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TMI Blog2018 (10) TMI 2045X X X X Extracts X X X X X X X X Extracts X X X X ..... uire adjudication. In ground no. 2 assessee has challenged the decision of the Departmental Authorities in holding the assessee as not to be existing for charitable purpose by applying the proviso to section 2(15) of the Act. Briefly the facts are, the assessee is a corporation formed under the Maharashtra Industrial Development Corporation (MIDC) Act. 1961 and is engaged in development of industrial assets by providing basic infrastructural facilities like land, road, street light, drainage system, water supply etc. The assessee is maintaining facilities such as water supply, drainage and also providing certain facilities to the occupants of industrial assets and collects charges for the same. Industrial plots are allotted by the assessee to various entities on receipt of lease premium, rent etc. It is also a fact that the assessee has been granted registration under section. 12AA of the Act by the DIT(E) Mumbai vide order dated 01.04.2002. For the assessment year under dispute assessee filed its return of income on 25.09.2012 declaring a deficit of Rs.34,39,60,131/-. On the strength of the registration granted under section 12AA of the Act the assessee claimed exemption under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se for A.Y. 2011-12. The co-ordinate bench after exhaustively dealing with the contentions raised by both the parties has decided the issues against the assessee while disposing off assessee's appeal in ITA No. 6552/Mum/2015 dated 27.03.2018. The relevant observations of the bench both on the issue of nature of activity carried out by the assessee and applicability of proviso to section 2(15) of the Act as well as assessee's claim of immunity from taxation of 289(1) of constitution of India are extracted hereunder for convenience:- "17. We have heard the rival contentions and perused the record. The main contention of the assessee was that it is an agent or instrumentality of Government of Maharashtra Government, since it is performing Sovereign functions of development and allotment of industrial plots for public purposes. Accordingly, it was contended that the assessee's income is immune from Union Taxation. In this regard the assessee placed reliance on various case laws, mainly Ramatanu Co-operative Housing Society Ltd (supra) and MD., H.S.I.D.C. and others (supra). However, as submitted by the Ld D.R, these decisions have not been rendered in the context of Income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as examined the provisions of MID Act and not actual functioning of the assessee. 18. In the case with M.D., H.S.I.D.C. (supra), following facts narrated by the Hon'ble Apex Court are relevant:- "4. Appellant-Corporation is public sector undertaking. Its principal function is allotment of industrial plots belonging to the State of Haryana. It was set up as a catalyst for promoting economic growth and accelerating the pace of industrialization. It not only provides financial assistance to the industrial concerns by way of term loans; it also develops infrastructure for setting up of industrial units. The Corporation also invests money in developing the industrial estates at strategic locations. In exercise of its functions, it also allots industrial plots to entrepreneurs for setting up their industries on "no profit no loss" basis. The entrepreneurs, according to the Corporation, must be the deserving ones. For the said purpose, it keeps in mind the principle that allotment of land should not be made to speculators who invest in property for getting high returns on escalation of price." Thus, it can be noticed that the decision in the above said case was also rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter of the Corporation.......The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates I and developing industrial areas ...... Receipts of these moneys arise not out of any business or trade, but out of the sole purpose of establishment, growth and development of industries." It can be noticed that the Hon'ble Apex Court has made all the above said observations, mainly, taking into account the purpose and object of the Act, viz., establishment, growth and organisation of industries. Since the State Government has to take the initiative for the same and since the assessee was incorporated with the said purpose, the Hon'ble Apex Court has observed that the real role of the Corporation was to act as "Agency of the Government in carrying out the purpose and object of the Act which is the development of industries. In some other place, the Hon'ble Supreme Court observed that the assessee Corporation was set up as "one of the limbs or agencies" of the Government. By placing reliance on the above said observations, it was argued on behalf of the assessee that the assessee is a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for development of industrial area and other infrastructural facilities under the provisions of the Maharashtra Industrial Development Act, 1961. In our view, the provisions of MID Act shall have supremacy over the resolutions passed by the Government of Maharashtra. We have already noticed that the Hon'ble Supreme Court has also considered various provisions of the MID Act only in the case of Shri Ramatanu Cooperative Housing Society Ltd (supra). Hence, we are of the view that the resolutions passed by the State Government should not be considered to determine the status of the assessee. The Ld D.R has already placed reliance on