TMI Blog2005 (7) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... I 58 - SUPREME COURT] , Calcutta State Transport Corporation [ 1996 (2) TMI 7 - SUPREME COURT] and in the case of U.P. Forest Corporation [ 1998 (3) TMI 5 - SUPREME COURT] . It was one of the contentions taken by the assessee in the instant case before the revenue authorities that Irrigation Minister is ex-officio Chairman; one of the non-official Member is nominated by the State Government as Vice Chairman; other officials like Chief Secretary and Secretary of the various departments are ex-officio Members; and five of the MLAs and 3 of the MLCs are also Members of the assessee and thus it has a popular representation . We are afraid; this is not what Hon ble Supreme Court has stated that the Members of the Corporation, either wholly or partly, directly or indirectly, must be elected by the inhabitants of the area . Section 3(2) of the VIDC Act does not say that ex-officio Chairman must be elected by the inhabitants of the area . So also in the case of MLAs and MLCs. In short, the revenue authorities rightly rejected assessee s claim of status of Local Authority . The local citizens of the area should elect them directly or indirectly. Perhaps the case of Irrigation Minister, MLAs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new assessee had not commenced its business. The new owner may expand the existing undertaking and its capacity. To say that only when it is in full swing and completed the entire expansion the business commenced is an incorrect appreciation. We have no doubt that the view canvassed by the learned standing counsel has no legal sanctity. Thus, we answer Question No. (II) also in favour of the assessee and against the revenue. In the result, appeal of the assessee stands allowed. - HON'BLE K.P.T. THANGAL, VICE PRESIDENT AND K.K. BOLIYA, ACCOUNTANT MEMBER For the Appellant : K.P. Dewani and Sudhir Dabir, Advs. For the Respondent : Anand Jaiswal, Adv. ORDER K.P.T. Thangal, Vice President 1. This appeal by the assessee is for the assessment year 1998-99. 2. The assessee is a Statutory Corporation set up under the Vidarbha Irrigation Development Corporation Ordinance, 1997 dated 12-3-1997, which was subsequently replaced by Vidarbha Irrigation Development Corporation Act, 1997 (Maharashtra Act No. XXVI of 1997) (for short VIDC Act), which came into effect from 12-3-1997. Assessee being aggrieved by the orders of the revenue authorities, approached the Tribunal and vide its orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished the return on 30-11-1998, declaring nil income. In the computation of income accompanying the return, loss was declared at Rs. 1,40,31,211 and claimed to be eligible for carry forward. Assessee is Government of Maharashtra Undertaking, came into existence vide Ordinance, dated 12-3-1997, i.e. , Vidarbha Irrigation Development Corporation Ordinance, 1997. Though the assessee had shown the status as Domestic Company , the status was claimed as Local Authority , which was rejected by the Assessing Officer, in the light of the following decisions: (1) Veljibhai Muljibhai Soneji v. State of Bombay AIR 1963 SC 1890 (2) Calcutta State Transport Corporation v. CIT [1996] 219 ITR 515 (SC) (3) CIT v. U.P. Forest Corpn. [1998] 230 ITR 945 (SC). 12. It was held, assessee is fully covered by the decision of the Apex Court in the case of U.P. Forest Corporation ( supra ). Assessee s claim for carry forward of loss was also rejected. Assessing Officer further rejected assessee s claim that the assessee has set up its business. Assessee s FDR interest amounting to Rs. 8,82,54,420 was brought to tax as income from other source and house property income was taken at Rs. 18,89,693. Assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and duties as are entrusted to Municipal bodies, such as those connected with providing amenities to the inhabitant of the locality like health and education services, water and sewerage, town planning and development of roads, markets, transportation, social welfare services, etc. In short, it should be entrusted with duties and functions similar to a Government body . As far as the assessee concerned, CIT(A) held, that assessee does not fall within the scope and parameters laid down by the judgment of Hon ble Supreme Court in the case of Municipal Corporation of Delhi v. Birla Cotton Spg. Wvg. Mills AIR 1968 SC 1232. She held that the Preamble of VIDC Act makes this clear. The Preamble of this Act mentions that it is an Act to make special provision for mobilisation of resources for completion of some ongoing irrigation projects in time-bound manner for promotion and operation of said irrigation projects in Vidarbha region and command area development and schemes for generation of hydro-electric energy to harness the water of Godavari and Tapi rivers allocated to the State of Maharashtra under the Water Dispute Tribunal Award and other allied and incidental activities includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if the area of operation is whole of the State, then such bodies cannot be treated as a Local Authority . 17. The CIT(A) further held, assessee also does not satisfy the condition laid down by the Apex Court in the case of Birla Cotton Spg. Wvg. Mills ( supra ), i.e. , the assessee is not a local authority elected by the inhabitants of the area; whereas in the case of DDA it consisted of a Chairman, Vice Chairman and other official and non-official members who were elected. However, this reasoning of CIT(A) was tried to be countered by the assessee, stating that as per section 4(1) of the VIDC Act, the Corporation consist members like Minister of Irrigation, non-official Members nominated, Chief Secretary and the like [quoted at page 19, para 43 of the CIT(A) s order]. Assessee further submitted that 5 MLAs and 3 MLCs are nominated by the Government as the Members of VIDC; hence, assessee satisfies the condition. However, this was rejected by the learned first appellate authority. 