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2015 (4) TMI 885 - ITAT MUMBAI

2015 (4) TMI 885 - ITAT MUMBAI - TMI - Eligibility 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 o .....

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n 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.

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ernment 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 ass .....

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cit 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 .....

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ccordingly, 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. - I.T.A. No.6552/Mum/2014 - Dated:- 27-3-2015 - S/Shri B.R.Baskaran And Sanjay Garg JJ. For the Appellant : S/Shri P J Pardiwalla and Mihir Naniwadekar For the Respondent : Shri S J Singh ORDER Per Bench:The appeal of the assessee is directed against the order dated 29.9.2014 passed by Ld CIT(A)-1, .....

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s not eligible to claim set off of brought forward deficit and also the deduction of book depreciation. 3. The facts relating to the issues cited above are stated in brief. The assessee is a Statutory Corporation formed under Maharashtra Industrial Development Act, 1961 (MID Act). The assessee is engaged in development of industrial assets by providing basic infrastructure facilities like land, roads, street lights, water supply, drainage etc. The assessee is maintaining facilities such as water .....

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iced that, in the immediately preceding year, the assessee was not held to be a valid trust by him and hence it was held to be not eligible for exemption u/s 11 of the Act. Following the said decision, the AO held that the assessee is not a valid trust for the year under consideration also and accordingly he held that it is not eligible for exemption u/s 11 of the Act. 4. The AO also held that the activities carried on by the assessee are commercial in nature and hence the proviso inserted by Fi .....

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ding development activities, earned interest on the deposits made by it. The assessee, however, did not declare them as its income. Instead, it disclosed them as its "liability" in the Balance sheet by claiming that the said funds and deposits belong to the Government of Maharashtra. The AO, however, did not accept the said contentions of the assessee and held that the above said receipts form part of the income of the assessee. For the year under consideration, the assessee had receiv .....

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n by the AO that the assessee is not a valid trust is erroneous. However, the ld.CIT(A) held that the assessee is not entitled to exemption u/s 11 of the Act for the following reasons: a) Section 58 of the MID Act provided that Government, by a notification, may declare that the Corporation shall be dissolved from such a date as may be specified in the notification. The ld. CIT(A), accordingly held that the provisions of section 58 of MID Act rendered the nature of the assessee as a revocable tr .....

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t charges, interest on deposits etc belong to State Government on the reasoning that there is no such legal obligation existing in the MID Act. Accordingly, the ld. CIT(A) upheld the assessment of ₹ 1701.61 crores in the hands of the assessee. Aggrieved, the assessee has filed this appeal before us. 8. We heard the parties and perused the record. The first issue is about the eligibility of the assessee to claim exemption u/s 11 of the Act. Before us, the Ld A.R submitted that the assessee .....

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n holding that the assessee was not a validly constituted trust and accordingly rejecting the claim for exemption u/s 11 of the Act. The Ld A.R submitted that the assessing officer has denied exemption in the earlier years also for identical reasons, but the Tribunal has set aside the order of the AO on this issue and held that the assessee is eligible for exemption u/s 11 of the Act. He further submitted that the Ld CIT(A), even though set aside the order of the AO on the above said issue, but .....

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isions would support the case of the Ld CIT(A) that the assessee is a revocable institution. However, we notice that the Ld CIT(A) has accepted that the assessee is a body corporate and it was validly constituted. Hence the Ld. CIT(A) has set aside the above said view taken by the AO. However, as noticed earlier, the Ld CIT(A) held that the assessee was not eligible for exemption u/s 11 of the Act on two other different reasons. The first reason cited by the Ld CIT(A) was that the clause 58 of t .....

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vocation" and "winding up" have different meaning and purpose. A careful perusal of section 58 of the MID Act would show that the section prescribes a condition for dissolving the assessee, meaning thereby, the assessee cannot be dissolved at the sweet will of the State Government. Accordingly, we are not agreeable to the view of the Ld CIT(A) and accordingly set aside the same. 10. The second reasoning given by the assessing officer as well as Ld CIT(A) is that the activities car .....

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5) of the Act. In this regard, he placed reliance on the decision of Hon'ble Supreme Court rendered in the case of Shri Ramtanu Co-operative Housing Society Ltd and Anr. Vs. State of Maharashtra & Ors (1970)(3 SCC 323). We notice that the Hon'ble Apex Court, in the above cited case, has considered the writ petition filed by the appellant therein, wherein the vires of the Maharashtra Industrial Development Act, 1961 and also the nature of activities of the assessee herein were questio .....

