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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 ..... A.Y. 2011-12 [ 2018 (11) TMI 778 - ITAT MUMBAI] the co-ordinate bench has categorically held that, since, the assessee cannot be considered either owner or deemed owner of the lands, the lease premium, rent, interest etc. cannot be brought to tax at the hands of the assessee. As the aforesaid decision was not available before the Departmental Authorities when they decided the issue in the impugned assessment year, we are inclined to restore the issue to the AO with a direction to examine the facts and decide the issue following the observations of the Tribunal - Ground raised is allowed for statistical purposes. - Shri Saktijit Dey, JM And Shri N. K. Pradhan, AM For the Appellant : Shri V. Sridharan S. Sriram. For the Respondent : Shri Sanjay Singh (CIT-DR). ORDER PER BENCH The aforesaid appeals by the assessee are against six separate orders passed on dated 31.03.2017 12.04.2017, by the ld. Commissioner of Income Tax (Appeals)- 57, Mumbai for the assessment years 2007-08, 2008-09, 2009-10, 2010-11, 2012- 13, 2013-14 2014-15. Since, the appeals relate to same assessee and involve common issues they have been clubbed together and are disposed off in a consolidated order as a matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial in nature, hence, do not qualify to be considered as charitable purpose as defined under section 2(15) of the Act. While doing so the Assessing Officer also negated assessee s contention regarding immunity from taxation under Article 289 (1) of the Constitution of India by claiming itself to be an agency of the Government of Maharashtra. Accordingly, the Assessing Officer disallowed assessee s claim of exemption under section 11 of the Act. Being aggrieved with the aforesaid decision of the Assessing Officer assessee preferred appeal before the learned Commissioner (Appeals). However, learned Commissioner (Appeals) also upheld the decision of Assessing Officer in this regard. 3. Shri V. Sridharan, learned counsel appearing for the assessee fairly submitted, the issues relating to applicability of proviso to section 2(15) along with assessee s claim of exemption under section 11 as well as the plea of the assessee that it is immune from taxation under Article 289(1) of constitution of India have been decided against the assessee by the Tribunal in A.Y. 2011-12 vide ITA no. 6552/Mum/2014 dated 27.03.2015. 4. Shri Sanjay Singh, learned Departmental Representative agreed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is to be an orderly development and growth' of industries in the Bombay Poona Sector. The second object is to secure dispersal of industries from the congested areas of the Bombay Poona sector to the under developed parts of the State. The industrial areas are broadly classified into two categories, namely, first, those meant for engineering and other industries which are not obnoxious, and secondly, those meant for chemical industries. The establishment and growth of industries in the State is inextricably bound up with availability of land. Available land is limited. Such limited supply leads to speculation in land. Power is therefore required for compulsory acquisition of land to achieve the purposes of the Act. At the same time, land owners are not to be derived of the legitimate benefit of reasonable increase in land values in a developing economy......The absence of amenities is envisaged and answered in the Act by empowering the Corporation to provide these essential amenities, facilities and conveniences. Thus, it can be seen that the Hon'ble Supreme Court has examined the provisions of the MID Act and the object purpose sought to be achieved by formation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding this issue. Following observations made by the Hon'ble Apex Court are relevant here: - The establishment, growth and development of industries in the State is within the State list of Industries. Furthermore, to effectuate the purposes of the development of industries in the State it is necessary to make land available. Such land can be made available by acquisition or requisition. The Act in the present case deals with the acquisition of land by the State and on such acquisition, the State may transfer the land to the Corporation which again may develop it itself and establish industrial estates or may develop industrial areas Corporation is therefore established for carrying out the purposes of the Act. The pith and substance of the Act is establishment, growth and organisation of industries, acquisition of land in that behalf and carrying out the purposes of the Act by setting up the Corporation as one of the limbs or agencies of the Government. The powers and functions of the Corporation show in no uncertain terms that these are all in aid of the principal and predominant purpose of establishment, growth and establishment of industries. The Corporation is establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the purpose of the Act. The Hon'ble Apex Court no where stated that the assessee is acting as an agent of the Government. In our view, there is a difference between agency and agent . In trading circles, an agent is considered to be representing the Principal and all his actions are binding upon the Principal. However, an agency is just an organisation or an outfit and its actions are not binding upon the State Government. Further, it