18. The CIT(A) further observed that unlike DDA, assessee-Corporation does not have any power to compulsorily levy any fee or betterment charge. What the assessee charges is recovery for the volume of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the Preamble of VIDC Act . Hence, Their Lordships directed the Tribunal to reconsider the issue in the light of the provisions of VIDC Act, Maharashtra Irrigation Act, 1976 and Bombay Canal Rules, 1934. 22. The first question of law framed for the consideration of the Tribunal by Their Lordships reads as under : ( i ) Whether the income of the assessee is not exigible to tax by virtue of the exemption under section 10( 20A ) of the Income-tax Act, 1961? 23. For the appreciation of facts and for the consideration of question of law, it is essential to go through the relevant provisions, section 10(20A). The same reads as under : 10( 20 ) the income of a local authority which is chargeable under the head Income from house property , Capital gains or Income from other sources or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area; Explanation . For the purposes of this clause, the expression local authority means ( i ) Panchayat as referred to in clause ( d ) of articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per volume of water supplied by it; the learned counsel for the assessee submitted, this observation of the CIT(A) is without merit. 26. The learned counsel for the assessee further submitted that as per section 50 of VIDC Act, rehabilitation is to be carried out only by the State Government and not by the assessee. The learned counsel submitted, a glance through the provisions of VIDC Act will clearly establish that the assessee satisfies all the conditions contemplated under section 10( 20A ) for grant of exemption. It is established for the promotion and operation of irrigation projects, for the development and scheme for generation of hydro-electric energy and for flood control. The Hydro-electric Power Project is defined in section 2( c ) of VIDC Act. The area of operation is defined as area of Godavari and Tapi Rivers Valley specified in the Schedule and other area or areas to which the provisions of the Act are extended by the Government by Notification in the Official Gazette. Section 12 of VIDC Act gives powers to the State Government to appoint an Executive Director. Section 17 of VIDC Act deals with the powers of the State Government to depute Government employees to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eservoir and its surrounds and reservoir water. In addition, assessee is empowered to establish, maintain and operate laboratories, etc., for the development of Godavari and Tapi River Valley. Assessee s counsel submitted, these activities result into development and improvement of villages, towns and cities. 29. Section 20 of the VIDC Act empowers the assessee-Corporation, from time to time, to determine and levy water charges for supply of water for irrigation, industrial and domestic purposes. Vide section 22 of the VIDC Act; any other person is restricted in taking up any similar developmental activity. Assessee is empowered to co-ordinate with other authorities to minimize the inconvenience caused. Section 24 of the VIDC Act, in fact gives a clear power to the assessee-Corporation to carry out all or any other functions and exercise all or any of the powers of the State Government or appropriate authority and Assessing Officer is authorized to carry out all or any of the functions and exercise all or any of the powers of the Canal Officer, notwithstanding anything contained in the Maharashtra Irrigation Act, 1976 and the provisions of Bombay Canal Rules, 1934, within the area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the learned counsel for the assessee invited our attention to section 34 of the Maharashtra Irrigation Act, 1976, which deals with the schemes for compulsory construction of field-channels. The learned counsel for the assessee also relied on sections 46, 58, 61, 62 and 72 of the Maharashtra Irrigation Act, 1976, which deals with the modes of supply of canal water, power to charge minimum rate, application for supply of water and the mode of agreement - when an agreement is to be entered; consent to agreement necessary where land is in possession of occupier other than the holder; and supplier of water under the scheme, etc. 32. Inviting our attention to provisions of Rules 11 and 12 of the Bombay Canal Rules, 1934, learned counsel submitted, the stand of the revenue that the area of action of the assessee has not been demarcated is incorrect. Inviting our attention to section 49 of the VIDC Act, learned counsel for the assessee submitted, assessee-Corporation has to prepare and submit to the State Government annual reports and returns, with particular reference to - ( a ) irrigation command area development and flood control; ( b ) water supply; ( c ) hydro electrical energy; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timum agricultural produce and it has a direct effect of development and improvement of villages. Learned counsel further submitted, the assessee-Corporation, apart from completion of some ongoing projects in time bound manner, has also to promote and operate the existing projects. Revenue itself has accepted that functions under the statute are for promotion and operation of irrigation and power project. The learned counsel for the assessee further submitted, assessee-Corporation constructs dam on various rivers as a measure of flood control to villages. Such construction of dams is definitely improvement of villages and towns. He further submitted, assessee-Corporation constructs canals and regulates water to various villages and towns. This is nothing but development of towns and villages. Improved irrigation facilities boost the development of villages. In fact many villages are bound to get developed as a result of such construction of canals and supply of water to villages. Assessee s counsel further submitted, water scheme of towns would stand developed with the help of irrigation facilities and such water schemes helps in development of towns. 