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TMI Blog2022 (5) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has already dealt with this matter, and we, are in deference to the observations made by the Hon ble Supreme Court in the case of Adityapur Industrial Area Development Authority [ 2006 (5) TMI 61 - SUPREME COURT ] come to the conclusion that substantial Question Nos. a and b are already covered, and there is no need to further agitate with the issue. Amount that has been collected for infrastructure development is being spent on infrastructure development, and it should also be excluded from the income o the basis of doctrine of diversion of income by overriding title - We make it clear that the earlier observations regarding substantial Question Nos. a and b also cover this issue. Any fees collected for infrastructure development by the Development Authority will be treated as income and the expenses incurred by the Authority for the purposes of infrastructure development would be deducted from the income, and the rest is taxable, and that has been done, and in fact, this issue was not at all raised before the first and second appellate authorities. We find it appropriate to mention herein that before the ITAT, the only ground that has been taken by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.1998, as adopted by the State of Uttarakhand) and to be spent by the State Government through a Committee to be constituted by it, for the purposes of residential infrastructure strictly as per the orders of the State Government issued from time to time, would be governed by the doctrine of diversion of income by overriding title so as to get excluded from the income of the Development Authority? 3. Facts of both the cases are that the appellant, Mussoorie Dehradun Development Authority, was assessed for the income tax for the assessment year 2006-07. The assessee raised two grounds of appeal. It had pleaded that the CIT (Appeals) should have held that prior period adjustments were not deductible. Such ground was not raised in the assessment year 2006-07. The assessee filed return of income on 23.01.2007 declaring NIL income. The return was processed under Section 143(1) of the Act on 14.02.2007, and the case of the assessee was selected for scrutiny assessment, and a notice under Section 143(2) of the Act was issued on 26.03.2007, which was served upon the assessee on 2903.2007. In response to the said notice, the assessee appeared through the Chartered Accountant. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It does not enjoy the status of a State Government which is exempt from taxation. Accordinly, the appeals of the assessee have been rejected in both the assessment years. Both such orders passed by the learned CIT (A) were again challenged before the Income Tax Appellate Tribunal (Delhi Branch E New Delhi). The Tribunal, after careful discussion of the provisions of law, as well as taking into consideration different provisions of different statutes, came to the conclusion that the First Appellate Authority did not commit any error of law in dismissing the appeals of the assessee. Such order is assailed in these appeals. 6. Mr. Vinay Garg, the learned counsel for the appellant, would argue that the provisions of the Bihar Industrial Area Development Authority Act, 1974, in particular Section 17, is distinct from the provisions of Section 58 of the U.P. Urban, Planning Development Act, 1973, as applicable to the State of Uttarakhand. It is also argued that the amount received by the Development Authority under specified heads of levies to be collected in a separate account under the orders of the Government of Uttar Pradesh, i.e. G.O. dated 15.01.1998, as adopted by the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is appropriate to take note of the exact words used by the Hon ble Supreme Court, which are as under:- 8. A mere perusal of Article 289(1) discloses that a claim of exemption under it must proceed on the foundation that the exemption is claimed in respect of property and income of a State. Once it is held that the property and income is that of the State, a question may well arise whether it is still taxable in view of the provision of Clause (2) of Article 289 which dominantly is in the nature of a proviso. Clause (2) empowers the Union to impose any tax to such extent as Parliament may by law provide, in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operation connected therewith. Thus, even the income of the State within the meaning of Clause (1) of Article 289 may be taxed by law made by the Parliament, if such income is derived from a trade or business of any kind carried on by or on behalf of the Government of a State or any operations connected therewith. Clause (1) of Article 289, therefore empowers Parliament to frame law imposing a tax on income of a State which is earned by means of trade or business of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under:- 17. When the State Government is satisfied that the purpose for which the Authority was established under this Act has been substantially achieved so as to render the continuance of the Authority unnecessary, the Government may by notification in the official Gazette, declare that the Authority shall be dissolved with effect from such date as may be specified in the notification and the authority shall be deemed to be dissolved accordingly from the said date and all the properties, funds and dues realizable by the authority alongwith its liabilities shall devolve upon the State Government. 12. It is also appropriate to take note of the corresponding provision, i.e Section 58 of the U.P. Urban, Planning Development Act, 1973. It reads as under:- 58. Dissolution of Authority.- (1) Where the State Government is satisfied that the purposes for which the Authority was established under this Act have been substantially achieved so as to render the continued existence of the Authority in the opinion of the State Government unnecessary, that Government may by notification in the Gazette, declare that the Authority shall be dissolved with effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is no need to further agitate with the issue. 15. As far as substantial Question No. c is concerned, the learned counsel for the appellant, would argue that the amount that has been collected for infrastructure development is being spent on infrastructure development, and it should also be excluded from the income o the basis of doctrine of diversion of income by overriding title. 16. We make it clear that the earlier observations regarding substantial Question Nos. a and b also cover this issue. Any fees collected for infrastructure development by the Development Authority will be treated as income and the expenses incurred by the Authority for the purposes of infrastructure development would be deducted from the income, and the rest is taxable, and that has been done, and in fact, this issue was not at all raised before the first and second appellate authorities. 17. We find it appropriate to mention herein that before the ITAT, the only ground that has been taken by the assessee is as under:- That on the facts and in the circumstances of the case and in law, the authorities below erred in holding that the claim of the appellant that there was diver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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