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2015 (4) TMI 885 - AT - Income TaxEligibility for exemption u/s 11 - whether the assessee is carrying on commercial activities and hence not eligible for exemption under section 11? - funds claimed to have been received on behalf of the Government of Maharashtra is taxable as income in the hands of the assessee - whether the assessee is not eligible to claim set off of brought forward deficit and also the deduction of book depreciation? - 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 - Held that:- 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. In view of the foregoing discussions, we agree with the Ld CIT(A) in 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. Funds claimed to have been received by the assessee on behalf of the Government of Maharashtra - Held that:- The assessee is raising the contention for the first time before us that it is carrying on the activities on its own account and also as agent of the Government of Maharashtra. There appears to be no reference in the orders of the tax authorities to the resolutions passed by the Government of Maharashtra. It is further contended that the assessee is following consistently taking the funds received on behalf of the State Government to the Balance Sheet as per the resolutions passed by the State Government. Since the assessee has submitted that it is also carrying out certain activities on behalf of the Government of Maharashtra and since the said claim of the assessee has not been examined by the tax authorities, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the same afresh by duly considering all the documents and explanations that may be furnished by the assessee before him in order to substantiate its contentions. The assessee is also directed to furnish all the details that may be called for by the assessing officer. Since we have set aside this matter to the file of the AO, the alternative contention of the assessee is also set aside to his file. Claim for deduction of brought forward deficit computed u/s 11 - Held that:- The Ld CIT(A) held that the same is not allowable as deduction, since the assessee's income is computed in 'commercial manner', since the provisions of the Act do not allow such kind of deduction. Though the Ld A.R placed reliance on certain case law in this regard, yet we notice that they were rendered in the context of the computation of income u/s 11 of the Act. Since the income of the assessee is required to be computed under normal provisions of the Act for the year under consideration, since it is covered by the proviso to sec. 2(15) of the Act, we are in agreement with the view expressed by Ld CIT(A) on this issue. We notice that the Ld CIT(A) has rejected the claim for deduction of book depreciation. In our view, the depreciation computed u/s 32 of the Income tax Act should be deducted for the purpose of arriving at the income of the assessee, when the income is computed in terms of the provisions of the Income tax Act. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to allow the depreciation admissible u/s 32 of the Act. - Decided partly in favour of assessee for statistical purposes.
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