35. Inviting our attention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention to the decision of the Hon ble Supreme Court in the case of Gujarat Industrial Development Corporation v. CIT [1997] 227 ITR 414, the learned counsel submitted, the word development in section 10( 20A ) has to be understood in a wider sense and establishment of industries is one of the modes of development - such an interpretation would preserve the object of section 10( 20A ) of the Income-tax Act, 1961. 39. The learned counsel submitted, it is important to note that by virtue of section 15 of the VIDC Act, from the appointed date, the assigned projects of the Corporation and their assets comprising movable and immovable including irrigation projects, hydro-electric power project, projects under construction, specified in that behalf, situated in the area of operation of the Corporation, which immediately before the appointed date vested in the State Government and were under the control of the Irrigation Department stand vested in the Corporation, and all income derived and expenses incurred in that behalf is brought on books of the Corporation; and the rights, liabilities and obligations of the State Government, whether arising out of any contract or otherwise pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature, developmental in character, which undoubtedly improves the cities, towns and villages, attracting the provisions of section 10( 20A ) of the Income-tax Act, 1961. The learned counsel submitted that merely looking to the Preamble of the VIDC Act is not sufficient so as to find out whether the assessee falls within the ambit of section 20( 20A ). Preamble can be looked only if the provisions are ambiguous and incapable of conveying the meaning enumerated in the provisions and not otherwise. Assessee s counsel heavily relied on the decision of the Apex Court in the case of Gujarat Industrial Development Corporation ( supra ) and the decision of the Hon ble Rajasthan High Court in the case of CIT v. Rajasthan Land Development Corpn. [2002] 255 ITR 199 . 42. The learned counsel for the assessee submitted, for the development of any city, town or village, water is an essential requirement and the assessee performs such function. As per the section, same functions are performed by the local bodies, Municipality, etc., which according to the revenue authorities, is entitled for benefit under section 10( 20A ) of the Income-tax Act, 1961. Assessee is essentially doing the same funct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimburse or bear the expenditure incurred by the State Government for the rehabilitation and resettlement of persons affected by the irrigation and hydro-electric power project activities of the assessee in furtherance of its objectives. Hence, the learned counsel submitted, the decision of the Hon ble Rajasthan High Court in the case of Rajasthan Land Development Corpn. ( supra ) clearly applies to the case of the assessee. 45. He further submitted, for most of the developmental functions performed by the local bodies, Municipalities, Corporations or any commercial establishment, water and electricity essentially to be provided by the assessee-Corporation. Therefore, the assessee is helping in fulfilling the essential necessities of supply of water for the developmental purpose. Learned counsel submitted, development of a place can be accelerated through varieties of schemes and establishment of industries is one of the modes of developing an area, as held by the Hon ble Supreme Court in the case of Gujarat Industrial Development Corpn. ( supra ), and, therefore, the activity of the assessee is essentially the one contemplated within the ambit of provisions of section 10( 20A ). 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te planning, development or improvement of cities, towns or villages as contemplated under section 10( 20A ). 49. Inviting our attention to Page 21F (Paper Book No. I), the learned standing counsel for the revenue submitted, assessee-Corporation (VIDC) has been constituted under VIDC Act, 1997, for the purpose of timely completion of 10 ongoing major irrigation projects mentioned in the Schedule to the Act. Further, the area of operation has been subsequently enlarged for full utilization of its share of water as per the Inter State Water Disputes Tribunal Award, i.e., to say completion of 86 new irrigation projects, 4 major irrigation projects, 27 medium irrigation projects and 55 minor irrigation projects, for which fund was also made available by the Government. Hence, the learned standing counsel for the revenue submitted, assessee is not entitled for the benefits contemplated under section 10( 20A ). 