the decision of Hon'ble Supreme Court rendered in the case of Ramana Dayaram Shetty Vs. The International Airport Authority of India Ltd (supra), wherein the Hon'ble Apex Court has listed out certain criteria to ascertain the nature or status of a Corporation. The Ld D.R also contended that the assessee failed to satisfy all the criteria prescribed by the Hon'ble Apex Court and accordingly contended that the assessee cannot be considered to be an agency or instrumentality of the State Government. However, the discussions made in the ensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public authority and its purposes, no doubt, are public purposes, but it is not a government department nor do its powers fall within the province of government" are very much relevant here and, in our view, they squarely apply to the assessee herein. We notice that the Hon'ble Gujarat High Court in the case of Gujarat Industrial Development Corporation V/s CIT [1985] 151 ITR 255 (Guj) has considered an identical issue and has held as under: 11. Having considered as to whether the assessee-Gujarat Industrial Development Corporation, Ahmedabad-is entitled or is not entitled to exclude its income from liability under the 1922 Act, we are clearly of the opinion that from their total income, no exclusion could be made on the ground that it is a State, as contemplated by article 289(1). The State is entirely different from the corporations, which are created by laws which are enacted either by the Parliament or by the State Legislatures for different and distinct purposes. They are separate entities in law. They sue and are sued in their own capacities and for any contractual liability of the corporation, no person can sue the State because every corporation in itself is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the meaning of the term "Commerce" is the activity of buying and selling, especially on large scale or the exchange of goods and services on a large scale involving transportation between cities, states and nations. Accordingly, it was contended that the assessee is not carrying on any trade or business or commerce. 24. A perusal of paragraph 16 of the decision rendered in the case of Shri Ramtanu Co-operative Housing Society Ltd and Anr. (supra) would show that the petitioners contended that the assessee Corporation was a trading one for the reasons that the Corporation could sell property, namely, transfer land; that the Corporation had borrowing powers, and that the Corporation was entitled to moneys by way of rents and profits. Thus, it can be seen that the claim of the petitioners was that the assessee corporation was engaged in "trading activity" and the same has been negated by the Hon'ble Supreme Court, mainly, taking into account the purpose or objective of the assessee. While discussing the issue, the Hon'ble Apex Court has used the term "business" also and, in our view, the same was to used as distinct and separate from "trading". Hence, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usive" has been used. The Legislature has deliberately departed from giving a definite import to the term "business" but made reference to several other general terms like "trade", "commerce", "manufacture" and "adventure or concern in the nature of trade, commerce and manufacture". In Black's Law Dictionary, Sixth Edition, the word "business" has been defined as under: "Employment, occupation, profession or commercial activity engaged in for gain, or livelihood. Activity or enterprise for gain, benefit, advantage or livelihood. Union League Club V/s Johnson 18 Cal 2d 275. Enterprise in which' person engaged shows willingness to invest time and capital on future outcome. DoggettV/s Surnet 62 App DC 103; 65 F. 2D 191. That which habitually busies or occupies or engages the time, attention, labour and effort of persons as a principal serious concern or interest or for livelihood or profit." According to Sampath Iyengar's Law of Income Tax (9th edition), a business activity has four essential characteristics. Firstly, a business must be a continuous and systematic exercise of activity. Business is defined as an active occupation continuously carried on. Business v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed was consequential profit motive or purpose behind the activity and when an activity is trade, commerce or business was elucidated in Institute of Chartered Accountants of India (supra) in the following words(page 123): 'Section 2(15) defines the term charitable purpose. Therefore, while construing the term business for the said Section, the object and purpose of the Section has to be kept in mind. We do not think that a very broad and extended definition of the term business is intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show, that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spirit. Enrichment of oneself or self gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. The quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it business? 