MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION, MUMBAI V. DEPUTY COMMISSIONER INCOME TAX (EXEMPTIONS)-2(1), MUMBAI

ITA 4474/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1255 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V SRIDHARA N; S SRIRAM A RS
• Keywords: Capital asset; Depreciation; Search and seizure; Charitable institution; Opportunity of being heard; Maximum Marginal Rate; Diversion of income; Rule of consistency; Additional evidence; Revocable transfer
• Section: 143(3); 32; 54; 63; 11

Judgement Text

P A G E | 1 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, M UMBAI BEFORE SHRI G.S.PANNU, AM AND SHRI RAVISH SOOD, JM ITA NO. 4474/MUM/2017 ( / ASSESSMENT YEAR:2011 - 12 ) MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION UDYOG SARATHI, MAHAKALI CAVES ROAD, ANDHERI (EAST), MUMBAI - 400 093 / VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1), PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400 012 ./ ./ PAN NO. AAACM3560C ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI V. SRIDHARAN & SHRI S. SRIRAM, A.RS / RESPONDENT BY : SHRI PURUSHOTTAM TRIPURI , CIT D.R / DATE OF HEARING : 15 .06.2018 / DATE OF PRONOUNCEMENT : 0 7 . 0 9 .2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 1, MUMBAI, DATED 12.04.2017, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 15.03.2016. THE ASSESSEE ASSAILING THE OR DER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN HOLDING THAT THE LANDS IN QUESTION ARE NOT OWNED BY THE GOVERNMENT OF MAHARASHTRA. CONSEQUENTLY, IT IS SUBMITTED THAT INCOME IS NOT TAXABLE AT THE HANDS OF THE ASSESSEE CORPORATION. 2. THE LEARNED ASSESSING OFFICER AND CIT(A) HAVE CONCLUDED THAT THERE IS AN IRREVOCABLE TRANSFER OF LANDS TO THE ASSESSEE THUS NOT ATTRACTING SECTION 61 OF THE INCOME - TAX ACT, 1961. IT HAS BEEN FURTHER HELD THAT THE EXCEPTION CONTAINED IN SECTION 62 OF THE INCOME - TAX ACT, 1961, IS INAPPLICABLE. HENCE IT HAS BEEN HELD THAT ALL INCOME FROM THE P A G E | 2 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) SAID LANDS MUST BE TAXED IN THE HANDS OF THE ASSESSEE CORPORATION. THESE CONCLUSIONS AND REASONINGS ARE INCORRECT . 3. FURTHER, IN VIEW OF SECTION 60 OF THE INCOME - TAX ACT, 1961, IF THE OWNERSHIP OF THE LANDS IS WITH THE GOVERNMENT OF MAHARASHTRA, INCOME FROM THE LEASE PREMIUMS AND ALL OTHER CONSEQUENTIAL INCOMES ARE NOT TAXABLE IN THE HANDS OF THE ASSESSEE CORPORATION. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT NOTICING THIS LEGAL POSITION. 4. (A) LET IT BE ASSUMED WITHOUT CONCEDING THAT THE OWNERSHIP OF THE LANDS VESTS IN THE CORPORATION. IT I S SUBMITTED THAT SUCH OWNERSHIP /VESTIN G IN ASSESSEE CORPORATION IS BY WAY OF LEGAL OBLIGATION IN THE NATURE OF TRUST. (B) T HIS HAS BEEN SO HELD BY THE HON BLE ITAT IN ORDER DATED 16.03.20 13 IN APPEAL ITA 6752/MUM/2011, FOR AY 2008 - 09. THIS HAS BEEN APPLIED AND FOLLOWED IN HON BLE ITAT'S ORDER DATED 27.03.2015 IN APPEAL NO. 6552/MUM/2014 FOR THIS VERY ASSESSMENT YEAR, WHILE REMANDING THE MATTER BACK TO THE A . O ON OTHER GROUNDS. (C) IT IS SUBMITTED THAT THERE IS NO INTENTION OF THE GOVERNMENT TO PASS ON THE BENEFICIAL INTEREST IN T HE INCOME TO THE ASSESSEE CORPORATION. (D) IT IS FURTHER SUBMITTED THAT GOVERNMENT OF MAHARASHTRA IS THE BENEFICIARY. IF THIS POSITION IS RIGHT, ASSESSEE CORPORATION IS EXEMPT FROM INCOME TAX. 5. ON A TRUE CONSTRUCTION OF THE PROVISIONS OF THE MID ACT, 1961, AND THE MID RULES, 1962, AND THE RELEVANT GOVERNMENT RESOLUTIONS, PRESENT CASE IS THAT OF DIVERSION OF INCOME BY OVERRIDING TITLE. HENCE, THE ASSESSEE CORPORATION IS EXEMPT FROM INCOME TAX. 6. AS PER ARTICLE 298 OF THE CONSTITUTION, AS IT STANDS AFTER THE CONSTITUTION (SEVENTH AMENDMENT) ACT, 1956, THE ACQUISITION, HOLDING, AND DISPOSAL OF PROPERTY IS BY WAY OF CONTRAST TO TRADE AND BUSINESS. CONSEQUENTLY, THE TWO PROVISOS TO CLAUSE (15) OF SECT ION 2 WOULD NOT APPLY TO THE PRESENT CASE. THIS HAS NOT BEEN NOTICED BY THE LEARNED ASSESSING OFFICER AND CIT(A). 7. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN HOLDING THAT: (A) RECEIPTS ARE NOT PAYABLE TO THE GOVERNMENT OF MAHARASHTRA DURING THE LIF ETIME OF THE CORPORATION, AND HENCE THESE RECEIPTS ARE NOTHING BUT ACCUMULATION OF INCOME; (B) ALL MONIES RECEIVED BY THE ASSESSEE ARE OWNED, CONTROLLED AND MANAGED BY ITSELF, WITHOUT ANY INTERFERENCE FROM GOVERNMENT OF MAHARASHTRA, AND THUS THE INCOME IS NOT OF GOVERNMENT OF MAHARASHTRA BUT OF THE ASSESSEE. 8. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN TREATING THE ACCRETIONS TO THE LIABILITY SIDE OF BALANCE SHEET OF THE ASSESSEE AS THE INCOME EARNED BY THE ASSESSEE DURING THE YEAR. 9. IT IS UNDISPUTED THA T FOR DECADES, THE ACCRETIONS TO THE DEPOSITS SHOWN IN THE LIABILITY SIDE OF THE BALANCE SHEET HAVE NEVER BEEN TREATED AS INCOME BY THE INCOME TAX DEPARTMENT. THE RULE OF CONSISTENCY DEBARS THE REVENUE FROM TAKING A CONTRARY STAND IN THE CURRENT ASSESSMENT YEAR. 10. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN HOLDING THAT THE RECOVERY /RECOUPMENT OF COSTS OF RS. 32,28,67,135 / - BY THE ASSESSEE FROM THE LESSEES, SHOWN AS REDUCTION FROM THE ASSETS, IS THE INCOME OF THE ASSESSEE. THE SAID AUTHORITY OUGHT TO H AVE P A G E | 3 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) SIMULTANEOUSLY CONSIDERED CORRESPONDING EXPENDITURE DEBITED TO ASSETS AND GIVEN DEDUCTION FOR THE SAME. CONSEQUENTLY, THE ADDITION WILL BE NIL. 11. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT NOTICING THAT IN ANY EVENT, THE LEARNED A . O OUGHT TO HAVE GIVEN A DEDUCTION OF A SUM OF RS. 10 , 42,85,70,248/ - BEING THE INCREASE IN THE ASSET SIDE OF THE BALANCE SHEET VIDE SERIAL NOS . 1, 2, 3, 4, AND 10. 12. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT NOTICING THAT IN ANY CASE, THE LEARNED AO ERRED IN ENH ANCING THE INCOME FROM RS.1,701. 77 CRORES TO RS. 2 , 456.50 CRORES IN A REMAND PROCEEDING, PURSUANT TO A REMAND ORDER PASSED BY THE HON BLE ITAT IN AN APPEAL FILED BY THE ASSESSEE. 13. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT ALLOWING THE DEPRE CIATION AMOUNTING TO RS. 12,34,18,456/ - AS APPLICATION OF INCOME, A DEDUCTION ALREADY ALLOWED BY ITAT IN ITS ORDER DATED 27.03.2015, VIDE ITS PARAGRAPH 35 THEREOF. 14. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN BRINGING TO TAX AN AMOUNT OF RS.4,040,249 ,074/ - BEING THE INTEREST ON DEPOSITS, IN THE HANDS OF THE ASSESSEE CORPORATION. IN VIEW OF THE FOREGOING, IT IS RESPECTFULLY PRAYED THAT THIS HONBLE TRIBUNAL MAY BE PLEASED TO SET ASIDE THE IMPUGNED ORDER IN APPEAL PASSED BY THE CIT(A) AND ALLOW THE APPEAL WITH CONSEQUENTIAL RELIEF, IF ANY. 2. BRIEFLY STATED, THE ASSESSEE VIZ. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (FOR SHORT MIDC) WHICH IS A N IND USTRIAL DEVELOPMENT CORPORATION FORMED UNDER THE MAHARASHTRA INDUSTRIAL DEVELOPMENT ACT, 1961 (MID C ACT) 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 SUPPLY, DRAINAGE AND ALSO PROVIDING CE RTAIN FACILITIES TO THE OCCUPANTS OF THE INDUSTRIAL ASSETS AND COLLECT S CHARGES FOR THE SAME. THE INDUSTRIAL PLOTS ARE ALLOTTED BY THE ASSESSEE ON RECEIPT OF LEASE PREMIUM, RENT ETC. THE ASSESSEE CORPORATION WHICH IS REGISTERED AS A CHARITABLE ORGANISATION WITH THE DIT (EXEMPTION), MUMBAI UNDER SEC.12AA OF THE ACT, VIDE REGISTRATION NO. TR - 37971, DATED 01.04.2002, HAD FILED ITS RETURN OF INCOM E FOR THE ASSESSMENT YEAR 2011 - 12 ON 11.12.2012, DECLARING A DEFICIT OF RS.32,60,86,206/ - . THE RETURN OF INCOME FILE D BY THE ASSESSEE WAS ACCOMPANIED WITH THE AUDITED INCOME AND EXPENDITURE ACCOUNT, BALANCE SHEET ALONG WITH SCHEDULES. THE CASE OF THE ASSESSEE WAS THER E AFTER SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC.143(2) OF THE ACT. P A G E | 4 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 3. DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE A.O THAT WHILE FRAMING THE ASSESSMENT FOR THE IMMEDIATELY PRECEDING YEAR THE ASSESSEE HAVING BEEN HELD BY HIM AS NOT BEING A VA LID TRUST WAS THUS ON THE SAID GROUND DISENTITLED FROM CLAIM OF EXEMPTION U NDER SEC. 11 OF THE ACT. FOLLOWING HIS AFORESAID VIEW, THE A.O WHILE FRAMING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION HELD THAT THE ASSESSEE NOT BEING A VALID TRUST WAS THUS NOT ELIGIBLE FOR EXEMPTION UNDER SEC. 11 OF THE ACT. ALTERNATIVELY, HE WAS ALSO OF THE VIEW THAT AS THE ACTIVITIES CARRIED ON BY THE ASSESSEE WERE COMMERCIAL IN NATURE, HENCE THE PROVISO INSERTED BY THE FINANCE ACT, 2008 IN SEC. 2(15) OF THE ACT WOULD BE APPLICABLE TO THE CASE OF THE ASSESSEE. IN THE BACKDROP OF HIS AFORESAID OBS ERVATIONS THE A.O CONCLUDED THAT SINCE THE GROSS RECEIPTS FROM THE AFOREMENTIONED ACTIVITIES CARRIED OUT BY THE ASSESSEE HAD EXCEEDED THE PRESCRIBED LIMIT OF RS. 25 LAC DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE ASSESSEE BY VIRTUE OF THE PROVISO T O SEC. 2(15) OF THE ACT COULD NOT BE CONSIDERED TO BE CARRYING ON ANY CHARITABLE ACTIVITY WITHIN THE MEANING OF THE SAID STATUTORY PROVISION. THE ASSESSEE IN ITS REBUTTAL ASSAILED THE AFORESAID OBSERVATIONS OF THE AO BY RAISING MULTIPLE CONTENTIONS BEFORE HIM VIZ. (I) THAT BEING A LOCAL AUTHORITY THE AMENDMENT TO PROVISIONS OF SEC.2(15) WITH EFFECT FROM 01.04.2009 WOULD NOT BE APPLICABLE TO ITS CASE; (II) THAT BEING AN AGENCY OF THE STATE GOVERNMENT OF MAHARASHTRA ITS INCOME WAS NOT TAXABLE; (III) THAT IT W AS NOT ENGAGED IN ANY COMMERCIAL ACTIVITY; AND (IV) THAT THERE WAS NO PROFI T MOTIVE IN ANY OF ITS OBJECTS OR ACTIVITIES AT ALL. HOWEVER, THE A.O NO T BEING PERSUADED TO SUBSCRIBE TO THE AFORESAID CLAIM OF THE ASSESSEE CONCLUDED THAT AS THE ASSESSEE WAS HIT BY THE AMENDMENT TO SEC. 2(15) WHICH WAS MADE AVAILABLE ON THE STATUTE WITH EFFECT FROM 01.04.2009 , THEREFORE, HAVING LOST ITS CHARITABLE CHARACTER WITHIN THE MEANING OF SEC.2(15) OF THE ACT FOR THE YEAR UNDER CONSIDERATION, IT WAS NOT ENTITLED FOR EXEMPT ION UNDER SEC.11 IN VIEW OF THE PROVISIONS OF SEC.13(8) OF THE ACT. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O REJECTED THE CLAIM OF EXEMPTION RAISED BY THE ASSESSEE UNDER SEC.11 OF THE ACT AND ACCORDINGLY BROUGHT ITS ENTIRE INCOME TO TAX. P A G E | 5 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 4. THE A.O FURTHER OBSERVED THAT THE ASSESSEE W AS AN INDUSTRIAL DEVELOPMENT CORPORATION WHICH WOULD ON A REGULAR BASIS ACQUIRE LAND AND DEVELOP THE SAME INTO INDUSTRIAL ESTATES/AREAS/ZONES AFTER INCURRING EXPENSES ON DEVELOPMENT OF APPROPRIATE INDUSTRIAL INFRASTR UCTURE. IT WAS NOTICED BY THE A.O THAT THE MAIN REVENUE STREAMS OF THE ASSESSEE CORPORATION W ERE THE FUNDS GENERATED FROM LEASING OF PLOTS, PROVIDING DEVELOPMENT ACTIVITIES AS WELL AS EARNING INTEREST ON THE AMOUNTS PARKED BY WAY OF DEPOSITS WITH THE BANK . IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE INSTEAD OF DECLARING THE AFOREMENTIONED RECEIPTS AS ITS INCOME HAD RATHER DISCLOSED THEM AS ITS LIABILITY IN THE BALANCE SHEET BY CLAIMING THAT THE SAID DEPOSITS BELONG ED TO THE GOVERNMENT OF MAHARASHTRA. HOW EVER, THE A.O DID NOT ACCEPT THE AFORESAID CHARACTERIZATION OF THE RECEIPTS BY THE ASSESSEE AND BEING OF THE VIEW THAT THE S UM OF RS. 1701.61 CRORES RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION BY WAY OF LEASE RENT, DEVELOPMENT CHARGES, INT EREST ETC. FORM ED PART OF ITS INCOME, BROUGHT THE SAME TO TAX IN THE HANDS OF THE ASSESSEE . 5. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER PASSED BY THE A.O IN APPEAL BEFORE THE CIT(A). THE CIT(A) OBSERVING THAT THE VIEW OF THE A.O THAT THE ASSESSEE WAS NOT A VALIDLY CREAT ED TRUST HAD BEEN REJECTED BY THE INCOME TAX APPELLATE TRIBUNAL (FOR SHORT TRIBUNAL) IN AN EARLIER YEAR, THUS FOLLOW ED THE DECISION OF THE TRIBUNAL AND VACATED THE FINDINGS ARRIVED AT BY THE A.O THAT THE ASSESSEE WAS NOT A VALID TRUST. HOWEVER, THE CIT(A) CONCLUDED THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION UNDER SEC. 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 DISSO LVED 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 THAT NATURE OF THE ASSESSEE AS A REVOCABLE TRUST. B) THE ASSESSEE IS PRIMARILY ENGAGED IN SUCH KIND OF A CTIVITIES WHICH ARE IN THE NATURE OF BUSINESS, MANUFACTURE AND COMMERCE RESULTING IN SOME P A G E | 6 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) KIND OF BENEFIT TO THE INDUSTRIES/INDUSTRIAL DEVELOPMENT. HENCE THE ACTIVITIES ARE ONLY VERY REMOTELY CONNECTED WITH THE DEVELOPMENT OF THE PUBLIC AT LARGE. HENCE, TH E PROVISO TO SECTION 2(15) IS FULLY APPLICABLE TO THE ASSESSEE. STILL FURTHER, T HE CIT(A) AFTER DELIBERATIN G ON THE CONTENTIONS ADVANCED BY THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE CLAIM OF ASSESSEE THAT THE FUNDS RECEIVED BY IT BY WAY OF LEASE RENT, DEVELOPMENT CHARGES, INTEREST ON DEPOSITS ETC. BELONG ED TO THE STATE GOVERNMENT , FOR THE REASON THAT THERE WAS NO SUCH LEGAL OBLIGATION EXISTING IN THE MID C ACT . ACCORDINGLY, THE CIT(A) UPHELD THE ASSESSMENT OF RS. 1701.61 CRORES IN THE HANDS OF THE ASSESSEE. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. THE ORDER OF THE CIT(A) WAS ASSAILED PRIMARILY ON THREE GROUNDS VIZ. (I) THAT AS THE ACTIVITIES CARRIED ON BY THE ASSESSEE DID NOT FALL IN THE CATEGORY OF TRADE, COMMERCE OR BUSINESS , THEREFOR E , IT WOULD NOT BE HIT BY THE PROVISO TO SEC. 2(15) OF THE ACT; (II) THAT THE ASSESSEE WAS PERFORMING SOVEREIGN FUNCTION S OF THE GOVERNMENT; AND (III) THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE WERE BOTH ON ITS OWN ACCOUNT AND ALSO AS AN AGENT OF THE GOVERNMENT OF MAHARASHTRA. THE TRIBUNAL VIDE ITS ORDER PASSED IN ITA NO. 6552/MUM/2014, DATED 27.03.2015, AFTER DELIBERATING AT LENGTH ON THE AFORESAID CONTENTION S ADVANCED BY THE ASSESSEE IN RESPECT OF THE ISSUE S UNDER CONSIDERATION WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME. THE TRIBUNAL FINDING ITSELF TO BE IN AGREEMENT WITH THE VIEW ARRIVED AT BY THE CIT(A) THAT THE ACTIVITIES OF THE ASSESSEE WERE COMMERCIAL IN NATURE , THUS UPHELD HIS VIEW THAT THE CASE OF THE ASSESSEE WOULD BE HIT BY THE PROVISO TO SEC. 2(15) OF THE ACT. STILL FURTHER , THE TRIBUNAL ALSO NOT BEING IM PRESSED WITH THE CLAIM OF THE AS SESSEE THAT AS IT WAS PERFORMING SOVEREIGN FUNCTIONS OF THE GOVERNMENT OF MAHARASHTRA AND THUS WAS IMMUNE FROM THE UNION TAXATION, REJECTED THE SAME. AS REGARDS THE CONTENTION ADVANCED BY THE ASSESSEE THAT IT WAS CARRYING ON THE ACTIVITIES ON ITS OWN ACCOU NT AND ALSO AS AN AGENT OF THE GOVERNMENT OF MAHARASHTRA , IT WAS OBSERVED BY THE TRIBUNAL THAT THE SAID CONTENTION WAS NEVER RAISED BEFORE THE LOWER P A G E | 7 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) AUTHORITIES. IN THE BACKDROP OF THE AFORESAID FACT THE TRIBUNAL BEING OF THE VIEW THAT AS THE LOWER AUTHORI TIES HAD NO OCCASION TO EXAMINE THE AFORESAID CLAIM OF THE ASSESSEE , THUS RESTORED THE SAID ISSUE FOR FRESH EXAMINATION TO THE A.O WITH A DIRECTION TO EXAMINE THE SAME AFRESH AFTER DULY CONSIDERING ALL THE DOCUMENTS AND EXPLANATIONS THAT MAY BE FURNISHED BY THE ASSESSEE BEFORE HIM IN SUPPORT OF ITS SAID CONTENTION. HOWEVER, THE TRIBUNAL BEING PERSUADE D TO BE IN AGREEMENT WITH THE ALTERNATIV E CONTENTION OF THE ASSESSEE THAT THE DEPRECIATION COMPUTED UNDER SEC. 32 OF THE ACT WAS LIABLE TO BE DEDUCTED FOR THE PURPOSE OF ARRIVING AT THE INCOME OF THE ASSESSEE, THUS DIRECTED THE A.O TO ALLOW THE CLAIM OF DEPRECIATION ADMISSIBLE UNDER SEC. 32 OF T HE ACT WHILE COMPUTING THE INCOME OF THE ASSESSEE . ON THE BASIS OF THE AFORESAID OBSERVATIONS THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED BY THE TRIBUNAL FOR STATISTICAL PURPOSES. 7. THE A.O WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, DATED 27.03. 2015, WHEREIN THE ISSUE AS TO WHETHER THE ASSESSEE WAS CARRYING ON THE ACTIVITIES ON ITS OWN ACCOUNT AND ALSO AS AN AGENT OF GOVERNMENT OF MAHARASHTRA WAS RESTORED TO HIM FOR FRESH ADJUDICATION , THEREIN VIDE ITS ORDER PASSED UNDER SEC. 143(3) R.W.S. 254 , DATED 15.03.2016 , OBSERVED THAT THE CLAIM OF THE ASSESSEE CORPORATION THAT THE LEASE PREMIUMS, INTEREST ON BANK DEPOSITS ETC. WERE BEING RECEIVED BY IT AS AN AGENT OF THE GOVERNMENT OF MAHARASHTRA WAS WITHOUT ANY BASIS AND THE SAME WERE BEING RECEIVED BY IT AS AN OWNER. T HE A.O WAS ALSO NOT IMPRESSED WITH THE CORRECTNESS OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE , WHEREIN THE LATTER WAS FOUND TO BE CREDIT ING THE ENTIRE RECEIPTS IN THE LIABILITY ACCOUNT A FTER DEDUCT ING THE EXPENS E CORRESPONDING TO THE SAME . IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE BY CONSISTENTLY FOLLOWING THE AFORESAID ACCOUNTING POLICY HAD ALLOWED SURPLUS TO ACCUMULATE IN ITS BALANCE SHEET AS A LIABILITY . THE A.O WHILE DISLODGING THE CLAIM OF THE ASSESSEE THAT IT WAS ACTING AS AN AGENT OF THE GOVERNMENT OF MAHARASHTRA , OBSERVED THAT NO PRINCIPAL - AGENT RELATIONSHIP DID EXIST BETWEEN THE GOVERNMENT OF MAHARASHTRA AND THE ASSESSEE VIZ. M IDC. RATHER , IT WAS NOTICED BY THE A.O THAT THE AFORESAID ACCOUNTING PRACTICE OF CREDITING R ECEIPT S AS DEPOSIT IN THE BALANCE SHEET P A G E | 8 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) WAS ALSO CONSISTENTLY BEING FOLLOWED BY THE ASSESSEE ALSO IN RESPECT OF THE RECEIPTS/INCOME RECEIVED FROM NON - GOVERNMENT AGENCIES FOR WORKS EXECUTED FOR THEM. ON THE BASIS OF THE AFORESAID DELIBERATIONS THE A.O CON CLUDED THAT AS THE ACCOUNTING POLICIES FOLLOWED BY THE ASSESSEE WERE DEFECTIVE, HENCE ITS TAXABLE INCOME COULD NOT BE DEDUCED FROM ITS FINANCIAL STATEMENTS. IT WAS ALSO OBSERVED BY THE A.O THAT THE ASSESSEE HAD WRONGLY ABATED COST OF FIXED ASSETS AGAINST RECOVERY OF CHARGES FOR UTILIZATION OF ASSETS . T HE A.O AFTER DELIBERATING AT LENGTH ON THE ISSUE UNDER CONSIDERATION , OBSERVED THAT THOUGH THE RECEIPTS BY THE ASSESSEE WERE ITS INCOME, HOWEVER THE LATTER HAD AS A PRACTICE CONSISTENTLY CHARACTERIZED THE SAM E AS A LIABILITY. IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE A.O REJECTED THE CLAIM OF THE ASSESSEE OF HAVING RECEIVED THE AMOUNTS BY WAY OF LEASE PREMIUM, INTEREST ON BANK DEPOSITS ETC. AS AN AGENT OF THE GOVERNMENT OF MAHARASHTRA AND HOLDING THE S AME AS THE INCOME OF THE ASSESSEE , THEREIN VIDE HIS ORDER PASSED UNDER SEC. 143(3) R.W.S. 254, DATED 15.03.2016 ASSESSED THE SAME AT AN AMOUNT OF RS. 2456,45,98,700/ - . 8. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S. 254 IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTION S ADVANCED BY THE ASSESSEE BEFORE HIM WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME AND DISMISSED THE APPEAL OF THE ASSESSEE, VIDE HIS ORDER DATED 12.04.2 017. 9. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) SH. V. SRIDHARAN AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT TH E LAND ON WHICH INDUSTRIAL AREA/INDUSTRIAL ESTATE WAS DEVELOP ED BELONGED TO THE GOVERNMENT OF MAHARASHTRA AND NOT THE ASSESSEE . IN THE BACKDROP OF THE AFORESAID CONTENTION , IT WAS SUBMITTED BY THE LD. A.R. THAT AS THE INCOME BY WAY OF LEASE PREMIUM, INTERE ST ON BANK DEPOSITS ETC. WAS RECEIVED BY THE ASSESSEE ON BEHALF OF THE STATE GOVERNMENT AND NOT IN ITS CAPACITY AS THAT OF OWNER OF THE LAND , THEREFORE , THE SAME NOT BEING THE INCOME OF THE ASSESSEE HAD P A G E | 9 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) RIGHTLY BEEN SHOWN BY THE ASSESSEE AS A LIABILITY IN ITS BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. THE LD. A.R IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION SUBMITTED THAT THE MID C ACT CONTEMPLATED TWO SETS OF LANDS VIZ. (I) THE LANDS WHICH WERE ACQUIRED BY THE STATE GOVERNMENT UNDER SEC. 32 R.W.S. 1(3) OF THE MID C ACT AND THE OWNERSHIP OF WHICH BEING VESTED WITH THE STATE GOVERNMENT AS PER SEC. 32(4) OF THE MID C ACT COULD THEREAFTER BE TRANSFERRED UNDER SEC. 32(7) TO THE ASSESSEE CORPORATION BY ISSUANCE OF A NOTIFICATION ; AND (II) THE LANDS WHICH AL READY BELONGED TO THE STATE GOVERNMENT AND COULD BE PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION I.E. MIDC AS PER SEC. 43 - 1A OF THE MID C ACT. IT WAS SUBMITTED BY THE LD. A.R THAT NEITHER THE GOVERNMENT HAD ISSUED ANY NOTIFICATION AS PER SEC. 32(7) OF THE MID C ACT TRANSFERRING THE OWNERSHIP OF THE LAND TO THE ASSESSEE, NOR ANY SUCH LAND WHICH WAS ALREADY BELONGING TO THE GOVERNMENT OF MAHARASHTRA HAD BEEN PLACED AT THE DISPOSAL OF THE ASSESSEE I.E. MIDC AS PER SEC. 43 - 1A OF THE MID C ACT. THE LD. A.R FURTHER IN ORDER TO DRIVE HOME HIS CONTENTION THAT IN ORDER TO FACILITATE DEVELOPMENT OF THE LAND THE STATE GOVERNMENT WOULD ONLY HAND OVER THE POSSESSION OF THE LAND TO THE ASSESSEE CORPORATION I.E. MIDC AND NOT THE OWNERSHIP , SUBMITTED THAT THE SCHEME OF THE MID C ACT CLEARLY REVEALED THAT THE LAND REQUIRED FOR DEVELOPMENT WOULD BE IDENTIFIED AND THEREAFTER ACQUIRED BY THE STATE GOVERNMENT , FOLLOWED BY HANDING OVER OF ONLY THE POSSESSION OF THE SAME TO THE ASSESSEE CORPORATION FOR THE PURPOSE OF CARRYING OUT THE DEVELOPMENT ON THE SAME . THE LD. A.R. EXPLAINING THE FUNCTIONING OF THE ASSESSEE CORPORATION I.E MIDC, SUBMITTED THAT THE ASSESSEE AFTER DEVELOPING THE LAND WOULD LEASE THE SAME TO THE OCCUPIERS AS PER THE POWERS VESTED WITH IT UNDER SE C. 14 OF THE MID C ACT. THE LD. A.R