50. The learned standing counsel for the revenue submitted, in fact the assessee is not planning, developing or improving villages, towns or cities at all. The development of village etc. means it should be done in the area in a planned and organised manner . Indirect development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same has been rented out by the assessee to the tenant or for any other purpose would make the expression in the occupation of a Ruler redundant and those words in the provision would not have its play. 53. The learned standing counsel for the revenue submitted, the area, which is sought to be developed by the assessee, is not any village, town or city but the submergence area and command area of the irrigation project. The learned standing counsel submitted, this aspect is further made clear from the fact that the provision itself contemplates that the authority could be dealing with housing accommodation or planning, development and improvement of cities, towns and villages or both. This clearly shows the intent of the Legislature in granting exemption to authorities, which are carrying on civic activities. It is only such authorities that are contemplated under this provision. Relying upon the decision of the Hon ble Supreme Court in the case of Rao Shiv Bahadur Singh v. State of Vindhya Pradesh AIR 1953 SC 394, wherein the Constitutional Bench held - While, no doubt, it is not permissible to supply a clear and obvious lacuna in a statute and imply a right of appeal, it is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 10( 20A ). any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. 57. This section was inserted by the Finance Act, 1970, with retrospective effect from 1st April, 1962. It was brought into statute book as Legislature felt that the income of the Housing Boards or statutory authorities set up for the purpose of dealing with or specifying needs for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages necessarily to be exempted from tax. Articles 285 and 289 of the Constitution of India provides for the immunity of the property of the Union of India and States from mutual taxation, which is one of the basic federal principal. Article 289 declares that property and income of the State shall be immune from Union taxation except of commercial undertakings carried on by the States, unless such undertakings are declared by the Parliament to be incidental to the ordinary functions of the Government. In effect, both the Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted for the purpose of dealing with and satisfying the need of housing accommodation or for the purpose of planning, development and improvement of cities, towns and villages or for both, are exempted from taxation. Their Lordships further held, The condition whether the respondent-Corporation is an authority constituted in India by or under any law does not require any interpretorial exercise for the purpose to answer it. The second requirement is that such an authority must have been constituted for the purpose of dealing with and satisfying the need of housing accommodation, like the Housing Board or for the purpose of planning, development and improvement of cities, towns and villages or for both. This obviously refers to the preamble regarding the purpose for which the enactment has been made and also the relevant definition and the functions which are assigned to such duly constituted authority. The predominant activities of the Corporation is related to agricultural and development activity of the same for the purpose of plan development; and the agricultural land cannot be isolated from the development of villages and, therefore, the lands fall within the ambit of Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have impact on the planning, development or improvement of city, town or village. 62. Coming to the other argument of the assessee that it is a State whose income is exempted under Article 289(1), CIT(A) held that assessee is a body corporate having perpetual succession and a common seal capable of suing and being sued in its name with power to borrow and spend. On dissolution the properties, funds and dues realizable by the Corporation and liabilities of the Corporation shall vest in the State Government. CIT(A) held, in the light of the ratio laid down by the Hon ble Andhra Pradesh High Court in the case of A.P. State Road Transport Corpn. ( supra ), as affirmed by the Hon ble Supreme Court in the case of Andhra Pradesh State Road Transport Corpn. v. ITO [1964] 52 ITR 524 and also in the light of the decision of the Hon ble jurisdictional High Court in the case of Vidarbha Housing Board v. ITO [1973] 92 ITR 430 (Bom.), assessee cannot be treated as a State and, therefore, the income cannot be exempted resorting to Article 289(1) of the Constitution of India. 63. It is the case of the revenue that though the assessee is an authority constituted in India under the law, it is not an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court held, so as to constitute a local authority, even if it is incorporated by an Act of Legislature, the following conditions are to be satisfied : ( a ) Members of the Corporation, either wholly or partly, directly or indirectly, must be elected by the inhabitants of the area. ( b ) The second essential attribute of a Local Authority is that it needs to have a function and duties normally entrusted to the Municipal bodies, such as providing civic amenities to the inhabitants of the locality like health, education, town planning, market, transportation, etc. ( c ) The most important essential attribute is that the Local Authority should have power to raise funds by levying taxes, rates, charges or fees. 68. In the instant case of the assessee none of these essentials are satisfied. It was one of the contentions taken by the assessee in the instant case before the revenue authorities that Irrigation Minister is