is an admitted fact that the assessee is a Statutory Corporation or body Corporate or legal person having an independent existence. The legal status of the assessee is made clear in section 3(2) of MID Act, which reads as under:- (2) The said Corporation shall be a body corporate with perpetual succession and a common seal, and may sue and be sued in its corporate name, and shall be competent to acquire, hold and dispose of property, both the movable and immovable, and to contract and do all the things necessary for the purposes of this Act. Since the assessee is a separate personality, it alone is liable for its actions. The Ld AR invited our attention to the Resolution No. IDC 1079/(1966)/IND.14 dated 11th September 1986, wherein it is stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be possible to hold that as a result of the specific statutory provisions the income received from the trade carried on by the corporation belongs to the shareholders who have constituted the said corporation, and so, we must look to the Act to determine whether the income in the present can be said to be income of the State of Andhra Pradesh. In this connection, we may usefully refer to the observations made by Lord Denning in Tamlin Vs. Hannaford (1950) 1 KB 18: 18. In the eye of the law said Lord Denning, the corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its property is not Crown property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a 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. These observations tend to show that a trading activity carried on by the corporation is not a trading activity carried on by the State departmentally, or is it a trading acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal position and accordingly obtained registration u/s 12A of the Act, filed returns of income etc. Accordingly, we reject the contentions of the assessee that it is a part of Government of Maharashtra. 22. The next contention urged before us was that the assessee is performing sovereign function of the Government. Since we have held that the assessee cannot be considered to be a part of State Government and since the private parties are allowed to carry on the activity of development of industrial estates, in our view, the said contention is bound to fail. 23. The next contention of the assessee is that the activities carried on by the assessee would not fall in the category of trade, commerce or business . Reliance was placed by Ld A.R on the decision of Hon'ble Supreme Court rendered in the case of Shri Ramtanu Co-operative Housing Society Ltd and Anr. (supra), wherein the Hon'ble Apex Court has held as under:- .These features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation......Receipt of these moneys arise not out of any busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. The meaning of commerce as given by the Concise Oxford Dictionary is exchange of merchandise, especially on large scale . In ordinary parlance, trade, and commerce carry with them the idea of purchase and sale with a view to make profit. If a person buys goods with a view to sell them for profit, it is an ordinary case of trade. If the transactions are on a large scale it is called commerce. Nobody can define the volume, which would convert a trade into commerce. For the purpose of the first proviso to section 2(15), trade is sufficient, therefore, this aspect is not required to be examined in detail. The word business is the broadest term and is encompasses trade, commerce and other activities. Section 2(13) of the Income-tax Act defines the term business as under 2. Definitions. (13) 'business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The word business is a word of large and indefinite import. Section 2(13) defines business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the Legislature is to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC), State of Gujarat V/s Raiour Mfg. Co. [1967] 19 STC 1(SC), Director of Supplies Disposal V/s. Member, Board of Revenue [1967] 20 STC 398(SC) and Mrs. Sarojini Rajah V/s CZT [19691 71 ITR 504 (Mad) to explain the terms trade, commerce or business . 18. Referring to the concept and principle of economic activity that has gained some acceptability in European Union and England it was explained that the said principle is applicable to Sales Tax, Value added tax, Excise duty etc. because these are not taxes on income but the taxable event occurs because of the economic activity involved. Even if a person/organization is carrying on trading/business on no loss no profit principle, it may be liable to pay taxes or comply with the statute when the charge, or incident of tax, is on the economic activity . The words trade, commerce and business are etymological chameleon and suit their meanings to the context in which they are found. Five tests propounded in Customs Excise Commissioner V/s Lord Fisher [1981] 'S.T.C. 238 and decision in Commissioner Of Sales Tax V/s Sal Publication Fund 12002] 252 ITR 701122 Taxman 437 (SC) was quoted. 