IN ORDER TO FORTIFY HIS CLAIM THAT THE OWNERSHIP OF THE LAND REMAINED WITH THE GOVERNMENT OF MAHARASHTRA RAISED TWO FOLD CONTENTIONS VIZ. (I) THE 7/12 EXTRACTS CLEARLY REVEALED THAT THE ASSESSEE WAS ONLY AN OCCUPIER OF TH E LAND (KABZADHAR) WHILE FOR THE OWNERSHIP REMAINED WITH THE GOVERNMENT OF MAHARASHTRA; AND (II) THAT THE TRANSFER OF ANY LAND COULD ONLY BE CARRIED OUT BY WAY OF A REGISTERED INSTRUMENT AS PER THE TRANSFER OF PROPERTY ACT, 1882 AND REGISTRATION ACT, 1908, WHICH HOWEVER HAD NOT HAPPEN ED IN THE CASE OF THE ASSESSE E . ON THE BASIS OF THE AFORESAID P A G E | 10 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) CONTENTION IT WAS THE CLAIM OF THE LD. A.R THAT THE ASSESSEE CORPORATION WAS NEITHER THE OWNER NOR THE LESSEE OF THE LANDS UNDER CONSIDERA TION. THE LD. A.R FURTHER ADVERTING TO THE TRANSFER OF THE LAND BY THE STATE GOVERNMENT TO THE ASSESSEE CORPORATION BY ISSUANCE OF A NOTIFICATION UNDER SEC. 32(7) OF THE MID C ACT OR PLACING OF THE LAND ALREADY BELONGING TO THE STATE GOVERNMENT AT THE DISPO SAL OF THE ASSESSEE CORPORATION AS PER SEC. 43 - 1A OF THE MID C ACT, SUBMITTED THAT IN EITHER OF THE AFORESAID SITUATION S A PUBLICATION OF NOTIFICATION IS CONTEMPLATED AS PER THE MANDATE OF THE MID C ACT. THE LD. A.R. TAKING SUPPORT OF THE AFORESAID CONTENTIO N SUBMITTED THAT AS NO SUCH NOTIFICATION WAS PUBLISHED, THEREFORE, IT COULD SAFELY BE CONCLUDED BEYOND DOUBT THAT THE LANDS ACQUIRED OR BELONGING TO THE GOVERNMENT OF MAHARASHTRA HAD NEVER BEEN TRANSFERRED TO THE ASSESSEE I.E. MIDC. THE LD. A.R. IN ORDER T O SUPPORT HIS AFORESAID CONTENTION DREW OUR ATTENTION TO AN AFFIDAVIT OF MRS. VAIDEHI RANADE, GENERAL MANAGER (LAND ACQUISITION) . ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT EVEN OTHERWISE A TRANSFER OF LAND MENTIONED IN SEC. 32(7) OF THE MID C ACT COULD NOT BE CONSTRUED AS A TRANSFER OF THE OWNERSHIP OR TITLE OF THE LAND TO THE ASSESSEE CORPORATION BY THE STATE GOVERNMENT, AS THE SAME WAS MERELY A TRANSFER OF POSSESSION IN ORDER TO FACILITATE NECESSARY DISPOSAL. IT WAS THE CLAIM OF THE LD. A.R THAT THE MEANING OF TRANSFER HAD TO BE READ CONTEXTUALLY AND THE SAME BEING FOR A LIMITED PURPOSE OF ENABLING THE ASSESSEE CORPORATION TO DEAL WITH THE LAND AS PER THE PROVISIONS OF THE MID C ACT , THUS COULD NOT BE CONSTRUED AS A TRANSFER OF THE OWNERSHIP OF THE SAME. THE LD. A.R IN ORDER TO SUPPORT HIS AFORESAID CONTENTION RELIED ON THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. NARANG DAIRY PRODUCTS (1996) 219 ITR 478 (SC) AND STATE OF ORISSA VS. GOURANGA PRASAD GOUNTIA 1974 (40) CUTTA CK LAW TIMES 237. THE LD. A.R FURTHER ADVERTING TO THE COMPENSATION WHICH WAS PAID BY THE ASSESSEE , SUBMITTED THAT AS PER SEC. 33(1), 33(2), 36(1), 36(2) AND 36(3) OF THE MID C ACT THE STATE GOVERNMENT REMAINED UNDER AN OBLIGATION TO PAY COMPENSATION ON THE ACQUISITION OF LAND. IT WAS SUBMITTED BY THE LD. A.R THAT THE FACT THAT THE COMPENSATION WAS PAID BY THE ASSESSEE CORPORATION ON BEHALF OF THE STATE GOVERNMENT WAS DULY RECOGNIZED IN ITS BALANCE SHEET S FOR THE LAST 40 YEARS AND WAS REFLECTED AS AN ADVANCE RECOVERABLE/RECEIVABLE P A G E | 11 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) FROM THE GOVERNMENT BY THE ASSESSEE CORPORATION I.E. MIDC ON THE ASSET SIDE. THE LD. A.R FURTHER IN ORDER TO IMPRESS UPON US THAT THE ASSESSEE WAS ONLY HANDED OVER THE POSSESSION OF THE LAND BY THE STATE GOVERNMENT AND AS SUCH COULD NOT BE REGARDED AS ITS OW NER , TOOK SUPPORT OF THE GOVERNMENT REGULATION NO. IDC/067/38498, DATED 16.08.1967 PLACED AT PAGE NO. 860 863 OF VOLUME IV OF ASSESSES PAPER BOOK (FOR SHORT APB). THE LD. A.R ALSO TOOK US THROUGH A RESOLUTION DATED 11.09.1986 ( PAGE 869 - 877 ) OF APB - VOLUME IV , WHEREIN IT WAS PROVIDED THAT THE ASSESSEE HELD THE LAND ONLY AS AN AGENT FOR THE STATE GOVERNMENT FOR UNDERTAKING THE FUNCTIONS ASSIGNED TO IT UNDER THE MID C ACT. IT WAS SUBMITTED BY THE LD. A.R THAT AS PER SEC. 18 OF THE MID C ACT THE AFORESAID RESOLUTION WAS BINDING ON THE ASSESSEE. STILL FURTHER, IT WAS SUBMITTED BY THE LD. A.R THAT AS PER THE SETTLED POSITION OF LAW WHEN AN ENACTMENT REFERRED TO IN AN ACT IS SUBJECT TO THE RULES FRAMED THEREIN, THEN IN CA SE OF ANY CONFLICT BETWEEN THE RULES AND THE ENACTMENT , THE RULES WOULD PREVAIL OVER THE ENACTMENT. THE LD. A.R TO SUPPORT HIS AFORESAID CONTENTION RELIED ON G.P SINGH, INTERPRETATION OF STATUTES (3 RD EDITION ) ( PAGE 162 - 163 ) OF APB - VOLUME VI. THE LD. A.R FURTHER SUBMITTED THAT THE MANNER OF PREPARATION OF ACCOUNTS BY THE ASSESSEE AS PER THE STATUTE CLEARLY REVEAL ED THE LEGAL RELATIONSHIP BETWEEN THE ASSESSEE AND THE STATE GOVERNMENT. IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE HAD CONSIS TENTLY BEEN SHOWING THE SUMS COLLECTED ON BEHALF OF THE STATE GOVERNMENT AS ITS LIABILITY AND NOT AS ITS INCOME. IT WAS AVERRED BY THE LD. A.R THAT THE ASSESSEE HAD BEEN PREPARING ITS ACCOUNTS IN FORM C , I.E. AS PER THE MANNER PRESCRIBE D IN THE MID C RULE S. THE LD. A.R IN ORDER TO STRENGTHEN HIS AFORESAID CONTENTION SUBMITTED THAT THE AFORESAID FORM C WAS INTRODUCED ALONG WITH THE MID C ACT IN THE YEAR 1961 AND HAD REMAIN ED THE SAME SINCE THEN. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE SAID LEGAL O BLIGATION WAS CLEARLY CAPTURED IN THE NOTES APPENDED TO THE ACCOUNTS OF THE ASSESSEE . STILL FURTHER, THE LD. A.R IN ORDER TO FORTIFY THE VERACITY OF THE ACCOUNTS OF THE ASSESSEE SUBMITTED THAT THE SAME WERE INDEPENDENTLY DRAWN UP BY THE C & AG IN A SEPARATE AUDIT REPORT ( PAGE 151 ) OF APB - VOLUME I . THE LD. A.R IN ORDER TO DRIVE HOME HIS CLAIM THAT THE LAND WAS HANDED OVER TO THE ASSESSEE BY THE GOVERNMENT OF MAHARASHTRA FOR THE P A G E | 12 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) LIMITED PURPOSE OF INDUSTRIAL DEVELOPMENT , SUBMITTED THAT THE SAME COULD S AFELY BE GATHERED FROM THE FACT THAT THE ASSESSEE WAS GIVEN ONLY A POSSESSION LETTER BY THE LAND ACQUISITION OFFICER OF THE STATE GOVERNMENT . THE LD. A.R IN ORDER TO SUBSTANTIATE HIS AFORESAID CLAIM TOOK US THROUGH A COPY OF THE POSSESSION LETTER AT PAGE 8 00 - 801 OF APB - VOLUME III. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE PROCEDURE OF HANDING OVER THE POSSESSION OF THE LAND BY THE STATE GOVERNMENT TO THE ASSESSEE VIZ. MIDC ALSO REFERRED TO THE AFORESAID ASPECTS ONLY . IT WAS THUS THE CLAIM OF THE LD. A.R THAT THERE WAS NO CONVEYANCE BY WHICH THE TITLE OF THE LAND COULD BE SHOWN TO HAVE BEEN TRANSFERRED TO THE ASSESSEE. THE LD. A.R EXPLAINING THE PURPOSE BEHIND NOT TRANSFERRING OF THE OWNERSHIP OF THE LANDS BY THE STATE GOVERNMENT TO THE ASSESSEE CORPOR ATION VIZ. MIDC, SUBMITTED THAT THE SAME WAS A CONSCIOUS LEGISLATIVE AND ADMINISTRATIVE DECISION IN ORDER TO ENSURE THAT THE SAID LANDS WERE NOT HIT BY THE TAXATION PROVISIONS OF THE MUMBAI MUNICIPAL CORPORATION ACT, 1888 (BMC ACT) AND MAHARASHTRA MUNICIPA L CORPORATION ACT, 1974 (BPMC ACT). ON THE BASIS OF HIS AFORESAID CONTENTION , IT WAS SUBMITTED BY THE LD. A.R THAT UNDER BOTH OF THE AFORESAID STATUTES TH E GOVERNMENT PROPERTIES WERE EXEMPTED FROM LEVY OF PROPERTY TAXES. IN THE BACKDROP OF THE AFORESAID SE TTLED POSITION OF LAW , IT WAS SUBMITTED BY THE LD. A.R THAT IF THE LANDS UNDER CONSIDERATION WOULD HAD BELONGED TO THE ASSESSEE THEN THE SAME WOULD HAVE BEEN SUBJECTED TO LEVY OF PROPERTY TAX, WHICH HOWEVER WAS NOT THE CASE. THE LD. A.R IN ORDER TO DEMONST RATE THAT THE ASSESSEE CORPORATION I.E. MIDC DID NOT HAVE ANY UNFETTERED AND UNRESTRICTED RIGHTS OVER THE LANDS UNDER CONSIDERATION , DREW OUR ATTENTION TO SEC. 19, 39 AND 56 OF THE MID C ACT , WHICH REVEALED VIZ . (I) THAT THE ASSESSEE WAS BOUND BY THE PROVISIONS OF THE MID C ACT WHEN CARRYING OUT ITS FUNCTION OF INDUSTRIAL DEVELOPMENT; AND (II) THE LANDS MADE AVAILABLE TO THE ASSESSEE COULD BE TAKEN AWAY IF THE STATE GOVERNMENT SO DECIDED . THE LD. A.R FURTHER SUBMITTED THAT MAHARASHTRA HOUSING AND AREA D EVELOPMENT ACT, 1976 (MHAD ACT) CHAPTER V AND MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY ACT, 1974 (MMRDA ACT) CHAPTER VIII , ALSO PROVIDED THAT WHERE THE AUTHORITY UNDER THE AFORESAID STATUTES REQUIRED CERTAIN LANDS, THE STATE GOVERNMENT WOULD ACQUIR E THE SAME AS AN OWNER AND THEREAFTER MAKE IT P A G E | 13 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) AVAILABLE TO THE AFOREMENTIONED AUTHORITIES . IT WAS SUBMITTED BY THE LD. A.R THAT THE RESPECTIVE AUTHORITIES ESTABLISHED UNDER THE BMC ACT AND THE BPMC ACT , UNLIKE THE ASSESSEE, HAD THE POWER TO ACQUIRE IMMOVAB LE PROPERTY AND AS PER THE SAID RESPECTIVE STATUTES EVEN THE PROPERTY ACQUIRED BY THE STATE GOVERNMENT FOR THESE AUTHORITIES WOULD BE VESTED WITH THE SAID AUTHORITIES. FURTHER, THE OBLIGATION OF PAYMENT OF COMPENSATION ON ACQUISITION OF LAND ALSO WOULD REMAIN ON THE AFOREMENTIONED AUTHORITIES ESTABLISHED UNDER THE AFORESAID STATUTES VIZ. BMC ACT AND BPMC ACT. THUS, THE LD. A.R ON THE BASIS OF HIS AFORESAID DELIBERATION S SUBMITTED THAT THE PROVISIONS OF THE MID C ACT WERE MORE AKIN TO MHAD ACT AND MMRDA AC T AS THE INTENTION OF THE STATE GOVERNMENT WAS NEVER TO VEST ANY LAND ACQUIRED WITH THE ASSESSEE CORPORATION VIZ. MIDC. THE LD. A.R FURTHER TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TATA MOTORS LTD. VS. TALATHI OF VILLAGE C HIKHALI AND ORS. 2011 (7) SCC 839 , SUBMITTED THAT THE HONBLE APEX COURT IN ITS AFORESAID JUDGMENT HAD APPROVED A CIRCULAR DATED 29.03.1975 ISSUED BY THE GOVERNMENT OF MAHARASHTRA IN CONTEXT OF ITS RELATIONSHIP WITH MIDC . THE LD. A.R. VEHEMENTLY SUBMITTED THAT THE HONBLE SUPREME COURT IN ITS AFORESAID JUDGMENT HAD OBSERVED THAT THE LESSEES OF MIDC WERE GOVERNMENT LESSEES AS THEY WERE EXEMPTED FROM PAYING THE NON - AGRICULTURAL ASSESSMENT TAX . STILL FURTHER, THE LD. A.R IN ORDER TO DRIVE HOME HIS CONTENTION T HAT THE LAND S UNDER CONSIDERATION WERE OWNED BY THE GOVERNMENT AND NOT BY THE ASSESSEE, RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF FRUIT AND VEGETABLES MERCHANTS UNION VS. DELHI IMPROVEMENT TRUST AIR 1957 SC 344. THE LD. A.R TAKING US THROUGH THE AFORESAID JUDICIAL PRONOUNCEMENT SUBMITTED THAT THE HONBLE APEX COURT HAD HELD THAT WHEN A PROPERTY IS VESTED WITH AN AUTHORITY FOR IMPROVEMENT AND DEVELOPMENT, THE OWNERSHIP IN THE SAID PROPERTY IS NOT TRANSFERRED AND ONLY THE POSSESSION IS TRANSFERRED. IT WAS SUBMITTED BY THE LD. A.R THAT THE HONBLE APEX COURT IN THE BACKDROP OF ITS AFORESAID OBSERVATIONS HAD CONCLUDED THAT THE GOVERNMENT CONTINUED TO BE THE OWNER OF THE LAND EVEN IF THE SAME WAS VESTED WITH THE IMPROVEMENT T RUST FOR THE PURPOSE OF DEVELOPMENT. THE LD. A.R. REFERRING TO THE FACTS OF THE CASE BEFORE THE HONBLE APEX COURT, SUBMITTED THAT IT WAS HELD BY THE COURT THAT MARKET P A G E | 14 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) BUILDING THAT WAS CONSTRUCTED ON THE LEASE D LAND WOULD ALSO BELONG TO THE GOVERNMENT . THE LD. A.R FU RTHER REFERRED TO THE ORDER PASSED BY A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. VS. ACIT (2012) 138 ITD 381 (MUM) , WHEREIN IT WAS HELD THAT AS THE FUNCTIONS UNDERTAKEN BY AN INDUSTRIAL DEVELOPMENT CORPORATION FOR DEVELOPMENT OF INDUSTRIAL INFRASTRUCTURE WERE TO BE REGARDED AS CARRYING ON OF SOVEREIGN FUNCTION S, HENCE ANY SURPLUS ARISING THEREFROM WOULD NOT BE SUBJECT TO INCOME TAX. IT WAS THE CLAIM OF THE LD. A.R THAT AS THE ASSESSEE CO RPORATION HAD BEEN SETUP ON SIMILAR LINES AS THAT OF CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD., EXCEPT THAT THE LATTER WAS A COMPANY WHILE FOR THE ASSESSEE WAS A STATUTORY CORPORATION, HENCE ON A SIMILAR FOOTING THE SURPLUS IN THE HAN DS OF THE ASSESSEE WOULD ALSO NOT BE EXIGIBLE TO TAX. THE LD. A.R FURTHER TAKING SUPPORT OF THE ORDER PASSED BY THE CESTAT IN CCE VS. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION, CENTRAL EXCISE (APPEAL NO. 164/2015, DATED 23.08.2017), SUBMITTED THAT IN THE AFORESAID CASE IT WAS HELD THAT THE ASSESSEE CORPORATION VIZ. MIDC WAS UNDERTAKING STATUTORY FUNCTIONS AS AN AGENT OF THE GOVERNMENT OF MAHARASHTRA. THE LD. A.R FURTHER AVERRED THAT AS THE ASSESSEE CORPORATION WAS HOLDING THE MONEYS COLLECTED BY IT ON BEHALF OF THE STATE GOVERNMENT IN A FIDUCIARY CAPACITY UNDER A TRUST , THUS THE CORPUS AND INTEREST ON IT WAS HELD ON BEHALF OF THE STATE GOVERNMENT . THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON CERTAIN CASE LAWS VIZ. (I ) MORLEY VS. TATTER STALL (1939) 7 ITR 316 (CA); (II) BROWN VS. INLAND REVENUE COMMISSIONERS (1965) 57 ITR 729 (HL); (III) SANDERSONS AND MORGANS VS. CIT (1970) 75 ITR 433 (CAL); (IV) CIT VS. TANUBHAI D. DESAI (1972) 84 ITR 713 (BOM); AND (V) GUJARAT MUNIC IPAL FINANCE BOARD VS. DCIT (1996) 221 ITR 317 (GUJ) . IN THE BACKDROP OF THE AFORESAID CONTENTIONS , IT WAS SUBMITTED BY THE LD. A.R THAT AS THE GOVERNMENT HAD ONLY VESTED THE POSSESSION OF THE LANDS WITH THE ASSESSEE CORPORATION , HENCE ONLY A FIDUCIARY REL ATIONSHIP WAS CREATED BETWEEN THE ASSESSEE CORPORATION AND THE GOVERNMENT BY THE OPERATION OF LAW AND NO BENEFICIAL INTEREST WAS CONFERRED UP ON THE ASSESSEE CORPORATION . THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE JUDGMENT OF THE HONB LE APEX COURT IN THE CASE OF P A G E | 15 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) POONA ELECTRIC SUPPLY CO. LTD. VS. CIT (1965) 57 ITR 521 (SC) . IT WAS THUS THE CLAIM OF THE LD. A.R THAT AS THE LANDS WHICH WERE HELD BY THE ASSESSEE CORPORATION ON BEHALF OF THE STATE GOVERNMENT WERE LEASED AS PER THE GUIDELIN ES AND DIRECTIONS IN THE MID C AC T, HENCE THE OWNERSHIP OF THE SUMS RECEIVED ON LEASING OF THE LANDS WAS CLEARLY DIVERTED AT SOURCE TO THE S TATE G OVERNMENT. IN SUPPORT OF THE AFORESAID CONTENTION RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF SOMAIYA ORGANAO CHEMICALS LTD. VS. CIT (1995) 216 ITR 291 (BOM) . ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT THE A.O HAD EVEN OTHERWISE ERRED IN TREATING THE GROSS RECEIPTS AS THE TAXABLE INCOME OF THE ASSESSEE WITHOUT GRANTING DEDUCTION FOR THE EXPENDITURE INCURRED ON EARNING OF THE SAME. THE LD. A.R. IN ORDER TO FORTIF Y HIS AFORESAID CLAIM TOOK US THROUGH A COMPUTATION OF INCOME , WHICH AS PER HIM WOULD REVEAL THE CORRECT WORKING OF THE INCOME AS PER THE VERSION OF THE A.O ( PAGE 878 ) OF APB - VOLUME V. THE LD. A.R TO SUPPORT HIS AFORESAID CONTENTION SUBMITTED THAT EVEN IF THE SUMS COLLECTED BY THE ASSESSES CORPORATION WERE TO BE TREATED AS ITS INCOME, THEN THE ADMINISTRATIVE COST INCURRED BY IT TILL THE REMITTING OF THE EN TIRE SUMS COLLECTED ON BEHALF OF GOVERNMENT WERE TO BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE CORPORATION. THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA COMPANY LTD. VS. CIT (1959) 37 ITR 1 (SC). ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE SUMS WERE TO BE ULTIMATELY PAID TO THE GOVERNMENT OF MAHARASHTRA, THEREFORE , THE SAID RECEIPTS WOULD NOT BE TAXABLE IN THE HA NDS OF THE ASSES SEE DUE TO THE P RINCIPLE OF OVERRIDING TITLE. THE LD. A.R. IN THE BACKDROP OF HIS CLAIM THAT AS THE INCOME RECEIVED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT OF MAHARASHTRA WAS PARKED BY WAY OF DEPOSITS WITH THE BANK, HENCE THE INTEREST ACCRUING ON SUCH DEPOSITS COULD NOT BE REGARDED AS THE INCOME OF THE ASSESSEE CORPORATION VIZ. MIDC, RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION (2006) 284 ITR 582 ( KAR) AND THAT OF THE HONBLE HIGH COURT OF DELHI IN CIT VS. DELHI STATE INDUSTRIAL DEVELOPMENT (2007) 295 ITR 419 (DEL). IT WAS FURTHER SUBMITTED P A G E | 16 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) BY THE LD. A.R THAT THE ASSESSEE CORPORATION HAD INCURRED CERTAIN SPECIFIC COSTS ON BEHALF OF THE USERS OF THE LAND DEVELOP ED BY IT, WHICH WERE SHOWN ON THE ASSET SIDE OF ITS BALANCE SHEET . THE LD. A.R SUBMITTED THAT THE AFORESAID COSTS WERE THEREAFTER RECOVERED FROM SUCH THIRD PARTIES AND WERE SHOWN AS A DEDUCTION IN ITS BALANCE SHEET FROM THE ASSETS SIDE. IN THE BACKDROP OF THE AFORESAID FACTS , IT WAS SUBMITTED BY THE LD. A.R THAT THE A.O FAILING TO APPRECIATE THAT THE RECOVERY OF THE COST S OF RS. 32,28,67,135/ - BY THE ASSESSEE DURING THE YEAR WAS IN THE NATURE OF A REIMBURSEMENT OF THE EXPENDITURE INCURRED BY THE ASSESSEE , HAD THUS ERRED IN TREATING THE SAME AS THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE LD. A.R IN SUPPORT OF HIS CLAIM THAT REIMBURSEMENT OF COSTS CANNOT BE REG ARDED AS THE INCOME OF THE ASSESSEE, RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. DUNLOP RUBBER COMPANY LTD. 142 ITR 493 (CAL). IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE A.O HAD ERRED IN ENHANCING THE INCOME WH ILE FRAMING THE ASSESSMENT UNDER SEC. 143(3) R.W.S 254, AS AGAINST THE INCOME AS STOOD ASSESSED IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. RELIANCE IN SUPPORT OF THE AFORESAID CONTENTION WAS PLACED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF MY SORE IN PATHIKONDA BALASUBBA SETTY VS. CIT (1967) 65 ITR 252 (MYSORE) AND THE ORDER OF ITAT, MUMBAI IN THE CASE OF KELLOGG INDIA (P) LTD. VS. ACIT (2012) 19 ITR (TRIB) 220 (MUM) . IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT EVEN IF IT WAS TO BE ASSUMED, TH OUGH NOT ADMITTED , THAT THE ASSESSEE WAS CARRYING ON TRADE OR COMMERCE, EVEN THEN IT WOULD DULY BE ENTITLED FOR DEPRECIATION ON THE ASSETS WHICH WERE USED BY IT IN CARRYING ON THE ALLEGED TRADE OR COMMERCE. IN THE BACKDROP OF HIS AFORESAID CONTENTION IT WA S SUBMITTED BY THE LD. A.R THAT THOUGH THE TRIBUNAL HAD VIDE ITS ORDER DATED 27.03.2015 ALLOWED THE CLAIM OF DEPRECATION OF THE ASSESSEE, HOWEVER BOTH THE A.O AND THE CIT(A) HAD ERRED IN NOT FOLLOWING THE DIRECTIONS OF THE TRIBUNAL AND HAD WRONGLY DECLINED THE DEPRECIATION OF RS. 12,34,18,456/ - AS CLAIMED BY THE ASSESSEE. LASTLY, IT WAS SUBMITTED BY THE LD. A.R THAT ARTICLE 298 OF THE CONSTITUTION OF INDIA CREATED A DISTINCTION BETWEEN CARRYING ON OF TRADE OR BUSINESS ON THE ONE HAND AND ACQUISITION OF PROP ERTY, HOLDING AND DISPOSAL OF PROJECTS ON THE OTHER HAND . IN THE BACKDROP OF HIS AFORESAID CONTENTION , IT WAS THE P A G E | 17 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) CLAIM OF THE LD. A.R THAT BY WAY OF AN ANALOGY THE TRADE OR BUSINESS REFERRED TO IN THE PROVISOS TO SEC. 2(15) OF THE ACT DID NOT COVER THE DEALINGS IN LAND CARRIED ON BY THE ASSESSEE CORPORATION ON BEHALF OF THE STATE GOVERNMENT. 10. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT THOUGH THERE WAS NO DISPUTE AS REGARDS THE PRINCIPLE THAT AN INCOME IS LIABLE TO BE BROUGHT TO TAX IN THE HANDS OF THE REAL OWNER ALONE, BUT AS THE ASSESSEE WAS THE REAL OWNER OF THE LAND S UNDER CONSIDERATION, THEREFORE, NO INFIRMITY DID EMERGE FROM THE ORDER OF THE A.O IN ASSESSING THE RECEIPTS VIZ. LEASE PREMIUMS, INTEREST ON BANK DEPOSITS ETC. AS THE INCOME OF THE ASSESSEE . IT WAS SUBMITTED BY THE LD. D.R THAT THOUGH THE TRIBUNAL IN THE FIRST ROUND OF APPEAL OBSERVING THAT THE ASSESSEE HAD FOR THE VERY FIRST TIME RAISED A CONTENTION BEFORE IT THAT LAND S UNDER CONSIDERATION WERE HELD BY IT BOTH ON ITS OWN ACCOUNT AND ALSO AN AGENT OF GOVERNMENT OF MAHARASHTRA , HAD THUS REMANDED THE MATTER TO THE FILE OF THE A.O WITH A DIRECTION TO THE ASSESSEE TO SUBSTANTIATE HIS AFORESAID CONTENTION, HOWEVER THE LATTER HAD FAILED TO ESTABLIS H SUCH DISTINCTION AND THEREIN PROVE THAT THE LANDS UNDER CONSIDERATION WERE NOT OWNED BY IT BUT WERE RATHER HELD BY IT ON BEHALF OF THE STATE G OVERNMENT. THE LD. D.R REBUTT ED THE CLAIM OF THE ASSESSEE THAT ONLY THE POSSESSION OF THE LANDS UNDER CONSIDERATION WERE HANDED OVER TO IT AND THE OWNERSHIP OF THE SAME REMAINED VESTED WITH THE S TATE G OVERNMENT. IT WAS SUBMITTED BY THE LD. D.R THAT THOUGH AS PER ARTICLE 299 OF THE CONSTITUTION OF INDIA EVERY CONTRACT MADE BY THE GOVERNMENT WAS STATUTORILY REQUIRED TO BE EXPRESSED TO BE MADE BY THE PRESIDENT OR BY THE GOVERNOR OF THE STATE, BUT THE CONTRACTS ENTER ED INTO BY THE ASSESSEE FOR LEASE OF LAND WERE NOT FOUND TO BE ENTERED INTO BY THE GOVERNOR OF THE STATE OF MAHARASHTRA OR ON HIS BEHALF , BUT RATHER WERE ENTERED INTO IN THE ASSESSES OWN NAME ONLY . THE LD. D.R ON THE BASIS OF HIS AFORESAID SUBMISSIONS AVERRED THAT THE ABOVE MENTIONED FACTUAL POSITION PROVED TO THE HILT THAT THE ASSESSEE BY ENTERING INTO CONTRAC TS WITH THE LESSEES IN ITS OWN NAME WAS THE OWNER OF THE LANDS UNDER CONSIDERATION. THE LD. D.R FURTHER SUBMITTED THAT AS PER THE PRINCIPLE OF N EMO DAT QUOD P A G E | 18 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) NON HABET NO ONE COULD TRANSFER WHAT HE DID NOT OWN. IN THE BACKDROP OF HIS AFORESAID CONTENTION , IT WAS SUBMITTED BY THE LD. D.R THAT NOW WHEN THE ASSESSEE HAD TRANSFERRED THE LAND TO THE LESSEES BY LEASE DEED S ENTER ED INTO FOR A PERIOD OF 30 YEARS/90 YEARS, HENCE IT COULD SAFELY BE GATHERED BEYOND DOUBT THAT THE ASSESSEE WAS DULY VESTED WITH THE OWNE RSHIP OF THE LAND THAT WAS TRANSFERRED BY IT . IN FURTHER SUPPORT OF HIS AFORESAID CONTENTION THE LD. D.R SUBMITTED THAT IN THE LEASE AGREEMENTS AS THE ASSESSEE WAS REFERRED TO AS THE LESS O R AND NOWHERE IT WAS MENTIONED THAT THE SAME WERE BEING EXECUTED ON BEHALF OF THE GOVERNMENT , THEREFORE, THE OWNERSHIP OF THE ASSESSEE IN RESPECT OF THE LANDS UNDER CONSIDERATION DID CLEARLY EMERGE. THE LD. D.R FURTHER TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF M/S SKODA AUTO INDIA PV T. LTD. VS T H E STATE OF MAHARASHTRA [WRIT PETITION NO. 4513 OF 2010, DATED 31.01.2011] (A MATTER RELATING TO PROPERTY TAX PAYABLE TO THE PANCHAYAT) , SUBMITTED THAT THE HIGH COURT AFTER OBSERVING AT PARA 6 OF ITS ORDER THAT THE LAND WAS HANDED OVER TO MID C, HAD THEREAFTER STATED AT PARA 16 THAT THE LAND BELONGED TO THE STATE GOVERNMENT/MIDC . STILL FURTHER, THE LD. D.R TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIGAMBER & ORS. VS. STATE OF MAHARASHTRA & ORS. [CIVIL APPEAL NO . 