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TMI Blog2019 (8) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... Y.2010-11 dated 19/06/2019 had deleted the aforesaid two additions. The relevant operative portion is reproduced hereunder:- "18. Issue nos. 5 & 6 are inter connected, therefore, are being taken up together for adjudication. However, the assessee has challenged the order of the CIT(A) in which the CIT(A) has treated the grant of Rs. 1 crores of Government of Maharashtra and rental income of Rs. 1,05,000/- as income from business of Assessee. The main contention of the assessee is that the CIT(A) was not authorized to decide the issue which was not before him and to raise the addition in question. On appraisal of the order passed by the CIT(A), we noticed that the CIT(A) has treated the grant of Rs. 1 crores of Government of Maharashtra on account of repairs and maintenance of airports as income of the assessee and also treated the rental income in sum of Rs. 1,05,000/- as income from business. it is to be seen whether the grant in sum of Rs. 1 crores released by Government of Maharashtra to the assessee on account of repairs and maintenance of airports is liable to be treated as income of the assessee or not. So far as the grant of Rs. 1 crores released by Government of Maharasht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (2) or clause (3) of Article 289 of the Constitution of India. The basic purport of Article 289(2) is to neutralize clause (1), but with a rider that, if there is any "trade or business" , done on behalf of the Government or any operations connected therewith or any property issued or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. To make this clause effective, even for Government / State, conduct of "trade or business" is necessary, which simply means involvement of commercial and profit motive for the vendor. This is in line with the decision of Hon'ble Supreme Court of India in the case of APSRTC (supra), relied upon by the DR, wherein the Hon'ble Supreme Court had observed, "the facts that the trading activity carried on by the appellant may be covered by article 289(2) of the Constitution does not really assist the appellant's case. Even if a trading activity falls under clause (2) of article 289 of the Constitution, it can sustain a claim for exemption from Union taxation only if it is shown that the income derived from the said trading activity is the income of the State". Therefore, whenever, there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as soon as it become disbanded, clause (3) come to life, which operates only if, "Parliament may by Law declare to be incidental to the ordinary functions of Government". Here, in the instant case, we have to read "Parliament" as "State Government" because in the instant case, it is the State Government which has authorized the assessee to perform the development projects at Navi Mumbai, VasaiVirar, Waluj and such other places. 40. We cannot agree with the argument of the DR that there is no document which has drawn out the Agent-Principal relationship, because the very first Resolution dated 18th March, 1970 mention in para no. 2 that "............... which would act as an "agent" of Government for the development of the areas with a view to secure the above objective", and in para no. 3 of this Resolution clearly say, "The subsidiary company will work under the control and supervision of the State Government in the General Administrative Department". In our opinion, the first Resolution itself makes it clear that the assessee is to be an agent, but functions as an arm of the State Government, because, if the assessee can only work under the control and supervision of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent of the State Government of Maharashtra. We, therefore, respectfully follow the Hon'ble jurisdictional High Court of Bombay, as held in the case of Percival (supra), and hold, the assessee to be the "agent" of the State Government of Maharashtra, read with the entire overwhelming documents, suggesting that there is no income to the assessee as such, and whatever is, generated, it gets deposited in the Consolidated Fund of the State. We also cannot ignore the fact that the department has been assessing the assessee as a State Government undertaking for the last three years, therefore, even this cannot be called as an afterthought and applying the 'rule of consistency', we hold that the department cannot be allowed to take a distinctive approach in the current year." 19. On appraisal of the facts and circumstances, we find that the assessee has been treated as agent of Government and the income of the assessee if any was treated as income of the Government which stand deposited in the consolidated fund of the State. The assessee placed reliance upon the decision of Kolkata High Court in case of Prl. CIT Vs. The State Fisheries Development Corporation ITA No. 19 of 2017 with GA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Economic Zones. It is the most essential business activity of the appellant to operate the SEZ and income from leasing out parts of it to eligible persons for eligible activities, with It approval of Govt. of India and inconformity with SEZ policy. 5.5.3 The assessing officer has failed to explain why this essential component of appellant's business does not have nexus with its stated business activity as approved by Govt. of India. A considerable amount of public money in form of Government grant has been invested in the company to generate infrastructure to promote eligible industries. If income from this activity is not considered as business income then it is beyond comprehension what other part would constitute its business Therefore, this ground of appeal is allowed. The assessing officer is directed to treat lease/rent of Rs. 2,04,90,596/- as business income and eligible for purpose of deduction u/s 80-IAB." 20. On the basis of the above mentioned finding, the CIT(A) has also decided the issue in favour of assessee. At the time of arguments the Ld. Representative of the assessee has also placed reliance of the case titled as Shreeji Exhibitors Vs. ACIT (2015) 42 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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