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he 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 established for that purpose. When the Government is satisfied that the Corporation has substantially achieved the purpose for which the Corporation is established, the Corporation will be dissolved because the rasion d'etre is gone. We, therefore, hold that the Act is a valid piece of legislation. .......In .....

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r properties and also that the Corporation would receive rents and profits in appropriate cases. 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. 17. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corpo .....

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orporation indicate the real role of the Corporation, viz., the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation..... 20. The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying and selling. There is no aspect of buying or selling by the Corporation in t .....

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with the Corporation as an agent in setting up industries in the State...... The hardcore of trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions are varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing indu .....

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) City and Industrial Development Corporation of Maharashtra Ltd Vs. ACIT (2012)(138 ITD 381)(Mum). (b) M.D., H.S.I.D.C. and Ors. Vs. Hari Om Enterprises and Anr (AIR 2009 SC 218). In this case, the Hon'ble Supreme Court has observed as under:- "Allotment of industrial plot keeping in view the object and purport for which the Corporation had been constituted and incorporated must be held to be a governmental function. In a case of this nature where the aim and object of the Corporation .....

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n, therefore, must be fair and reasonable so as to subserve the requirement of Article 14 of the Constitution." With regard to the contentions that the activities of the assessee are not in the nature of trade, commerce or business, the Ld A.R placed reliance on the following case law:- (a) Director of Income tax Vs. Sabarmati Ashram Gaushala Trust (2014)(362 ITR 539)(Guj), wherein it was held that the proviso to sec. 2(15) is not aimed at excluding genuine charitable trusts of general publ .....

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objects would not, normally, amount to business, unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the revenue....the services rendered by a Chamber of commerce could not be held to be 'business' in the nature carried out with a profit motive.......The issue whether a professional institution is not hit by the proviso to section 2(15) of the Act will essentially depend upon the individual facts of the ca .....

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th 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 question is whether the legislative intent is to exclude from the definition of charitable purpose any activity which has the aim and object of providing services to trade, commerce or business. The matter is not free from doubt but there are good reasons to hold that the bar or probation is not with reference to activity of the beneficiary .....

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India and another Vs. DGIT (Exemptions) (2013)(358 ITR 91)(Delhi). In this case, the assessee therein was denied exemption under the Act on the ground that it was holding coaching classes for preparing students for the examination and charging fees for the same. The Hon'ble Delhi High Court referred to the decision rendered by it in the case of Bureau of Indian Standards Vs. DGIT (Exemptions) (358 ITR 78), wherein, inter alia, it was held as under:- "In these circumstances, 'renderi .....

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desh Environment Protection and Pollution Control Board Vs. CIT (2011)(9 ITR (Trib) 604)(Chandigarh). In this case, the Tribunal referred to the Circular No.11 dated December 19, 2008 (2009)(308 ITR (St.) 5) and observed as under:- "As the above Central Board of Direct Taxes circular, which is binding on the Commissioner under section 119(1)(a) of the Act, aptly puts it, whether the assessee has, as its object, advancement of any other object of general public utility is essentially a quest .....

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that where an object of general public utility is not merely a mask to hide the true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of "general public utility", the carrying on of bona fide activities in furtherance of such objectives of "general public utility" will also be hit by the proviso to section 2(15). Thus, the Ld A.R has made two fold submissions, v .....

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essee cannot be considered to be an agent of the State Government and further the activities carried on by the assessee is very much commercial in nature and hence the Ld CIT(A) has rightly confirmed the order of the AO. The Ld D.R submitted that the MID Act was enacted at a time when private parties were not allowed to develop Industrial Estates and further the Government also took initiative for orderly development of Industrial Estates. Thus, at that point of time, the aim and objective of th .....

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mprovement of all. In this regard, he invited our attention to section 15 of the MID Act relating to the functions of the assessee and submitted that the activities of the assessee are very much commercial in nature. However, nowadays, the plots are allotted to the highest bidder through the process of auctioning with the sole objective of earning profit. Accordingly, the Ld D.R submitted that there is drastic change in the approach and objective of the assessee and hence it can no longer be sai .....