5346 OF 2013, DATED 01.08.2013 ], SUBMITTED THAT THE HONBLE APEX COURT HAD OBSERVED AT PARA 9 AND PARA 25 OF ITS ORDER THAT THE STATE GOVERNMENT HAD ACQUIRED THE LAND IN FAVOUR OF MIDC. THE LD. D.R FURTHER REFERRING TO SEC. 32(7) OF THE MID C ACT , SUBMITTED THAT THE SAME CONTEMPLATED COMPULSORY TRANSFER OF LAND BY THE GOVERNMENT TO THE ASSESSEE I.E. MIDC . THE LD. D.R STRONGLY OBJECTED TO THE AFFIDAVIT OF MRS. VAIDEHI RANADE, GENERAL MANAGER (LAND ACQUISITION) ON TWO COUNTS VIZ. (I) THE AFFIDAVIT TH OUGH WAS AN ADDITIONAL EVIDENCE, HOWEVER NO APPLICATION SEEKING LIBERTY OF THE TRIBUNAL FOR ADMISSION OF THE SAME WAS FILED BY THE ASSESSEE; AND (II) THAT AS THE AFFIDAVIT REFERRED TO A PERIOD POST 2014, WHILE FOR THE DISPUTE PERTAINED TO A PERIOD MUCH EAR LIER THAN THAT, THUS THE SAME WAS CLEARLY IRRELEVANT IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. THE LD. D.R FURTHER TAKING SUPPORT OF SEC. 39(1)(A) OF THE MID C ACT, SUBMITTED THAT THE SAME DULY EMPOWERED THE ASSESSEE I.E. MIDC TO DISPOSE OFF THE LAND TRA NSFERRED TO IT WITHOUT DEVELOPMENT . IN THE BACKDROP OF HIS AFORESAID P A G E | 19 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) CONTENTION IT WAS SUBMITTED BY THE LD. D.R THAT THE AFORE SAID FACT CLEARLY PROVED THAT THE OWNERSHIP OF THE LAND UNDER CONSIDERATION WAS TRANSFERRED TO THE ASSESSEE I.E. MIDC . THE LD. D.R TAKING US THROUGH PAGE 803 - 805 OF THE APB SUBMITTED THAT THE SAME CLEARLY REVEALED THAT THE LAND WAS ACQUIRED ON BEHALF OF MIDC. THE LD. D.R FURTHER DRAWING OUR ATTENTION TO THE FINANCIAL STATEMENTS OF THE ASSESSEE PLACED AT PAGE 860 - 861 OF APB, SUBMITTED THAT IT WAS THEREIN CLEARLY STATED THAT THE GOVERNMENT WOULD CHARGE INTEREST @ 7% ON THE ADVANCES GIVEN BY IT TO THE ASSESSEE. IT WAS THUS THE CLAIM OF THE LD. D.R THAT THE LANDS UNDER CONSIDERATION WERE ACQUIRED ON BEHALF OF THE ASSESSEE I.E. MIDC . THE LD. D.R REBUTTING THE CONTENTION OF THE ASSESSEE THAT THE TRANSFER MENTIONED IN SEC. 32(7) OF THE MID ACT WAS IN CONTEXT OF TRANSFER OF POSSESSION TO FACILITATE DEVELOPMENT OF LAND BY THE ASSESSEE CORPORATION, SUBMITTED TH AT THE SAID STATUTORY PROVIS ION CLEARLY CONTEMPLATED TRANSFER OF OWNERSHIP OF LAND TO THE ASSESSEE I.E. MIDC. THE LD. D.R TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIGAMBER & ORS. VS. STATE OF MAHARASHTRA & ORS. [CIVIL APPEAL NO. 5346 OF 2013, DATED 0 1.08.2013] SUBMITTED THAT THE HONBLE APEX COURT HAD AT PAGE 3 PARA 9 OF ITS ORDER CLEARLY STATED THAT THE LAND WAS ACQUIRED BY THE GOVERNMENT IN FAVOUR OF THE CORPORATION AND TWO NOTIFICATIONS FOR SUCH ACQUISITION WERE ISSUED. IT WAS FURTHER SUBMITTED BY THE LD. D.R THAT THE HONBLE APEX COURT HAD ORDERED THAT THE ENHANCED COMPENSATION WAS TO BE PAID BY MIDC AND NOT BY THE STATE GOVERNMENT, WHICH THUS PROVED THAT THE LAND BELONGED TO MIDC. THE LD. D.R FURTHER REBUTTING THE CONTENTIONS ADVANCED BY THE L D. A.R THAT THE RULES FRAMED UNDER THE MID C ACT IN CASE OF ANY CONFLICT WITH THE ENACTMENT WOULD PREVAIL OVER THE SAME, SUBMITTED THAT AS THE TRIBUNAL HAD IN THE EARLIER ROUND OF APPEAL CATEGORICALLY OBSERVED THAT THE GOVERNMENT REGULATIONS CANNOT OVERRIDE THE MID C ACT, HENCE THE SAID CONTENTION OF THE ASSESSEE WAS NOT MAINTAINABLE . THE LD. D.R ADVERTING TO ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE WHEREIN THE REVENUE RECEIPTS HAD DIRECTLY BEEN TAKEN BY THE ASSESSEE TO ITS BALANCE SHEET , SUBMITTED THAT THE SAID METHODOLOGY HAD NO SANCTION OF LAW AND AS SUCH COULD NOT BE ACTED UPON FOR DEDUCING THE TRUE INCOME OF THE ASSESSEE. IT WAS SUBMITTED BY THE LD. D.R THAT THOUGH THE P A G E | 20 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) DEPOSITS RECEIVED BY THE ASSESSEE FROM VARIOUS PLOT HOLDERS FOR EXECUTING CERTAIN WORKS FOR THEM COULD BE OF A CAPITAL NATURE FOR SUCH PLOT HOLDERS, BUT THE CORRESPONDING RECEIPT S WERE CERTAINLY REVENUE RECEIPTS FOR THE ASSESSEE. IN THE BACKDROP OF THE AFORESAID CONTENTION IT WAS SUBMITTED BY THE LD. D.R THAT AS THE METHOD OF ACCOUNTING COULD NOT BE DECISIVE OF DETERMINING THE INCOME OF THE ASSESSEE , THUS THE REVENUE RECEIPTS IN THE HANDS OF THE ASSESSEE HAD RIGHTLY BEEN ASSESSED AS THE INCOME OF THE ASSESSEE BY THE A.O . IT WAS FURTHER SUBMITTED BY THE LD. D.R THAT EVEN OTHERWI SE THE ASSESSEE HAD NOT SHOWN ITS ENTIRE RECEIPTS IN ITS INCOME & EXPENDITURE ACCOUNT. IN ORDER TO FORTIFY HIS AFORESAID CONTENTION, THE LD. D.R SUBMITTED THAT THE ASSESSEE HAD ONLY ACCOUNTED FOR PART OF THE WATER RECEIPT CHARGES IN THE INCOME & EXPENDITUR E ACCOUNT WITH NO EXPLANATION AS TO WHY THE REMAINING AMOUNT HAS NOT BEEN ACCOUNTED FOR . THE LD. D.R FURTHER REBUTTING THE CLAIM OF THE ASSESSEE THAT IT WAS ONLY HANDED OVER THE POSSESSION OF THE LAND AND THE OWNERSHIP OF THE SAME IN THE ABSENCE OF ANY CON VEYANCE IN ITS FAVOUR CONTINUED TO REMAIN WITH THE STATE GOVERNMENT , SUBMITTED THAT THE ASSESSEE WAS HANDED OVER THE POSSESSION OF LAND AS THE OWNER OF THE PROPERTY. ADVERTING TO THE CLAIM OF THE ASSESSEE THAT IT DID NOT HAVE ANY UNFETTERED AND UNRESTRICTE D RIGHTS OVER THE LANDS WHICH COULD BE TAKEN AWAY BY THE STATE GOVERNMENT, SUBMITTED THAT THE LANDS WHICH WERE BEING HANDED OVER BY THE ASSESSEE TO THE MUNICIPALITIES WERE ONLY THE COMMON AREAS I.E. ROADS ETC. AS COULD BE GATHERED FROM A PERUSAL OF PAGE 83 9 OF THE APB. THE LD. D.R TO FORTIFY HIS CONTENTION THAT THE ASSESSEE CORPORATION VIZ. MIDC WAS THE OWNER OF THE LANDS UNDER CONSIDERATION SUBMITTED THAT THE EXTRACT/PRINTOUT OF THE WEBSITE OF THE ASSESSEE CORPORATION I.E. MIDC CLEARLY REVEALED THAT THANE (WAG H LE ESTATE) WAS STILL MENTIONED AS OWNED BY THE ASSESSEE, WHILE FOR THE CORRESPONDING NOTIFICATION TRANSFERRING THE SAME WAS PRODUCED BY THE ASSESSEE AS HAVING BEEN ISSUED UNDER SEC. 56. IT WAS THUS THE CLAIM OF THE LD. D.R THAT AS THE ASSESSEE WAS VES TED WITH THE OWNERSHIP OF THE LAND UNDER CONSIDERATION, HENCE THE INCOME ARISING THEREFROM WOULD CLEARLY BE LIABLE TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. THE LD. D.R REFERRING TO THE JUDGMENT OF THE HONBLE SUPREME COURT OF IN THE CASE OF TATA MOTORS LTD. VS. TALATHI OF P A G E | 21 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) VILLAGE CHIKHALI & ORS. 2011 (7) SCC 839, SUBMITTED THAT A PERUSAL OF THE CORRESPONDING DECISION OF THE HONBLE HIGH COURT OF BOMBAY REVEALED THAT THERE WERE CERTAIN FACTUAL DISCREPANCIES. IT WAS SUBMITTED BY THE LD. D.R THAT WHI LE FOR THE HONBLE SUPREME COURT IN ITS DECISION HAD STATED THAT THE LAND WAS LEASED TO TATA MOTORS LTD. BY MIDC, HOWEVER THE HIGH COURT OF BOMBAY HAD IN ITS DECISION STATED THAT THE LAND WAS LEASED TO TATA MOTORS LTD. BY THE G OVERNMENT. AS REGARDS THE CLA IM OF THE ASSESSEE THAT THE INTEREST ON THE AMOUNTS OWED BY THE ASSESSEE TO THE STATE GOVERNMENT AND PARKED WITH THE BANKS WAS TO BE ASSESSED IN THE HANDS OF THE STATE GOVERNMENT, IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD NEVER FURNISHED ANY DETAILS OF THE AMOUNTS OWED TO THE STATE GOVERNMENT, THUS THE CORRESPONDING INTEREST IN RESPECT OF THE SAME COULD NOT BE COMPUTED . THE LD. D.R REBUTTING THE CLAIM OF THE ASSESSEE THAT AS THE GOVERNMENT HAD ONLY VESTED THE POSSESSION OF THE LANDS WITH ASSE SSEE WITH NO BENEFICIAL INTEREST HAVING BEEN CONFERRED IN IT S FAVOUR, HENCE PURSUANT TO A FIDUCIARY RELATIONSHIP CREATED BETWEEN IT AND THE GOVERNMENT , THE OWNERSHIP OF THE SUMS RECEIVED FROM LEASING OF THE LANDS GOT DIVERTED AT SOURCE TO THE GOVERNMENT . T HE LD. D.R IN SUPPORT OF HIS AFORESAID CONTENTION SUBMITTED THAT AS PER SEC. 20 OF THE MID C ACT THE MONEY RECEIVED FROM THE SALE OF PLOTS BECAME THE ASSESSE S OWN MONEY BY OPERATION OF LAW. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE A.O HAD ERRED IN ASSESSING THE GROSS RECEIPTS AS ITS TAXABLE INCOME, THE LD. D.R SUBMITTED THAT THE SAID ISSUE CAN BE REMANDED FOR ADJUDICATION BY THE A.O . HOWEVER, IT WAS SUBMITTED BY THE LD. D.R THAT IN CASE INSTANCES OF EXPENDITURE INCURRED FOR DEVELOPMENT OF LAND WHIC H HAD NOT BEEN SUBSEQUENTLY LET OUT/SOLD EMERGES, THEN THE SAID EXPENDITURE COULD NOT BE ALLOWED AS A DEDUCTION. THE LD. D.R FURTHER MEETING OUT THE CLAIM OF THE ASSESSEE THAT THE RECEIPTS WERE NOT LIABLE TO BE TAXED IN ITS HANDS DUE TO THE PRINCIPLE OF OV ERRIDING TITLE SUBMITTED THAT AN OVERRIDING TITLE CAN ONLY BE CREATED BY A STATUTE OR BY AN ORDER OF THE COURT. IT WAS SUBMITTED BY THE LD. D.R THAT AS THERE WAS NO SUCH EXEMPTION CREATED ON THE INCOME OF THE ASSESSEE , NOR ANY ACCRUED LIABILITY IN RESPECT OF ANY AMOUNT PAYABLE TO THE GOVERNMENT DID EMERGE, HENCE THE INCOME WAS TAXABLE ONLY IN THE HANDS OF THE ASSESSEE. THE LD. D.R FURTHER SUBMITTED P A G E | 22 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) THAT AS THE ASSESSEE HAD NOT FURNISHED ANY BIFURCATED DETAILS AS REGARDS THE SUMS HELD BY IT ON BEHALF OF THE GOVERNMENT AND THE SUMS BELONGING TO IT , HENCE ITS CLAIM THAT THE INTEREST INCOME BELONGED TO THE GOVERNMENT ONLY COULD NOT BE ACCEPTED AND THE ENTIRE INTEREST HAD RIGHTLY BEEN BROUGHT TO TAX BY THE A.O IN THE HANDS OF THE ASSESSEE . THE LD. D.R FURTHER ADV ERTING TO THE CLAIM OF THE ASSESSEE THAT THE REIMBURSEMENT COSTS RECOVERED FROM THE THIRD PARTIES FOR THE PROJECTS UNDERTAKEN ON THEIR BEHALF WAS TAXED BY THE A.O, SUBMITTED THAT THE SURPLUS ARISING FROM SUCH PROJECTS CARRIED OUT BY THE ASSESSEE ON BEHALF OF THE THIRD PARTIES WOULD BE TAXABLE AS THE INCOME OF THE ASSESSEE. IT WAS THE CONTENTION OF THE LD. D.R THAT THE ASSESSEE HAD WRONGLY STATED THAT IT WAS COVERED UNDER SEC. 113(3 - A) OF THE MRTP ACT WHICH REQUIRED A NOTIFICATION TO BE ISSUED , BUT NO SUCH NOTIFICATION WAS ISSUED . IT WAS SUBMITTED BY THE LD. D.R THAT THE ASSESSEE WAS COVERED UNDER SEC. 40(1A) OF THE MRTP ACT WHICH WAS INSERTED ON THE STATUTE IN THE YEAR 1994 . IT WAS FURTHER SUBMITTED BY THE LD. D.R THAT SEC. 40(1A) OF THE MRTP ACT GRANTED TH E ASSESSEE THE STATUS OF A SPECIAL PLANNING