deduction for any expenses incurred wholly and exclusively for the purpose of earning the said income. - ITA No.4378, 4379 & 4383/Mum/2013 - - - Dated:- 18-12-2014 - SHRI R.C.SHARMA, AM SHRI SANJAY GARG, JM Revenue by : Shri Asghar Jain VP Assessee by : Shri Madhur Agrawal O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by Revenue against the order of CIT(A) for the assessment years 2003-04 to 2005-06, in the matter of order passed under Section 143(3) of the Act. 2. Common grounds are involved in all the appeals. Crux of the arguments was with reference to taxability of CIDCO as assessee liable to tax. 3. At the outset, learned AR placed on record order of the Tribunal in assessee s own case for the assessment year 2006-07, dated 8-8-2012, wherein it was held that assessee is a State Government undertaking. We found that the assessee company is a government of Maharashtra Undertaking having 100% beneficial ownership of equity shares. It is entrusted with the work of development of city viz. in Navi Mumbai, New Aurangabad, Nashi, Nanded, Nagpur, Tarapu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purposes of such trade or business, or any income accruing or arising in connection therewith. To make this clause effective, even for Government / State, conduct of trade or business is necessary, which simply means involvement of commercial and profit motive for the vendor. This is in line with the decision of Hon ble Supreme Court of India in the case of APSRTC (supra), relied upon by the DR, wherein the Hon ble Supreme Court had observed, .the facts that the trading activity carried on by the appellant may be covered by article 289(2) of the Constitution does not really assist the appellant's case. Even if a trading activity falls under clause (2) of article 289 of the Constitution, it can sustain a claim for exemption from Union taxation only if it is shown that the income derived from the said trading activity is the income of the State . Therefore, whenever, there is an activity in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecome disbanded, clause (3) come to life, which operates only if, Parliament may by Law declare to be incidental to the ordinary functions of Government . Here, in the instant case, we have to read Parliament as State Government because in the instant case, it is the State Government which has authorized the assessee to perform the development projects at Navi Mumbai, Vasai Virar, Waluj and such other places. 40. 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 State Government, meaning the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of Maharashtra. We, therefore, respectfully follow the Hon ble jurisdictional High Court of Bombay, as held in the case of Percival (supra), and hold, the assessee to be the agent of the State Government of Maharashtra, read with the entire overwhelming documents, suggesting 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. 44. 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. 45. Ground no. X to XXIV. We have held that there is no business activity of the assessee on its own and the assessee does not hold any assets in its own name, as is evident from the Balance Sheet filed with the revenue authorities, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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