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e. 12. He submitted that the activities of the assessee came to be considered by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) while considering the Stay application filed by the assessee and the CESTAT has expressed the view that the assessee is not performing any sovereign function, since the assessee is having its own identity distinct from the Maharashtra State Government and operates independently. Further the CESTAT noted down the fact that the receipts are credited to it .....

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e the assessee could not derive support from them. Accordingly he submitted that the assessee cannot be considered to be performing any sovereign function, but only carrying on commercial activity like any other business entity. 13. He further invited our attention to the decision rendered by the Hon'ble Supreme Court in the case of Andhra Pradesh State Road Transport Corpn. Vs. ITO (1964)(52 ITR 524), wherein the Hon'ble Apex Court held that the Andhra Pradesh Road Transport Corporation .....

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above said case, the Memorandum of Association provided that all income of the assessee would belong to Price equalization/stabilization fund of State Government and that the total capital of company was to be contributed by State government and company would be wholly owned by State Government. Still the Hon'ble High Court held that the assessee's income could not be treated as income of State and it is not exempt from Union taxation under article 289(1) of the Constitution. He also pl .....

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ence its income cannot be considered to be the income of the State Government. 14. The Ld D.R submitted that the Hon'ble Supreme Court, in the case of Ramana Dayaram Shetty Vs. The International Airport Authority of India and Ors. (1979 AIR 1628; 1979 SCR (3) 1014), has laid down following parameters in order to determine whether a Corportation is an agency or instrumentality of Government:- (a) Whether there is any financial assistance given by the State, and if so, what is the magnitude of .....

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ons. The Ld D.R submitted that the assessee has not obtained any financial assistance from the State Government or any other form of assistance. The State Government has given land for development and also provided loan to it. It is pertinent to note that the State Government is charging interest on the loan so given. The Ld D.R submitted that, in general practice, no interest shall be charged on the amount given to an agent. He submitted that the assessee is an autonomous corporation, a separat .....

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Industrial Development Corporation of Maharashtra Ltd (supra), since the assessee therein satisfied all the five parameters prescribed by the Hon'ble Apex Court. 15. The Ld D.R also brought to our notice the following two Acts viz., (a) The Road Transport Corporations Act, 1950 (b) The Jammu and Kashmir Development Act, 1970. The Ld D.R submitted that the provisions two enactments cited above are akin to MID Act. He submitted that the eligibility of the assessee viz., "Jammu Development .....

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urpose or any activity of general public utility. The Tribunal followed the decision rendered in the case of Jalandhar Development Authority (ITA No.562 (Asr.) of 2008 dated 12-06-2009) under identical set of facts and upheld the order of Ld CIT in cancelling the registration granted u/s 12A of the Act. The Ld D.R submitted that the order of the ITAT has been upheld by the Hon'ble High Court of Jammu and Kashmir (ITA No.164/2012; CMA No.2/2012 dated 12.11.2013) and the SLP filed before Hon&# .....

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and further the SLP has been dismissed by the Hon'ble Apex Court. Accordingly the Ld D.R submitted that the assessee herein is no longer carrying on any activity of general public utility and further it is operating with profit earning motive. Hence the assessee cannot be considered to be a charitable institution. Further, its activities are very much commercial in nature and hence it is hit by the proviso to sec. 2(15) of the Act also. The Ld D.R submitted that the assessee is taking two co .....

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32 of the MID Act provides that the State Government shall acquire the land and transfer the same to the assessee and the same shall be dealt with by the assessee in accordance with the provisions of sec. 43-1A of MID Act. The Ld A.R submitted that the State Government was carrying out the industrialization process through the Board of Industrial Development and upon incorporation of the assessee herein, all the employees of the erstwhile Board was taken over by the assessee. He submitted that G .....

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er' are two different aspects as observed in the cases reported in 225 ITR 1010 and 262 ITR 459. He further submitted that the Hon'ble Supreme Court in the decisions rendered in the cases of Shri Ramatanu Co-operative Housing Society Ltd (supra) and also in the case of MD., H.S.I.D.C. and others (supra) has held that the functions of allotment of industrial plot keeping in view the object and purpose for which the Corporation had been constituted and incorporated must be held to be a gov .....

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ds. The Ld A.R placed reliance on the Resolution No.IDC 1067/38498 dated 16-08-1967, which is placed at page 54 of the paper book filed by the assessee and submitted that the assessee is required to remit the proceeds to the State Government after recouping its expenses. The Ld A.R submitted that the assessee is acting as per the directions of the State Government only. He further submitted that the Allahabad bench of ITAT has held in the case of U.P. Forest Corporation (supra) that the decision .....