AUTHORITY (FOR SHORT SPA) AND POST 1994 NO NOTIFICATION WAS THEREAFTER NEEDED TO VEST THE LAND WITH THE ASSESSEE. THE LD. D.R SUBMITTED THAT THE DEFINITION OF PLANNING AUTHORITY CONTEMPLATED UNDER SEC. 2(19 ) OF THE MRTP ACT INCLUDED WITHIN ITS SWEEP A SPA. ADVERTING TO THE CONTENTION OF THE ASSESSEE THAT THE MRTP ACT WAS A GENERAL LAW WHILE FOR THE MID C ACT WAS A SPECIFIC LAW , IT WAS SUBMITTED BY THE LD. D.R THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF RAJIV MOHAN MISHRA VS. CIDCO [PIL NO. 80 OF 2013; DATED 24.03.2017] , HAD AT PAGE 6 OF ITS ORDER SPECIFICALLY STATED THAT IN THE EVENT OF A CONFLICT BETWEEN THE TWO ACTS THE MRTP ACT WAS TO PREVAIL. IT WAS FURTHER AVERRED BY THE LD. D.R THAT THE HONBLE HIGH COURT HAD AT PAGE 14 OF ITS AFORESAID ORDER STATED THAT MIDC WAS A PLANNING AUTHORITY . THE LD. D.R FURTHER TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TRIG GUARDS FORCE LTD. VS. MIDC [CIVIL APPEAL NOS. 984 - 986 OF 2005, D ATED 06.12.2007] SUBMITTED THAT ON A PERUSAL OF THE SAID JUDGMENT IT COULD SAFELY BE GATHERED THAT MIDC WAS ITSELF USING THE POWERS GIVEN UNDER THE MRTP ACT. ON THE BASIS OF THE AFORESAID CONTENTIONS , IT WAS SUBMITTED BY THE LD. D.R THAT AS THE A.O HAD RIGHTLY ASSESSED THE RECEIPTS AS THE INCOME OF THE P A G E | 23 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) ASSESSEE CORPORATION , THEREFORE, NO INFIRMITY DID EMERGE FROM HIS ORDER PASSED UNDER SEC. 143(3) R.W.S. 254 OF THE ACT WHILE GIVING EFFECT TO THE ORDER PASSED BY THE TRIBUNAL IN THE FIRST ROUND OF APPEAL. THE LD. D.R SUBMITTED THAT AS THE APPEAL FILED BY THE ASSESSEE WAS DEVOID OF ANY MERIT , THUS THE SAME WAS LIABLE TO BE DISMISSED. 11. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES AT LENGTH, PERUSED THE ORDERS OF THE LOWER AUTHORIT IES AND THE ORDER PASSED BY THE TRIBUNAL IN THE FIRST ROUND OF APPEAL , AS WELL DELIBERATED ON THE EXHAUSTIVE SUBMISSIONS PLACED ON RECORD AND JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE REPRESENTATIVES FOR BOTH THE PARTIES BEFORE US. WE FIND THAT TH E ASSESSEE HAS PRIMARILY SOUGHT OUR INDULGENCE IN THE PRESENT APPEAL FOR ADJUDICATING T HE VALIDITY OF THE ORDER OF THE CIT(A) THAT AS THE LANDS UNDER CONSIDERATION WERE NOT OWNED BY THE GOVERNMENT OF MAHARASHTRA, HENCE THE INCOME ARISING THEREFROM VIZ. LEA SE PREMIUMS, RENT, INTEREST INCOME FROM FUNDS PARKED AS BANK DEPOSITS ETC. WERE LIABLE TO BE ASSESSED AS THE INCOME OF THE ASSESSEE CORPORATION . THE ASSESSEE HAS ASSAILED BEFORE US T HE OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE INCOME FROM THE LANDS WAS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE ON MULTIPLE GROUNDS VIZ. (I). THAT IT WAS WRONGLY OBSERVED BY THE AUTHORITIES BELOW THAT THE LANDS UNDER CONSIDERATION WERE OWNED BY THE ASSESSEE CORPORATION AND NOT BY THE STATE GOVERNMENT OF MAHARASHTRA ; (II). THAT AS PER SEC. 60 OF THE ACT, IN THE ABSENCE OF THE TRANSFER OF THE LANDS TO THE ASSESSEE THE INCOME ARISING THEREFROM WAS TO BE ASSESSED IN THE HANDS OF THE TRANSFEROR I.E THE GOVERNMENT OF MAHARASHTRA; (I I I). THAT THE AUTHORITIES BELOW WERE IN ERROR IN CONCLUDING THAT AS THERE WAS AN IRREVOCABLE TRANSFER OF LANDS TO THE ASSESSEE, THUS THE PROVISIONS OF SEC. 61 OF THE ACT CONTEMPLATING THE ASSESSING OF THE INCOME IN THE HANDS OF THE TRANSFEROR WERE NOT APPLICABLE; (I V ). THAT IT WAS ERRONEOUSLY C ONCLUDED T HAT THE EXCEPTION CARVED OUT IN SEC. 62 AS REGARDS THE APPLICABILITY OF SEC. 61 STOOD EXCLUDED . ALTERNATIVELY, THE ASSESSEE HAD ALSO ASSAILED THE ORDER OF THE CIT(A) BEFORE US ON THE GROUND THAT EVEN IF IT WAS TO BE ASSUMED (NOT ADMITTED) THAT TH E LANDS UNDER CONSIDERATION STOOD VESTED WITH THE ASSESSEE, THE SAME HOWEVER BEING HELD P A G E | 24 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) BY THE ASSESSEE CORPORATION IN A FIDUCIARY CAPACITY UNDER TRUST ON BEHALF OF THE STATE GOVERNMENT , THUS THE INCOME ARISING FROM THE SAME WAS NOT LIABLE TO BE BROUGHT TO TAX IN ITS HANDS . THE ASSESSEE HAD ALSO DISPUTED THE ORDER S OF THE LOWER AUTHORITIES ON THE GROUND THAT AS IT WAS A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE, HENCE THE SAME COULD NOT BE ASSESSED IN ITS HANDS. OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE MONIES RECEIVED BY THE ASSESSEE WERE OWNED, CONTROLLED AND MANAGED BY IT WITHOUT ANY INTERFERENCE BY THE GOVERNMENT OF MAHARASHTRA TO WHOM THE SAME WERE NOT PAYABLE DURING THE LIFE TIME OF THE CORPORATION HAS ALSO BEEN CHALLENGED BEFORE US. STILL FURTHER, THE ASSESSEE TAKING SUPPORT OF THE PRINCIPLE OF CONSISTENCY HAS DISPUTED THE DEPARTURE TAKEN BY THE REVENUE AUTHORITIES FROM ITS CONSISTENT APPROACH OF ACCEPTING THE RECEIPTS ON BEHALF OF THE STATE GOVERNMENT AS A LIABILITY IN THE BALANCE SHEETS OF THE ASSESSEE CORPORATION IN THE PAST YEARS , AND HOLDING TO THE CONTRARY AND ASSESSING THE SAME AS THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. WE FURTHER FIND THAT INDEPENDENT OF ASSAILING THE ORDER OF THE LOWER AUTHORITIES ON THE GROUND THAT THEY HAD ERRED IN ASSESSING THE INCOME ARISING THEREFROM VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME ON BANK DEPOSITS ETC. AS THE INCOME OF THE ASSESSEE CORPORATION, IT HA S ALSO CHALLENGED THE QUANTUM OF ADDITION S MADE IN ITS HANDS VIZ. (I). THE RECOVERY/RECOUPMENT OF COSTS OF RS. 32,28,67,135/ - RECEIVED BY THE ASSESSEE FROM THE LESSEES AND ASSESSED AS ITS INCOME; (II). THE FAILURE ON THE PART OF THE LOWER AUTHORITIES IN NOT GIVING A DEDUCTION OF A SUM OF RS. 1042 ,85,70,248/ - BEING THE INCREASE IN THE BALANCE SHEET OF THE ASSESSEE; (III). TH E ENHANCEMENT OF INCOME CARRIED OUT BY THE LOWER AUTHORITIES FROM THE ORIGINAL ASSESSED INCOME OF RS. 1,701.77 CRORES TO AN AMOUNT OF RS. 2,456.50 CRORES WHILE GIVING EFFECT T O THE ORDER OF THE TRIBUNAL; (IV) THE ERROR ON THE PART OF THE LOWER AUTHORITIES I N NOT ALLOWING DEPRECIATION OF RS. 12,34,18,456/ - DESPITE DIRECTION BY THE TRIBUNAL, VIDE ITS ORDER DATED 27.03.2015; AND (V). THAT THE LOWER AUTHORITIES HAD ERRED IN BRINGIN G TO TAX INTEREST ON DEPOSITS OF RS. 404,02,49,074/ - . 12. BEFORE PROCEEDING FURTHER, WE MAY HEREIN OBSERVE THAT THE ASSESSEE IN THE PRESENT APPEAL HAS ALSO ASSAILED THE APPLICABILITY OF THE PROVISO TO SEC. P A G E | 25 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 2(15) IN ITS CASE. HOWEVER, AS THE TRIBU NAL IN THE FIRST ROUND OF APPEAL HAD VIDE ITS ORDER DATED 27.03.2015 SUBSCRIBED TO THE VIEW OF THE CIT(A) AND AT PARA 29 OF ITS ORDER CONCLUDED THAT AS THE ACTIVITIES OF THE ASSESSEE CORPORATION WERE COMMERCIAL IN NATURE AND THUS WOULD BE HIT BY THE PROVISO TO SEC. 2(15) OF THE ACT , HENCE AFORESAID CONTENTION RAISED TO THE CONTRARY BY THE ASSESSEE BEFORE US WOULD NOT BE MAINTAINABLE. THE GROUND OF APPEAL NO. 6 RAISED BY THE ASSESSEE IS THUS DISMISSED AS NOT MAINTAINABLE. 13. WE SHALL NOW ADVERT TO T HE CORE ISSUE INVOLVED IN THE PRESENT APPEAL I.E AS TO WHETHER THE CIT(A) WAS RIGHT IN LAW AND THE FACTS OF THE CASE IN CONCURRING WITH THE A.O THAT AS THE LANDS UNDER CONSIDERATION WERE NOT OWNED BY THE GOVERNMENT OF MAHARASHTRA, HENCE THE INCOME ARISING THEREFROM VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME EARNED ON THE FUNDS PARKED AS DEPOSITS WITH THE BANKS ETC. WERE LIABLE TO BE ASSESSED AS THE INCOME OF THE ASSESSEE CORPORATION. W E ARE OF THE CONSIDERED VIEW THAT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ITO VS. CH. ATTCHAIAH (1996) 218 ITR 239 (SC), IT IS OBLIGATORY ON THE PART OF THE REVENUE AUTHORITIES TO ASSESS THE INCOME IN THE HANDS OF THE RIGHT PERSON AND THE RIGHT PERSON ALONE. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDER ATION IN THE BACKDROP OF THE CONTENTIONS ADVANCED BY THE REPRESENTATIVES 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. BUILDIN GS 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 P A G E | 26 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 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 DISPOSE OF F PROPERTY, BO TH MOVEABLE AND IMMOVABLE, AND TO CONTRACT AND DO ALL THINGS NECESSARY FOR THE PURPOSES OF THE ACT. STILL FURTHER, A PERUSAL OF THE FUNCTIONS OF THE ASSESSEE CORPORATION AS CONTEMPLATED IN SEC. 14(II) OF THE MIDC ACT REVEALS THAT THE SAME PARTICULARLY INCL UDES VIZ. (I). ESTABLISHING AND MANAGING INDUSTRIAL ESTATES AT PLACES SELECTED BY THE STATE GOVERNMENT; (II). DEVELOP ING INDUSTRIAL AREAS SELECTED BY THE STATE GOVERNMENT FOR THE PURPOSE AND MAKE THEM AVAILABLE FOR UNDERTAKINGS TO ESTABLISH THEMSELVES; AND (III). UNDERTAK ING SCHEMES OR WORKS, EITHER JOINTLY WITH OTHER CORPORATE BODIES OR INSTITUTIONS, OR WITH GOVERNMENT OR LOCAL AUTHORITIES, OR ON AN AGENCY BASIS, IN FURTHERANCE OF THE PURPOSE FOR WHICH THE ASSESSEE CORPORATION IS ESTABLISHED AND ALL MATTER S CONNECTED THEREWITH. STILL FURTHER, T HE ASSESSEE CORPORATION AS PROVIDED IN SEC. 15 OF THE MIDC ACT INTERALIA STANDS VESTED WITH THE POWERS VIZ. (I). TO ACQUIRE AND HOLD SUCH PROPERTY, BOTH MOVABLE AND IMMOVABLE AS THE ASSESSEE CORPORATION MAY DEEM NECES SARY FOR THE PERFORMANCE OF ANY OF ITS ACTIVITIES AND TO LEASE, SELL, EXCHANGE OR OTHERWISE TRANSFER ANY PROPERTY HELD BY IT ON SUCH CONDITIONS AS MAY BE DEEMED PROPER BY IT; (II). TO PURCHASE BY AGREEMENT OR TO TAKE ON LEASE OR UNDER ANY FORM OF TENANCY A NY LAND, TO ERECT SUCH BUILDINGS AND TO EXECUTE SUCH OTHER WORKS AS MAY BE NECESSARY FOR THE PURPOSE OF CARRYING OUT ITS DUTIES AND FUNCTIONS; (III). TO PROVIDE OR CAUSE TO BE PROVIDED AMENITIES AND COMMON FACILITIES IN INDUSTRIAL ESTATES AND INDUSTRIAL AR EAS AND CONSTRUCT AND MAINTAIN OR CAUSE TO BE MAINTA INED WORKS AND BUILDINGS THEREOF; (IV) TO MAKE AVAILABLE BUILDINGS ON HIRE OR SALE TO INDUSTRIALISTS OR PERSONS INTENDING TO START INDUSTRIAL UNDERTAKINGS; (V). TO CONSTRUCT BUILDINGS FOR THE HOUSING OF T HE EMPLOYEES OF SUCH INDUSTRIES; (VI). TO ALLOT FACTORY SHEDS OR SUCH BUILDINGS OR PARTS OF BUILDINGS, INCLUDING RESIDENTIAL TEN EMENTS TO SUITABLE PERSONS IN THE INDUSTRIAL ESTATES ESTABLISHED OR DEVELOPED BY THE ASSESSEE CORPORATION; AND (VII). TO MODIFY OR RESCIND SUCH ALLOTMENTS, INCLUDING THE RIGHT AND POWER TO EVICT THE ALLOTTEES CONCERNED ON BREACH OF ANY OF THE TERMS OR CONDITIONS OF THEIR ALLOTMENT. WE P A G E | 27 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) FIND FROM A PERUSAL OF THE AFOREMENTIONED FUNCTIONS AND POWERS O F THE ASSESSEE CORPORATION THAT IN FURTHERANCE OF ITS OBJECT OF ESTABLISHING AND DEVELOPING INDUSTRIAL ESTATES 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 ACQUIRI NG 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 PROVID ING AMENITIES OR CO MMON 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 SE C. 