19. The final and determining factors, it was ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Board of Direct taxes, further held that the legal terms trade, commerce or business in section 2(15), means activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. The Hon'ble Delhi High Court further discussed about the difference between the objectives while carrying on a pure business activity and charitable activity:- Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides for disposal of land covered by the lay out prepared by the Corporation by the Corporation by public auction or by entertaining individual applications. The Id. DR brought to our notice the following paper report which supports the view that the assessee had adopted the practice to dispose of land by public auction. TWO FLOT AUCTIONS PROMPT MIDC TO MULL CHANGE IN IT PARK POLICY Tushar Pawar, TNN I Nov 5, 2014, 04.08 AM 1ST NASHIK: Twice bitten, never shy. The Maharashtra Industrial Development Corporation (MIDC) looks determined to make the IT park project in its Ambad industrial estate a success. After two failed auction attempts, the MIDC is planning to change the reservation of the IT park following poor response from the industry. Around a decade ago, the state government had set up several state-of the-art IT parks in some select cities across Maharashtra, including the one in Nashik. The IT park building, which was built by MIDC at Rs. 2.23 crore, was inaugurated in 2002. But since then, it has been lying idle because of poor response from industry. The MIDC tried to auction the IT park twice in the past one-and-a-half years, but failed miserably as not a single indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Government. In our view, the control or directions issued by the State Government would not change the character of business activity . We are of the view that the activity carried on by the assessee should be examined independently and the fact that the assessee is being regulated by the State Government would not make any difference. In our view Ownership of the Corporation and activities of the Corporation are two different aspects and the ownership cannot be considered or taken into account to determine the character or nature of the activities carried on by the Corporation. 29. In view of the foregoing discussions, we agree with the Ld CIT (A) in /11 holding that the activities of the assessee are commercial in nature and hence would be hit by the proviso to sec. 2(15) of the Act. 6. In view of the aforesaid decision of the co-ordinate bench in assessee s own case and considering that there is no difference in facts in the impugned assessment year, respectfully following the aforesaid decision of the coordinate bench we hold that the assessee is not entitled to claim under section 11 of the Act as the activities carried out are of commercial nature, hence, is hit by the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came up for consideration before the Tribunal in A.Y. 2011-12, the co-ordinate bench vide order dated 07.09.2018 in ITA No. 4474 /Mum/2017 has accepted assessee s claim that lease premium and other charges received by the assessee on behalf of the Govt. of Maharashtra are not taxable as the assessee is merely a custodian of such funds. In this context he drew our attention to relevant observations of the bench with regard to the disputed issue. Thus, the learned counsel for the assessee submitted, the Tribunal having held that the assessee cannot be considered to be the owner or deemed owner of the land, the receipts arising from lease premium, rent, interest etc. cannot be taxed at the hands of the assessee. 11. The learned Departmental Representative drawing our attention to the ground raised by the assessee in this regard submitted, the assessee has not claimed any specific relief in the said ground. Without prejudice to the aforesaid submission the learned Departmental Representative submitted, since, the latest order of the Tribunal for the A.Y. 2011-12 was neither available before the Assessing Officer nor Commissioner (Appeals), the issue may be restored to the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentatives for both the parties and perused the exhaustive material placed on record and the judicial pronouncements relied upon by both the parties to drive home their respective claims. It is the contention of the assessee before us that all the industrial lands are held by the assessee corporation on behalf of the State Government of Maharashtra. It is further claimed that the assets which are owned by the assessee in its own name viz, buildings and other assets are separately shown in its own name in its 'balance sheet'. We are of the considered view that the issue as to in what status the lands under consideration were held by the assessee corporation can be appreciated in the backdrop of the scheme of the Maharashtra Industrial Development Corporation Act, 1961 [for short MIDC Act ]. We find from a perusal of the MIDC Act that the assessee corporation viz. MIDC had been established for securing and assisting rapid and orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Maharashtra. On a perusal of Sec. 3(2) of the MIDC Act, it emerges that the assessee corporation viz. MIDC is competent to acquire, hold and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes and industrial areas selected by the State Government for the said purpose, the assessee corporation subject to the provisions of the MIDC Act is vested with the powers of acquiring and holding property and leasing, selling, exchanging or transferring the same on such conditions as it may deem fit, as well as purchasing or taking on lease or under any form of tenancy any land, erect buildings on the same and make the same available on hire or sale to industrialists or persons intending to start industrial undertakings. Still further, the assessee corporation as per Sec. 17 of the MIDC Act also stands vested with the power to levy fees or service charges for providing amenities or common facilities viz, maintenance of roads, drainage, water supply, providing of street lighting etc. in such industrial estates and industrial areas on the plot holders or other persons receiving benefit of said services or amenities. Further, perusal of Sec. 19 of the MIDC Act reveals that the property, fund and other assets vesting in the assessee corporation shall be held and applied by it, subject to the provisions and the purposes of the said Act. 14. We further find from a perusal of Sec. 