26. Now, let us discuss about the facts prevailing in the case under consideration. When the assessee corporation was originally incorporated, the activity of promotion of industrialization all over the State of Maharashtra should have been the avowed objective of the State Government. Hitherto, the relevant activities were carried out through a Board and subsequently, it should have been decided to form a separate autonomous body or statutory corporation to carry out or accelerate the process of industrialization by developing industrial estates. Accordingly, MID Act was enacted and the assessee Corporation was incorporated unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a-half years, but failed miserably as not a single industry filed any bid on both the occasions. Speaking to TOT, a senior MIDC official said, "There is no response from the industry to the IT perk in the Ambad MIDC areas. In March last year, we had invited bids from industrial houses for the auction of shops at the IT park. But we did not receive a single bid. Our second attempt was in August this year. This time, we had reduced the minimum bid rate by 10% from Rs. 24,530 per Sq. m to Rs. 22,300 per Sq. mt keeping in minds demands from the industry. Nevertheless, we did not receive any response from the industries. We are now planning to change the reservation of the IT park and allot the shops to industrial houses from other sectors. We are preparing the proposal for the change of IT reservation of the park, which will be sent shortly to our head office in Mumbai for approval." This news paper report would show that the policy of "no profit no loss" has been given a go-by by the assessee. Further, as submitted by Ld DR, the assessee has also lost is monopoly in this field and the private entrepreneurs are also nowadays allowed to develop industrial estates. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 of the Act as the activities carried out are of commercial nature, hence, is hit by the proviso to section 2(15) of the Act. Further, we hold that the assessee cannot be regarded as a part of the Government of Maharashtra so as to claim immunity under Article 289 (1) of Constitution of India. Accordingly, ground no. 2 is dismissed. 7. Ground no. 3 being consequential to ground no. 2 is accordingly dismissed. 8. Ground no. 4 is with regard to assessee's claim that lease premium, rent, interest on bank deposits etc. having been received on behalf of Govt. of Maharashtra are not taxable as income at the hands of the assessee. Facts relating to this issue are, during the assessment proceedings the Assessing Officer while examining the accounts of the assessee found that receipts from lease premium, rent, interest on bank deposits etc. instead of being shown as income have been shown as liability in the balance sheet. When the Assessing Officer called upon the assessee to explain the reason for not offering the income, through an elaborate written submission assessee submitted, since, it has received the lease premium and other charges on behalf of Govt. of Maharashtra, they are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Assessing Officer nor Commissioner (Appeals), the issue may be restored to the Assessing Officer for fresh examination in the light of the order passed by the Tribunal for A.Y. 2011-12. 12. We have considered rival submissions and perused material on record. Facts emerging from record clearly indicate that during the assessment proceedings the Assessing Officer noticing that the assessee has shown receipts from lease premium, rents, interest etc. in the liability side of the balance sheet without offering them as income, has show caused the assessee to explain why such receipts should not be treated as its income. In response, the assessee has taken a categorical stand that, since, it is not the owner of the land, the lease premium, rent and interest arising out of deposits on surplus funds belong to the Govt. of Maharashtra and the assessee merely holds such fund as the custodian of State Govt. However, the Assessing Officer rejecting the claim of the assessee assessed the income in the hands of the assessee. Notably, learned Commissioner (Appeals) has restored the issue to the Assessing Officer for deciding the issue following the direction of the Tribunal in A.Y. 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 3(2) of the MIDC Act, it emerges that the assessee corporation viz. MIDC is competent to acquire, hold and dispose off property, both moveable and immovable, and to contract and do all things necessary for the purposes of the Act. Still further, a perusal of the functions of the assessee corporation as contemplated in Sec. 14(ü) of the MIDC Act reveals that the same particularly includes viz. (i). establishing and managing industrial estates at places selected by the state government; (ii). developing industrial areas selected by the State Government for the purpose and make them available for undertakings to establish themselves; and (iii). undertaking schemes or works, either jointly with other corporate bodies or institutions, or with Government or local authorities, or on an agency basis, in furtherance of the purpose for which the assessee corporation is established and all matters connected therewith. Still further, the assessee corporation as provided in Sec. 15 of the MIDC Act interalia stands vested with the powers viz. (i). to acquire and hold such property, both movable and immovable as the assessee corporation may deem necessary for the performance of any of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it, subject to the provisions and the purposes of the said Act. 14. We further find from a perusal of Sec. 32 of the MIDC Act that in case the State Government is of the opinion that any land is required for the purpose of development by the assessee corporation, or for any other purpose in furtherance of the objects of the said Act, then after putting the owner of the land or any other person interested therein to notice as regards its decision of acquiring such land, calling for his objections and disposing off the same after affording an opportunity of being heard to such