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 THE MIDC ACT THAT IN CASE THE STATE GOVERNMENT IS OF THE OPINION THAT ANY LAND IS REQUIRED FOR THE PURPOSE OF DEVELOPMENT BY THE ASSESSEE CORPORATION, OR FOR ANY OTHER PURPOSE IN FURTHERANCE OF THE OBJECTS OF THE SAID ACT, THEN AFTER PUTTING THE OWNER OF THE LAND OR ANY OTHER PERSON INTERESTED THEREIN TO NOTICE AS REGARDS ITS DECISION OF ACQUIRING SUCH LAND, CALLING FOR HIS OBJECTIONS AND DISPOSING OFF THE SAME AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO SUCH PERSON , THE STATE GOVERNMENT SHALL ACQUIRE SUCH LAND BY PUBLISHING A NOTICE IN THE OFFICIAL GAZETTE . ON A PERUSAL OF S UB - SECTION (4) OF SEC. 32 OF THE MIDC ACT, IT EMERGES THAT WHEN A NOTICE UNDER SEC. 32(1) OF THE ACT IS PUBLISHED IN THE OFFICIAL GAZETTE, THE LAND SHALL, ON AND FROM THE DATE OF S UCH PUBLICATION, VEST ABSOLUTELY IN THE STATE GOVERNMENT FREE FROM ALL ENCUMBRANCES . STILL FURTHER, AS PER SUB - SECTION (5) OF SEC. 32 OF THE MIDC ACT, WHERE ANY LAND IS VESTED WITH THE STATE GOVERNMENT UNDER SUB - SECTION (4) OF SEC. 32 OF THE P A G E | 28 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) MIDC ACT, THEN THE STATE GOVERNMENT MAY BY NOTICE IN WRITING ORDER ANY PERSON WHO MAY BE IN POSSESSION OF THE LAND TO SURRENDER OR DELIVER POSSESSION THEREOF TO THE STATE GOVERNMENT OR ANY PERSON DULY AUTHORISED BY IT IN THIS BEHALF WITHIN THIRTY DAYS OF THE SERVICE OF THE NOTICE. AS PER SUB - SECTION (7) OF SEC. 32 OF THE MIDC ACT, AFTER THE LAND HAD BEEN ACQUIRED FOR THE ASSESSEE CORPORATION OR ANY LOCAL AUTHORITY, THE STATE GOVERNMENT SHALL, AFTER IT HAS TAKEN POSSESSION THEREOF, BY NOTIFICATION IN THE OFFICIAL GAZETTE TRANSFER THE LAND TO THE ASSESSEE CORPORATION OR THAT LOCAL AUTHORITY, AS T HE CASE MAY BE, FOR THE PURPOSE FOR WHICH IT WAS ACQUIRED AND THE PROVISIONS OF SEC. 43 - 1A OF THE MIDC ACT SHALL THEREAFTER BE APPLICABLE. AS PER SEC. 43 - 1A OF THE MIDC ACT, FOR THE FURTHERANCE OF THE ACT, THE STATE GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE, UPON SUCH CONDITIONS AS M A Y BE AGREED BETWEEN IT AND THE ASSESSEE CORPORATION, PLACE AT THE LATTERS DISPOSAL THE LANDS VESTED IN THE STATE GOVERNMENT. THAT AFTER SUC H LAND IS DEVELOPED BY, OR UNDER THE CONTROL AND SUPERVISION OF THE ASSESSEE CORPORATION, IT SHALL BE DEALT WITH BY THE CORPORATION IN ACCORDANCE WITH THE REGULATIONS MADE, AND DIRECTIONS GIVEN BY THE STATE GOVERNMENT IN THIS BEHALF. ON A PERUSAL OF SUB - SE CTION (3) OF SEC. 43 - 1A, IT EMERGES THAT IF ANY LAND PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION UNDER SUB - SECTION (1) OF SEC. 43 - 1A IS REQUIRED AT ANY TIME THEREAFTER BY THE STATE GOVERNMENT, THE ASSESSEE CORPORATION SHALL REPLACE IT AT THE DISPOSA L OF THE STATE GOVERNMENT UPON SUCH TERMS AND CONDITIONS AS MAY BE MUTUALLY AGREED UPON. WE FURTHER FIND THAT AS PER SEC. 33 AND SEC. 36 OF THE MIDC ACT, WHERE ANY LAND IS ACQUIRED BY THE STATE GOVERNMENT UNDER CHAPTER VI OF THE ACT, THE COMPENSATION FOR A CQUISITION OF THE SAME SHALL BE PAID BY THE STATE GOVERNMENT UNDER THE SAID STATUTORY PROVISION. STILL FURTHER, IN CASE THE COMPENSATION IS NOT PAID OR DEPOSIT ED ON OR BEFORE TAKING THE POSSESSION OF THE LAND , THEN AS PER SEC. 38 OF THE MIDC ACT THE STATE GOVERNMENT SHALL BE LIABLE TO PAY THE SAID AMOUNT ALONGWITH INTEREST DETERMINED AT THE RATE OF FOUR PERCENT PER ANNUM FROM THE DATE OF TAKING OF POSSESSION OF THE SAME TILL THE SAID AMOUNT IS PAID OR DEPOSITE D. P A G E | 29 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 1 5 . WE THUS, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS THAT THE LAND ACQUIRED IS VESTED WITH THE STATE GOVERNMENT, THEREIN DELIBERATE UPON THE ISSUE THAT ON THE TRANSFER OF THE LAND TO THE ASSESSEE CORPORATION F OR THE PURPOSE FOR WHICH IT WAS ACQUIRED BY THE STATE GOVERNMENT UNDER SEC. 32 OF THE MIDC ACT, OR PLACING OF THE LAND VESTED IN THE STATE GOVERNMENT AT THE OF THE ASSESSEE CORPORATION WITHIN THE MEANING OF SEC. 43 - 1A OF THE MIDC ACT, CAN IN EITHER OF THE SITUATIONS BE CONSTRUED AS A TRANSFER OF THE OWNERSHIP OF THE LAND TO THE ASSESSEE CORPORATION, WHICH RESULTANTLY WOULD LEAD TO ASSESSING OF THE INCOME ARISING THEREFROM VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME FROM THE FUNDS PARKED AS DEPOSITS WITH THE BANK ETC. , AS THE INCOME OF THE ASSESSEE CORPORATION. WE HAVE PERUSED THE COPY OF THE 7/12 EXTRACTS PLACED ON RECORD BY THE ASSESSEE ( PAGE 338 - 342 AND PAGE 7 92 - 799 OF APB), WHICH AS CLAIMED BY THE LD. A.R REVEAL S THAT THE ASSESSEE IN THE SAID REVENUE RECORDS IS ONLY STATED TO BE AN OCCUPIER OF THE LAND (KABZADHAR), WHILE FOR THE OWNERSHIP OF THE SAME REMAIN S VESTED WITH THE STATE GOVERNMENT OF MAHARASHTRA. WE ARE FURTHER PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE LD. A.R THAT IN CASE THE OWNERSHIP OF THE LAND VESTED WITH THE STATE GOVERNMENT WAS TO BE TRANSFERRED TO THE ASSESSEE CORPORATION, THE SAME COULD ONLY HAVE BEEN POSSIBLE BY WAY OF A REGISTERED DOCUM ENT AS REQUIRED UNDER THE TRANSFER OF PROPERTY ACT, 1882 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 THER EIN READS AS UNDER: (7). 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 CORPORAT ION OR THAT LOCAL AUTHORITY, AS THE CASE MAY BE, FOR THE PURPOSE FOR WHICH IT WAS ACQUIRED, AND THE PROVISIONS OF SECTION 43 - 1A SHALL APPLY TO ANY LAND SO TRANSFERRED . , 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 P A G E | 30 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 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 THE LAND VESTED IN THE STATE GOVERNMENT AT THE DISPOSAL OF THE ASSESSEE CORPORATION FOR DEVELOPING BY, OR UNDER THE CONTROL AND SUPERVISION OF THE CORPORATION, AND THEREAFTER TO BE DEALT WITH FOR THE FURTHERANCE OF THE OBJECTS OF THE MIDC ACT IN ACCORDANCE WI TH THE REGULATIONS MADE AND DIRECTIONS GIVEN BY THE STATE GOVERNMENT IN THIS BEHALF, HENCE THE CLAIM OF THE REVENUE OF THERE BEING AN ABSOLUTE TRANSFER OF THE OWNERSHIP OF THE LAND TO THE ASSESSEE CORPORATION CAN SAFELY BE RULED OUT. WE HAVE GIVEN A THOUGH TFUL CONSIDERATION TO THE ISSUE UNDER CONSIDERATION AND ARE OF A STRONG CONVICTION THAT A PERUSAL OF THE SCHEME OF THE MIDC ACT REVEALS BEYOND ANY SCOPE OF DOUBT THAT THE LAND ACQUIRED BY/VESTED WITH THE STATE GOVERNMENT WERE ONLY PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION FOR THE FURTHERANCE OF THE OBJECTS OF THE MIDC ACT VIZ. (I) IN GENERAL TO PROMOTE AND ASSIST IN THE RAPID AND ORDERLY ESTABLISHMENT, GROWTH AND DEVELOPMENT OF INDUSTRIES IN THE STATE OF MAHARASHTRA, AND IN SPECIFIC (II). TO ESTABL ISH AND MANAGE INDUSTRIAL ESTATES AT PLACES SELECTED BY THE STATE GOVERNMENT; (III). DEVELOP INDUSTRIAL AREAS SELECTED BY THE STATE GOVERNMENT FOR THE PURPOSE AND MAKE THEM AVAILABLE FOR UNDERTAKINGS TO ESTABLISH THEMSELVES; AND (IV). TO UNDERTAKE SCHEMES OR WORKS, EITHER JOINTLY WITH OTHER CORPORATE BODIES OR INSTITUTIONS, OR WITH GOVERNMENT OR LOCAL AUTHORITIES, OR ON AN AGENCY BASIS, IN FURTHERANCE OF THE PURPOSES FOR WHICH THE CORPORATION IS ESTABLISHED AND ALL MATTERS CONNECTED THEREWITH. WE ARE OF THE CONSIDERED VIEW THAT A BARE PERUSAL OF THE SCHEME OF THE MIDC ACT, AND THE ABSENCE OF ANY INSTRUMENT OF TRANSFER EVIDENCING VESTING OF THE OWNERSHIP OF THE LAND IN FAVOUR OF THE ASSESSEE CORPORATION , BOTH MILITATES AGAINST THE OBSERVATIONS OF THE LOWER AU THORITIES THAT THE OWNERSHIP OF THE LAND HAD BEEN TRANSFERRED TO ASSESSEE CORPORATION. WE THUS, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT AS NEITHER THERE IS ANY MATERIAL BORNE FROM RECORD, NOR ANY DOCUMENTARY EVIDENCE H AD BEEN FURNISHED BEFORE US BY THE REVENUE WHICH COULD IRRE F UTABLY DISLODGE THE CLAIM OF THE ASSESSEE AND THEREIN PERSUADE US TO CONCLUDE THAT EITHER THE OWNERSHIP OF P A G E | 31 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) THE LAND UNDER CONSIDERATION HAD BEEN TRANSFERRED TO THE ASSESSEE CORPORATION, OR THE LATTER COULD JUSTIFIABLY BE HELD AS A DEEMED OWNER OF THE SAME FOR THE PURPOSE OF JUSTIFYING ASSESSING OF THE INCOME ARISING THEREFROM VIZ. LEASE PREMIUMS, RENT, INTEREST I NCOME 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 NOS. 1,4,5 , 7 ,8 AND 14 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 1 6 . ALTERNATIVELY, WE ARE FURTHER OF THE CONSIDERED VIEW THAT THE AFORESAID STATUTORY PROVISIONS VIZ. SEC. 32 AND SEC. 43 - 1A OF THE MIDC ACT ARE INEXTRICABLY INTERLINKED AND INTERWOVEN IN ORDER TO FACILITATE FURTHERANCE OF THE OBJECTS OF ACT. WE FIND FROM A CO NJOINT READING OF THE AFORESAID STATUTORY PROVISIONS THAT AFTER THE LAND WHICH IN THE OPINION OF THE STATE GOVERNMENT IS REQUIRED FOR THE PURPOSE OF DEVELOPMENT BY THE ASSESSEE CORPORATION, OR FOR ANY OTHER PURPOSE IN FURTHERANCE OF THE OBJECTS OF THE ACT, IS COMPULSORILY ACQUIRED UNDER SEC. 32 OF THE MIDC ACT BY THE STATE GOVERNMENT AND GETS ABSOLUTELY VESTED WITH IT FREE FROM ALL ENCUMBRANCES, THEN THE LATTER AFTER BEING PUT INTO POSSESSION OF THE SAME TRANSFERS IT TO THE ASSESSEE CORPORATION FOR THE PUR POSE FOR WHICH THE SAME WAS ACQUIRED . AFTER THE LAND ACQUIRED AND VESTED WITH THE STATE GOVERNMENT IS TRANSFERRED BY THE STATE GOVERNMENT TO THE ASSESSEE CORPORATION FOR THE PURPOSE FOR WHICH THE SAME WAS ACQUIRED, THE SAME AS PER THE PROVISIONS OF SEC. 43 - 1A IS PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION FOR BEING DEVELOPED BY, OR UNDER ITS CONTROL AND SUPERVISION, AND THEREAFTER DEALT WITH BY THE ASSESSEE CORPORATION IN THE MANNER IN ACCORDANCE WITH THE REGULATIONS MADE AND DIRECTIONS GIVEN BY THE STATE GOVERNMENT IN THIS BEHALF. IN THIS REGARD IT WOULD BE RELEVANT AND PERTINENT TO OBSERVE THAT AS PER SUB - SECTION (3) OF SEC. 43 - 1A OF THE MIDC ACT, IF ANY LAND PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION UNDER SUB - SECTION (1) OF SEC. 43 - 1A IS R EQUIRED AT ANY TIME THEREAFTER BY THE STATE GOVERNMENT, THE ASSESSEE CORPORATION REMAINS UNDER AN OBLIGATION TO PLACE IT AT THE DISPOSAL OF THE STATE GOVERNMENT UPON SUCH TERMS AND CONDITIONS AS MAY BE MUTUALLY AGREED UPON. WE HAVE DELIBERATED AT LENGTH ON THE AFORESAID STATUTORY PROVISIONS VIZ. SEC. 32 AND P A G E | 32 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) SEC. 43 - 1A, AND ARE OF THE CONSIDERED VIEW THAT IN EITHER OF THE SITUATIONS CONTEMPLATED THEREIN VIZ. (I). THAT LANDS ARE COMPULSORILY ACQUIRED BY THE STATE GOVERNMENT UNDER SEC. 32 OF THE MIDC ACT FOR D EVELOPMENT OF THE SAME BY THE