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a registered document as required under the Transfer of Property Act, 1 882 and Registration Act, 1908, which however was not so in the case of the assessee. We are of the considered view that the term 'transfer' used in sub-section (7) of Sec. 32 of the MIDC Act, which therein reads as under: ?) Where the land has been acquired for the corporation or any local authority, the State Government shall, after it has taken possession thereof, by notification published in the Official Gazette, transfer the land to the corporation or that local authority. as the case mazi be. for the purpose for has to be accorded its contextual meaning. Rather, a thoughtful deliberation of the context in which the term 'transfer' had been used in sub-sec. (7) of Sec. 32 reveals that the same is in reference to advancing of the purpose for which such land was acquired, with a further mention of application of the provisions of Sec. 43-1A of the MIDC Act to the land acquired by the State Government. In the backdrop of our aforesaid observations, we are of the considered view that now when Sec. 43-1A [application of which is referred to in sub-sec. (7) of Sec. 32] contemplates placing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying assessing of the income arising therefrom viz. lease premiums, rent, interest income on funds parked as deposits with the bank etc., as the income of the assessee corporation, hence the said claim of the revenue fails and is thus rejected. The Grounds of appeal Not 1,4 ,5 ,8 and 14 are allowed in terms of our aforesaid observations. 13. Thus, as could be seen from the aforesaid observations of the Tribunal, in assessee s own case for A.Y. 2011-12 the co-ordinate bench has categorically held that, since, the assessee cannot be considered either owner or deemed owner of the lands, the lease premium, rent, interest etc. cannot be brought to tax at the hands of the assessee. In view of the aforesaid and considering the fact that the aforesaid decision was not available before the Departmental Authorities when they decided the issue in the impugned assessment year, we are inclined to restore the issue to the Assessing Officer with a direction to examine the facts and decide the issue following the observations of the Tribunal in ITA No. 4474/Mum/2017 dated. 07.09.2018. Of course, the Assessing Officer must decide the issue after affording reasonable opportunity of being heard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of assessment under section 147 of the Act, learned Commissioner (Appeals) rejected all contentions of the assessee by upholding the validity of proceeding initiated under section 147 of the Act. 18. The learned Counsel for the assessee drawing our attention to the reasons recorded by Assessing Officer for reopening the assessment submitted, the Assessing Officer had no tangible material before him after completion of original assessment to form the belief that income assessable to tax has escaped assessment. He submitted, only upon re examining the balance sheet of the assessee the Assessing Officer formed opinion that there is escapement of income. Thus, he submitted, there being no failure on the part of the assessee to disclose fully and truly all material facts required for assessment, reopening of assessment after expiry of four years from the end of the relevant assessment year is invalid. The learned counsel submitted, assessee being a statutory corporation of Govt. of Maharashtra has to maintain its accounts as per the MIDC Act and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r computing its income. It is also noticed that the aforesaid facts came to the notice of the Assessing Officer while examining the balance sheet of the assessee for year ending 31.03.2009. Further, no material has been brought to our notice from assessee s side to demonstrate that this issue was examined by the Assessing Officer during the course of assessment proceeding. It is also observed, the issue on which assessment was reopened was a issue in dispute in subsequent years as well and the Assessing Officer has made similar additions in those assessment years. Thus, in our opinion, the Assessing had material before him to form a prima facie belief that income has escaped assessment. In view of the aforesaid, we do not find any reason to interfere with the decision of learned Commissioner (Appeals) on the issue of validity of reopening of assessment under section 147 of the Act. Ground no. 1 is dismissed. 21. In ground no. 2 assessee has challenged the addition made on account of lease premium, rent, interest etc. as income of the assessee. 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 Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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