ex-officio Chairman; one of the non-official Member is nominated by the State Government as Vice Chairman; other officials like Chief Secretary and Secretary of the various departments are ex-officio Members; and five of the MLAs and 3 of the MLCs are also Members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to either dealing with or satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both. 71. In the case of Rajasthan Land Development Corporation ( supra ), Hon ble Rajasthan High Court held that a Corporation constituted by a Legislative enactment, engaged in the activities of planning, development and improvement of agricultural lands, having regard to the scheme of Rajasthan Land Development Corporation Act, 1975, is an assessee entitled to exemption under section 10( 20A ). In this case the Hon ble High Court held, the assessee-Corporation was dealing with activities related to agricultural and development activity of the same for the purpose of plan development; and further held, the agricultural land cannot be isolated from the development of villages and, therefore, Their Lordships held, the lands fall within the ambit of Corporation engaged in the activities of planning, development and improvement of agricultural lands, which related to planning, development and improvement of villages. 72. In the instant case of the assessee there is no doubt that the Corporation is constituted by a legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it develops the area within its activity. 73. It is not disputed that the assessee under the provisions of VIDC Act, to construct hydro-electric power projects, which may be added subsequently to the existing ones and this activity also result in making available drinking water and the water is essential for the development of cities, towns and villages. The establishment of industry, the Hon ble Rajasthan High Court held in the case of Rajasthan Land Development Corporation ( supra ) tantamount to planning, developing and improving the cities, towns and villages. On the same line, construction of power projects will also lead to planning, development and improvement of cities, towns and villages. It is true, as contended by the learned standing counsel for the revenue, that the VIDC Act was not passed for the purpose of enabling the assessee to perform functions set out in section 10( 20A ) directly. But the Hon ble Supreme Court held in the case of Gujarat Industrial Development Corporation ( supra ), that direct nexus is not essential. 74. The distinction pointed out by the learned standing counsel for the revenue, with reference to the decision of the Hon ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State of Rajasthan and for other matters connected therewith or incidental thereto. One of the objects was construction, renovation, re-designing, re-aligning and lining of water courses. The word land development has also been defined under section 2( j ) of the Act. The same is also reproduced here as under : 11. The word land development has been defined under section 2( j ) of the Act as under : ( j ) land development means any of the following works, - ( i ) construction, renovation, re-designing, re-aligning and lining of water courses; ( ii ) land levelling and land shaping, including re-alignment of field boundaries; ( iii ) digging, renovation, re-designing and re-aligning of field drains; ( iv ) providing of drop structures, culverts and farm roads in the fields; ( v ) land reclamation by use of engineering, biological and chemical measures, including leaching; ( vi ) contour bunding and nala bunding; ( vii ) growing of trees, plants, shrubs and grasses; ( viii ) development of permanent and temporary pastures, farm forestry and commercial afforestation; ( ix ) such other works as may be necessary or incidental to development of land or ground or flow water potential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intenance and management of irrigation projects having irrigable command area is not for the purpose of development and can this isolately be treated from development of villages, towns and cities ? If the development of agricultural land is not isolated from the development of villages, by no stretch of imagination the establishment of irrigation project and hydro-electric power project could be isolated from the development of villages, towns, cities, etc. 79. Coming to the functions and powers of Corporation, it is defined in Chapter IV. For the brevity and clear understanding, sections 18 and 19 are reproduced here as under : 18. The function of the Corporation shall be, ( a ) to promote and operate, ( i ) some irrigation projects mentioned in the schedule and command area development including flood control; and ( ii ) some schemes for the generation of hydro-electrical energy; ( b ) to plan, investigate, design, construct and manage those irrigation projects and their command area development; ( c ) to plan, investigate, design, construct and manage the schemes of the generation of hydro-electrical energy; ( d ) to enter into contracts in respect of the works and any other ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stations, navigation works, irrigation, flood control and drainage canals and such other works and structures as may be required; ( c ) to take measures to prevent pollution of any water under its control and to take all measures deemed necessary to prevent discharges into such water of effluents which are harmful to water supply, irrigation, public health or fish life; ( d ) to stock its reservoirs or water courses with fish and to sell fish or fishing rights and prohibit taking out fish from the water under its control; ( e ) to