person, the State Government shall acquire such land by publishing a notice in the official gazette. On a perusal of sub-section (4) of Sec. 32 of the MIDC Act, it emerges that when a notice under Sec. 32(1) of the Act is published in the official gazette, the land shall, on and from the date of such publication, vest absolutely in the State Government free from all encumbrances. Still further, as per sub-section (5) of Sec. 32 of the MIDC Act, where any land is vested with the State Government under sub-section (4) of Sec. 32 of the 15. We thus, in the backdrop of our aforesaid observations that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered view that now when Sec. 43-1A [application of which is referred to in sub-sec. (7) of Sec. 32] contemplates placing of the land vested in the State Government at the disposal of the assessee corporation for developing by, or under the control and supervision of the corporation, and thereafter to be dealt with for the furtherance of the objects of the MIDC Act in accordance with the regulations made and directions given by the State Government in this behalf, hence the claim of the revenue of there being an absolute transfer of the ownership of the land to the assessee corporation can safely be ruled out. We have given a thoughtful consideration to the issue under consideration and are of a strong conviction that a perusal of the scheme of the MIDC Act reveals beyond any scope of doubt that the land acquired by/vested with the State Government were only placed at the disposal of the assessee corporation for the furtherance of the objects of the MIDC Act viz. (i) in general to promote and assist in the rapid and orderly establishment, growth and development of industries in the State of Maharashtra, and in specific (ii). to establish and manage industrial estates at places selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated. 07.09.2018. Of course, the Assessing Officer must decide the issue after affording reasonable opportunity of being heard to the assessee. Ground raised is allowed for statistical purposes. 14. Ground no. 5 being general in nature does not require adjudication. 15. Grounds raised in ITA Nos. 4475/Mum/18 & 4476/Mum/2017 for Assessment Years 2013-14 and 2014-15 respectively being identical, our decision in ITA No. 4332/Mum/2017 will apply mutatis mutandis to these two appeals also. 16. Accordingly, all these appeals are partly allowed for statistical purposes ITA No. 4326/Mum/2017-A.Y.2007-08 17. In ground no. 1 of both these appeals the assessee has challenged the validity of reopening of assessment under section 147 of the Act. For the A.Y. 2007-08 assessee filed its return of income on 31.10.2007 declaring loss of Rs.54,39,99,473/-. Subsequently, assessee filed a revised return of income on 25.2008 reducing the loss to Rs.40452295/-. Assessment in case of the assessee was originally completed under section 143(3) of the Act vide order dated 21.12.2009 determining the total income at Nil. Much After completion of the original assessment the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not required to maintain accounts as per Companies Act. He submitted, accounts of the assessee are subjected to audit by the CAG and there is no chance of any manipulation or suppression of income. He submitted, during the original assessment proceeding the Assessing Officer has thoroughly examined the books of account and all other relevant material and document and thereafter completed the assessment. Thus, he submitted, reopening of assessment on a mere change of opinion, that too, after expiry of four years from the relevant assessment year is invalid. 19. The learned Departmental Representative strongly supporting the observations of the learned Commissioner (Appeals) submitted, though, the original assessment was completed under section 143(3) of the Act, however, the issue of taxability of lease premium and other charges was not at all examined by the Assessing Officer. Therefore, no opinion on the issue was formed while completing the original assessment. The learned Departmental Representative submitted, during the reassessment proceeding the assessee had raised objections against the reopening of assessment and the Assessing Officer has disposed of the objection of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. This ground is identical to ground no. 4 of ITA No. 4332/Mum/2017. Following our decision therein we restore the issue to the Assessing Officer for deciding afresh in terms with our direction therein. Ground raised is allowed for statistical purposes. ITA No. 4327/Mum/17-A.Y.2008-09 22. Grounds raised in the aforesaid appeal are more or less identical to ITA No. 4326/M/2017. Following our decision therein we dismiss ground no. 1. Whereas, ground no. 2 is allowed for statistical purposes. ITA no. 4329/Mum/ 2017 A.Y.2009-10 23. Ground no. 1 is on reopening of assessment under section 147 of the Act. The facts relating to this ground are almost similar to facts involved in respect of similar ground in ITA No. 4327/M/17. The only difference being, in the impugned assessment year the reopening of assessment is before expiry of four years from the end of relevant assessment year. In view of our decision in respect of similar grounds raised in other appeals considered by us earlier in this order, we dismiss the ground raised by the assessee. 24. Ground no. 2 is identical to ground no. 2 of ITA No. 4332/Mum/2017. Following our detail reasoning therein, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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