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t applicable to the assessee herein. With regard to the reliance placed by Ld D.R on the order passed by the CESTAT, the Ld A.R submitted that it was an observation made in a Stay order and subsequently another order No.M/1895/14/CSTB/C-I dated 20.11.2014 was passed by the CESTAT against the miscellaneous petition filed by the assessee. In the second order, the absolute stay was granted by CESTAT. Accordingly, he submitted that the observations made in the order of the CESTAT should not be relie .....

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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 tax provisions of the Act. In the case of Ramatanu Co- operative Housing Society Ltd (supra) the appellant therein has challenged the power of the Government of Maharashtra to enact the MID Act and the Hon'ble Supreme Court, by considering various provisions of the Act, came to the conclusion that the MID Act was a valid piece of leg .....

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ot;9. The development of industrial areas and industrial estates (sic) intended to serve two objects. In the first place, there 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 ar .....

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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 assessee under the MID Act and accordingly rendered its decision upholding the validity of MID Act. Admittedly, the provisions of MID Act were not examined vis-à-vis t .....

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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 .....

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examined in the context of the Income tax Act. Accordingly, we are of the view the observations made by the Hon'ble Supreme Court in the above said cases should be considered to have been made in a different context and hence, we are of the view that the assessee cannot take support of the same for the issues considered under the Income tax Act. 19. Before us, the ld A.R placed strong reliance on the observations made by Hon'ble Supreme Court in the case of Shri Ramtanu Co-operative Hous .....

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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......The Corporation is therefore established for carrying o .....

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ed for that purpose........ ........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 trading character 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 and developing industrial areas,..... Receipts of these moneys arise not out of any business or trade, bu .....

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orporation 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 limb or agency of the Government and it is performing a "Sovereign fun .....

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er place, the Hon'ble has clarified this point by observing as under:- "These provisions in regard to finance of the Corporation indicate the real role of the Corporation, viz., the agency of the Government in carrying out the purpose and object of the Act which is the development of industries." Thus the Hon'ble Apex Court has observed that the "real role" of the assessee corporation was to perform as an agency of the Government in carrying out the purpose of the Act .....

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quot;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 t .....

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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 Co- operative 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 .....

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cannot be considered to be an agency or instrumentality of the State Government. However, the discussions made in the ensuing paragraphs would not make any difference so far as taxation under the Income tax Act is concerned. 21. We shall now refer to some of the observations made by the Hon'ble Supreme Court in the case of Andhra Pradesh State Road Transport Corporation Vs. ITO (52 ITR 524), which are relevant here:- "It may be that the statute under which a notification has been issued .....

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re holders who brought the corporation into existence and the income received from the said trade likewise belongs to them, that would be another matter. It would then 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 An .....

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y 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 activity carried on by a State through its agents appointed in that behalf." The observations made by Lord .....

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t;11. Having considered as to whether the assessee-Gujarat Industrial Development Corporation, Ahmedabad-is entitled or is not en titled 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 Legislatur .....

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the assessee." The Ld. DR, in his written submissions, has also placed reliance on the decision of jurisdictional High Court rendered in the case of Vidarbha Housing Board V/s ITO (1973) (92 ITR 430). Identical view has been expressed by Pune Bench of ITAT in the case of Goa, Daman and Diu Industrial Development Corporation (151 ITD 447). The Hon'ble Supreme Court in the case of Andhra Pradesh State Civil Supplies Corporation Ltd (1984)(148 ITR 497) has, in clear terms, held that " .....

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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 no .....

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......Receipt 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 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 .....

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he 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 not used as distinct and separate from "trading". Hence, in our view, the expression "business" was used in the context of "trading business&qu .....

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138)(Delhi) as under:- "Scope of 'trade, commerce or business 16. The key words, namely; trade, commerce and business were enumerate and elucidate in Institute of Chartered Accountants of India (supra) as under (page 113):- 'Trade', as per the Webster's New Twentieth Century Dictionary (2nd edition), means, amongst others, "a means of earning one's living, occupation or work. In Black's Law Dictionary, "trade" means a business which a person has learn .....

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ce. 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 manufactur .....

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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 l .....