assist in the establishment of water users association and other organizations formed under the Maharashtra Co-operative Societies Act, 1961 for the better use of facilities made available by the Corporation; ( f ) to lease rights for water sports, other recreational activities related to the use of reservoir and its surroundings and reservoir water; ( g ) to establish, maintain and operate laboratories, experimental and research stations and farms for conducting experiments and research for ( i ) utilizing the water, electrical energy and other resources in the most economical manner for the development of the Godavari and Tapi River Valley in Vidarbha r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a ) irrigation, command area development and flood control, ( b ) water supply, ( c ) hydro-electrical energy, ( d ) recreation facilities, ( e ) use of lands, ( f ) resettlement of displaced persons; and ( g ) other activities of the Corporation. (2) The Corporation shall also furnish to the State Government such returns, statistics, reports, accounts and other information with respect to its conduct of affairs, properties or activities or in regard to any proposed work or scheme as the State Government may, from time to time, require. 50. The rehabilitation and resettlement of the persons affected due to the irrigation and the hydro-Electric Power Projects shall be carried out by the State Government in accordance with the provisions of the Maharashtra Project Affected Persons Rehabilitation Act, 1986; Provided that, all the expenditure required to be incurred by the State Government for the rehabilitation and the resettlement of persons affected by the irrigation and Hydro-Electric Power Project shall be borne by the Corporation. 83. In short, in the light of the decision of the Hon ble Supreme Court in the case of Gujarat Industrial Development Corporation ( supra ) and also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced at page 24, para 45 of this order, makes it clear that once the Corporation s existence ceased to exist by operation of law, from such date as may be specified in the Notification, the Corporation shall be deemed to be dissolved and accordingly all the properties, funds and dues vested in or realisable by the Corporation shall vest in the State Government and also all the liabilities incurred by the Corporation are enforceable against the State Government; which indicates that assessee is discharging a part of the sovereign function. The liability of the State Government is not confined to the extent of properties/funds that vested in the Government, but to the actual extent. From any point of view, the Corporation needs to be treated as an Authority as contemplated under section 10( 20A ). 88. Hence, we answer Question No. (I) in favour of the assessee and against the revenue. 89. Coming to Question No. (II) framed by the Hon ble High Court and directed to decide on the facts; it is reproduced in Para 8 of this order. 90. The facts leading to the dispute is as under :- One of the contentions by the assessee before the Tribunal was whether the assessee had commenced the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon ble Madras High Court in the case of CIT v. Ponds India Ltd. [2002] 253 ITR 686 . Inviting our attention to the written submissions made before the Hon ble High Court, the learned counsel for the assessee submitted; this should be treated as a part of the submission before the Tribunal (Pages 52 to 66 of the Paper Book - Volume I). 92. The learned counsel for the assessee submitted; in the irrigation project, dam is constructed where water is accumulated and canals are taken out from the dam to regulate the water flow. The canals are very long running into 50 kms. or much more. However, construction of canal of a small portion itself is the starting point for the commencement of business. Water is drawn to nearby agricultural fields from the canal. Assessee never stated that the assessee has not commenced the business. Assessee only stated that the projects were going on and are yet to be completed. The authorities have misread the letter dated 16-2-2001 and reached a wrong conclusion. The stand of the revenue that the assessee cannot ask for two different methods one for writing books of account for the purpose of business and another for tax purpose is contrary to law l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Hon ble Madras High Court in the case of Ponds India Ltd. ( supra ); that an undertaking had had been set up long prior and which had commenced its business several years earlier, cannot be regarded as new undertaking set up in the year in which ownership passed from one to another. It is not the year in which the assessee owned the undertaking forms the matter; what is material is the year in which it was set up. The change of ownership does not result and amounts to setting up a new undertaking. 96. The learned counsel for the assessee also distinguished the decision of the Privy Council relied upon by the revenue authorities in the case of CIT v. Sarangpur Cotton Mfg. Co. Ltd. [1938] 6 ITR 36. 97. The learned standing counsel for the revenue, on the other hand, supported the orders of the revenue authorities, and submitted the contention of the assessee that the assessee had commenced the business even before acquiring the right of ownership is totally false. Vide letter dated 16-2-2001 assessee categorically admitted that none of the projects undertaken were completed or ready for intended use. This itself falsifies assessee s submission. Once given a statement to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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