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istics. Firstly, a business must be a continuous and systematic exercise of activity. Business is defined as an active occupation continuously carried on. Business vocation connotes some real, substantive and systematic course of activity or conduct with a set purpose. The second essential characteristic is profit motive or capable of producing profit. To regard an activity as business, there must be a course of dealings continued, or contemplated to be continued, normally with an object of maki .....

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made to State of Punjab V/s Bajaj Electricals Ltd. [1968] 2 SCR 536, Khoday Distilleries Ltd. V/s State of Karnataka [1995] 1 SCC 574, Bharat Development (P) Ltd. V/s CIT [1982] 133 ITR 470/[1980] 4 Taxman 58 (Delhi), Barendra Prasad Ray V/s ITO [1981] 129 ITR 295/6 Taxman 19 (SC), State of Andhra Pradesh V/s H. Abdul Bakhi & Bros. [1964] 15 STC 664 (SC), State of Gujarat V/s Raipur Mfg. Co. [1967] 19 STC 1(SC), Director of Supplies & Disposal V/s. Member, Board of Revenue [1967] 20 STC .....

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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 .....

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ection 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 .....

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indicia stipulated in Lord Fisher (supra) are also relevant. Each case, therefore, has to be examined on its own facts.' Recently in another decision in WP(C) No. 1755/2012 titled Bureau of Indian Standards V/s Director General of Income Tax (Exemptions) [2013] 212 Taxman 210/[2012] 27 taxmann.com 127 (Delhi) it was held that Bureau of Indian Standards (BIS) was carrying on charitable activities as described within the ambit of Section 2(15) and was entitled to registration/notification unde .....

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ular No.11of 2008 issued by 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:- &qu .....

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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 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 ab .....

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ould 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 under that Act. At that point of time, the assessee Corporation was enjoying monopoly, i.e., .....

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hin the definition of charitable purpose as defined u/s 2(15) of the Act. 27. However, we notice from the contentions of Ld D.R, there appears to be drastic change in the approach of the assessee. In the present days, the assessee appears to be adopting the system of offering plots/space by way of "auctioning", obviously the object is to corner maximum possible price on sale of plot/space. We also understand that the Government of Maharashtra has framed The Maharashtra Industrial Devel .....

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MULL CHANGE IN IT PARK POLICY Tushar Pawar, TNN / Nov 5, 2014, 04.08 AM IST 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 cit .....

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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 ₹ 24,530 per Sq. m to ₹ 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 th .....

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present day scenario would show that the private entrepreneurs are developing many Special Economic Zones all over the Country. Hence, in the present day scenario, the activities of the assessee and the private entrepreneurs stand on same footing. There cannot be any dispute that the activity of setting up/developing industrial estates and maintaining the infrastructure facilities by the private entrepreneurs is considered as "Business activity". Since the activity carried on by the a .....

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e Government. He further submitted that the lands vested with the assessee can also be taken back by the State Government. Accordingly he contended that the activities of the assessee cannot be considered to be a business activity, since it is acting in accordance with the directions issued by the State 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 .....

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olding 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. 30. The next issue is with regard to the funds claimed to have been received by the assessee on behalf of the Government of Maharashtra. With the said contentions, the assessee did not disclose the funds received by way of lease premiums, interest on bank deposits etc. as its income in the Profit and Loss account, but shown as "Liabilities" in the Balance .....

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er the said proceeds to the State Government. He further submitted that the assessee has been consistently following this accounting system and this method of accounting followed has been accepted by the Comptroller and Audit General of India also. He further submitted that the nature of these amounts and also the relationship between the assessee and the State Government is evident from reading of number of resolutions/orders passed by the State Government. In the written submissions, the asses .....

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suitable industries. From the proceeds collected through such disposal to industries (i.e., through lease etc.), the MIDC is entitled to reimburse expenditures incurred by it, and the remainder amount is required to be remitted to the Government. Thus, the first charge over the amounts is with the Government, and not with MIDC. Further, reference may also be made to resolution no. IDC 1079/(1966)/IND.14 dated 11.9.1986, where the earlier resolution of 1967 has been reiterated, and it has been st .....

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behalf of the Government of Maharashtra and is disclosed as "Deposits" in the audited accounts. It is noteworthy that the lease premiums and rents are often not as per market rate but are given at concessional rates, in order to aid the objective of the MID Act." Accordingly, it was contended that the funds received in respect of activities carried on behalf of the Government of Maharashtra cannot be considered as income of the assessee. In the alternative, it was contended that t .....

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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 examine .....

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