ASSESSEE CORPORATION, AND ARE THEREAFTER BY WAY OF A NOTIFICATION PUBLISHED IN THE OFFICIAL GAZETTE TRANSFERRED TO THE ASSESSEE CORPORATION FOR THE PURPOSE FOR WHICH IT WAS ACQUIRED; OR (II). THE LANDS VESTED WITH THE STATE GO VERNMENT ARE BY WAY OF A NOTIFICATION PUBLISHED IN THE OFFICIAL GAZETTE PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION, FOR BEING DEVELOPED AND DEALT WITH BY IT IN ACCORDANCE WITH THE REGULATIONS MADE AND DIRECTIONS GIVEN BY THE STATE GOVERNMENT IN THI S BEHALF, THE ASSESSEE AS PER SUB - SECTION (3) OF SEC. 43 - 1A REMAINS UNDER AN OBLIGATION TO PLACE SUCH LAND AT THE DISPOSAL OF THE STATE GOVERNMENT, AS AND WHEN THE SAME IS REQUIRED BY THE LATTER. THUS, FROM A CAREFUL CONSIDERATION OF THE RESTRICTIVE COVENA NT CONTEMPLATING THE FETTERED AND BRIDLED RIGHTS AS REGARDS THE LANDS TRANSFERRED/PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION AS EMBODIED IN SEC. 43 - 1A(3) R.W SEC. 32(7) OF THE MIDC ACT, IT CAN SAFELY BE GATHERED BEYOND DOUBT THAT THOUGH THE LAND UN DER EITHER OF THE AFORESAID STATUTORY PROVISIONS IS TRANSFERRED/PLACED AT THE DISPOSAL OF THE ASSESSEE CORPORATION, HOWEVER AS THE ASSESSEE REMAINS UNDER AN OBLIGATION TO PLACE SUCH LAND AT THE DISPOSAL OF THE STATE GOVERNMENT, AS AND WHEN THE SAME IS SO R EQUIRED BY THE LATTER, THUS, THE SAME WOULD CLEARLY BE IN THE NATURE OF A REVOCABLE TRANSFER AND NO ABSOLUTE INTEREST AS REGARDS SUCH LAND CAN BE SAID TO HAVE BEEN VESTED WITH THE ASSESSEE. STILL FURTHER, OUR AFORESAID VIEW THAT THERE IS NO IRREVOCABLE T RANSFER OF LAND BY THE STATE GOVERNMENT TO THE ASSESSEE CORPORATION ALSO STANDS FORTIFIED ON A PERUSAL OF THE POWERS VESTED WITH THE STATE GOVERNMENT UNDER SEC. 56 OF THE MIDC ACT TO WITHDRAW INDUSTRIAL ESTATES OR INDUSTRIAL AREAS OR PART THEREOF FROM THE JURISDICTION OF THE ASSESSEE CORPORATION. ON A PERUSAL OF SEC. 56 OF THE MIDC ACT, IT EMERGES THAT WHERE THE STATE GOVERNMENT IS SATISFIED THAT IN RESPECT OF ANY PARTICULAR INDUSTRIAL ESTATE OR INDUSTRIAL AREA, OR ANY PART THEREOF, THE PURPOSE FOR WHICH TH E CORPORATION WAS ESTABLISHED UNDER THIS ACT HAD BEEN SUBSTANTIALLY ACHIEVED SO AS TO RENDER THE CONTINUED EXISTENCE OF SUCH ESTATE OR AREA OR PART THEREOF UNDER THE CORPORATION UNNECESSARY, THE STATE P A G E | 33 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE DECLARE THAT SUCH INDUSTRIAL ESTATE OR INDUSTRIAL AREA OR PART THEREOF HAS BEEN REMOVED FROM THE JURISDICTION OF THE CORPORATION. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS WE ARE THUS OF THE CONSIDERED VIEW THAT EVEN IF THE OWNERSHIP OF THE LANDS WAS TO BE PRESUMED AS HAVING BEEN TRANSFERRED TO THE ASSESSEE CORPORATION, THE SAME CLEARLY BEING IN THE NATURE OF A REVOCABLE TRANSFER, HENCE THE INCOME ARISING THEREFROM VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME ON BANK DEPOSITS ETC. WOULD AS PER SEC. 61 R. W.S 63 OF THE INCOME - TAX ACT, 1961 BE ASSESSABLE IN THE HANDS OF THE TRANSFEROR VIZ. THE STATE GOVERNMENT OF MAHARASHTRA AND COULD NOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE CORPORATION. BEFORE PARTING, WE MAY HEREIN OBSERVE THAT IN THE FIRST ROUND OF APPEAL THE TRIBUNAL HAD VIDE ITS ORDER DATED 27.03.2015 DISLODGED THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT AS SEC. 58 OF THE MIDC ACT PROVIDED THAT IN CASE OF DISSOLUTION OF THE ASSESSEE ALL ITS ASSETS WOULD GO TO TH E STATE GOVERNMENT, HE NCE IT BEING A REVOCABLE TRUST WOULD NOT BE ELIGIBLE FOR EXEMPTION UNDER SEC. 11 OF THE INCOME - TAX ACT , 1961. WE FIND THAT THE TRIBUNAL EXPRESSING ITS DISAGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) HAD OBSERVED THAT AS REVOCATION AND WINDING UP HAVE DIFFERENT MEANING AND PURPOSE, THUS THE FACT THAT DISSOLUTION CLAUSE VIZ. SEC. 58 OF THE MIDC ACT ONLY PROVIDED FOR THE MANNER OF DISTRIBUTION OF ASSETS IN THE CASE OF WINDING UP , AND EV ERY TRUST DEED OR MEMORANDUM IS EXPECTED TO HAVE SUCH KIND OF CLAUSE, THEREFORE, THE SAME CANNOT BE CONSTRUED FOR CHARACTERISING THE ASSESSEE AS A REVOCABLE TRUST AND THEREIN DISENTITLING THE ASSESSEE OF ITS CLAIM OF EXEMPTION UNDER SEC. 11 OF THE INCOME - TAX ACT, 1961 ON THE SAID COUNT . WE FIND THAT THE AFORESAID OBSERVAT IONS WHICH WERE RECORDED BY THE T RIBUNAL IN CONTEXT OF SEC. 58 OF THE MIDC ACT , HAVING BEEN RENDERED IN CONTEXT OF ADJUDICATING THE ELIGIBILITY OF THE ASSESSEE FOR CLAIM OF EXEMPTION UNDER SEC. 11 ON A READING OF THE DISSOLUTION CLAUSE , THUS WOULD HAVE N O BEARING ON OUR OBSERVATIONS RECORDED ON A PERUSAL OF SEC. 43 - 1A(3) R.W SEC. 32(7) AND SEC. 56 OF THE MIDC ACT, FOR CONCLUDING THAT THE TRANSFER OF LAND BY THE STATE GOVERNMENT TO THE ASSESSEE CORPORATION W AS A REVOCABLE TRANSFER WITHIN THE MEANING OF P A G E | 34 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) S EC. 61 R.W.S 63 OF THE INCOME - TAX ACT, 1961 . THE GROUND S OF APPEAL NO. 2 AND 3 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 1 7 . WE SHALL NOW DELIBERATE ON THE CONTENTIONS ADVANCED BY THE COUNSELS FOR THE RESPECTIVE PARTIES IN ORDER TO BUTTRESS THEIR RESPECTIVE CLAIMS. THE LD. D.R IN ORDER TO DRIVE HOME HIS CLAIM THAT IT WAS THE ASSESSEE CORPORATION WHICH WAS THE OWNER OF THE LAND UNDER CONSIDERATION AND NOT THE STATE GOVERNMENT OF MAHARASHTRA, TOOK US THROUGH THE COPIES OF THE LEASE DE EDS EXECUTED BY THE ASSESSEE CORPORATION IN FAVOUR OF PRIVATE PARTIES ( PAGE 343 - 400 OF APB). IT WAS SUBMITTED BY THE LD. D.R THAT AS A PERUSAL OF ALL THE LEASE DEEDS REVEALED THAT THE ASSESSEE CORPORATION WAS REFERRED TO AS THE LESSOR, THUS THE CLAIM OF THE ASSESSEE THAT THE LANDS WERE OWNED BY THE STATE GOVERNMENT OF MAHARASHTRA AND WERE HELD BY THE ASSESSEE CORPORATION IN A FIDUCIARY CAPACITY UNDER TRUST ON BEHALF OF THE STATE GOVERNMENT WAS CLEARLY DISPROVED. THE LD. D.R IN ORDER TO BUTTRESS HIS AFO RESAID CLAIM SUBMITTED THAT AS ARTICLE 299 OF THE CONSTITUTION OF INDIA REQUIRED THAT EVERY CONTRACT MADE BY THE GOVERNMENT SHALL BE EXPRESSED TO BE MADE BY THE PRESIDENT OR BY THE GOVERNOR OF THE STATE, THUS THE AFORESAID FACTUAL POSITION PROVED TO THE H I LT THAT THE LANDS HELD BY THE ASSESSEE WERE NOT OWNED BY THE STATE GOVERNMENT OF MAHARASHTRA. THE LD. A.R REBUTTING THE SAID CONTENTION OF THE REVENUE SUBMITTED THAT AS ARTICLE 299 OF THE CONSTITUTION OF INDIA WAS APPLICABLE ONLY IN RESPECT OF THE CONTRACT S ENTERED INTO IN EXERCISE OF THE EXECUTIVE POWERS OF THE GOVERNMENT, THUS THE SAID CONTENTION OF THE REVENUE WAS GROSSLY MISCONCEIVED. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION. WE WOULD NOT HESITATE TO OBSERVE THAT THOUGH AT THE FIRS T BLUSH THE AFORE SAID CONTENTION OF THE REVENUE APPEARED TO BE CONVINCING, HOWEVER ON A PERUSAL OF THE ARTICLE 299 OF THE CONSTITUTION OF INDIA WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SAID CLAIM OF THE REVENUE. ADMITTEDLY, ALL THE CONTRACTS MADE IN EXERCISE OF THE EXECUTIVE POWERS OF THE UNION AND STATE SHALL BE EXPRESSED TO BE MADE BY THE PRESIDENT OR THE GOVERNOR, HOWEVER THE SAME WOULD NOT BE APPLICABLE TO THE CONTRACTS MADE BY A SPECIFIED AUTHORITY IN EXERCISE OF POWERS CONFERRED BY A ST ATUTE. WE HAVE PERUSED THE COMMENTARY OF DR. P A G E | 35 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) DURGA PRASAD BASU AND SHRI. M.P JAIN, TO WHICH OUR ATTENTION WAS DRAWN BY THE LD. A.R ( PAGE 1004 AND 1015 OF APB) . ON A PERUSAL OF THE AFORESAID COMMENTARY, WHICH THOUGH WOULD ONLY BE OF A PERSUASIVE VALUE, IT EMERGES THAT ARTICLE 299(1) APPLIES ONLY TO A CONTRACT MADE IN EXERCISE OF THE EXECUTIVE POWER OF THE UNION OR STATE AND WOULD NOT THUS INCLUDE A CONTRACT WHICH IS MADE BY A SPECIFIED STATUTORY AUTHORITY IN EXERCISE OF THE EXECUTIVE POWER OF THE UNION OR OF A STATE. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF STATE OF HARYANA & ORS. VS. LAL CHAND & ORS 1984 AIR 1326/ 1984 SCR (3) 715, VIDE ITS ORDER DATED 02/05/1984, HAD OBSERVED THAT ARTICLE 299(1) APPLIES TO A CONTRACT MADE IN EXERCISE OF TH E EXECUTIVE POWER OF THE UNION OR THE STATE, BUT NOT TO A CONTRACT MADE IN EXERCISE OF A STATUTORY POWER. IN THE BACKDROP OF THE AFORESAID SETTLED POSITION OF LAW, WE ARE OF THE CONSIDERED VIEW THAT AS THE ASSESSEE CORPORATION IS AUTHORISED TO ENTER INTO L EASE AGREEMENTS BY VIRTUE OF SEC. 14, 15 AND 37 OF THE MIDC ACT, THUS THE CONTRACTS MADE THER E OF BEING OF A STATUTORY NATURE WOULD THUS NOT FALL WITHIN THE SWEEP OF ARTICLE 299 OF THE CONSTITUTION OF INDIA. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS A RE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID CLAIM OF THE REVENUE AUTHORITIES, WHICH THUS FAILS AND IS REJECTED. 1 8. WE SHALL NOW ADVERT TO THE CLAIM OF THE LD. D.R WHO TAKING SUPPORT OF THE PRINCIPLE NEMO DAT QUOD HABET I.E NO ONE CAN TRANSFER WHAT HE DOES NOT HAVE, HAD THUS TRIED TO IMPRESS UPON US THAT AS THE ASSESSEE CORPORATION HAD TRANSFERRED LANDS TO THE PRIVATE PARTIES I.E LESSEES BY LEASE DEEDS ENTERED INTO FOR A PERIOD OF 30 YEARS/90 YEARS, THUS IT COULD SAFELY BE PR ESUMED THAT THE OWNERSHIP OF THE LAND WAS VESTED WITH THE ASSESSEE CORPORATION , WHICH THEREAFTER HAD BEEN TRANSFERRED BY IT . THE LD. A.R HAD OBJECTED TO THE SAID CONTENTION ON THE GROUND THAT AS THE ASSESSEE CORPORATION HAD TRANSFERRED THE LAND IN EXERCISE OF POWERS VESTED WITH IT AS AN AGENT, THUS NO ADVERSE INFERENCE AS REGARDS THE STATUS IN WHICH THE LANDS WERE HELD AND THEREAFTER TRANSFERRED BY THE ASSESSEE COULD BE DRAWN. WE HAVE DELIBERATED ON THE ISSUE UNDER CONSIDERATION AND ARE AFRAID TO OBSERVE TH AT THE LD. D.R HAD FAILED TO APPRECIATE THE TRUE IMPORT OF THE PRINCIPLE P A G E | 36 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) NEMO DAT QUOD HABET, WHICH PROVIDES THAT A PERSON WHO DOES NOT OWN THE PROPERTY CANNOT CONFER IT TO ANOTHER EXCEPT WITH THE OWNERS AUTHORITY . THE AFORESAID PRINCIPLE EXCLUDES SITUATI ONS WHERE THE SALE OF THE PROPERTY IS BY A PERSON WHO IS DULY AUTHORISED BY THE OWNER TO SELL THE PROPERTY VIZ. AGENT, POWER OF ATTORNEY HOLDER ETC. OUR AFORESAID CONVICTION IS FORTIFIED FROM A PERUSAL OF SEC. 7 OF THE TRANSFER OF PROPERTY ACT, 1882, WHICH CONTEMPLATES THE PERSONS COMPETENT TO TRANSFER A PROPERTY. WE FIND THAT SEC. 7 OF THE TRANSFER OF PROPERTY ACT. 1882 SPECIFICALLY PROVIDES THAT WHERE THE TRANSFEROR HAS NO TITLE TO THE PROPERTY, HE MUST HAVE AUTHORITY TO TRANSFER IT . THUS, IN THE PRESENT CASE AS THE ASSESSEE CORPORATION IS CONFERRED WITH THE AUTHORITY TO LEASE OR DISPOSE THE LANDS UNDER SEC. 14, SEC. 15 AND SEC. 37 OF THE MIDC ACT, THEREFORE, THE LEASE DEEDS EXECUTED BY THE ASSESSEE CORPORATION UNDER A STATUTORY RIGHT VESTED WITH IT WOULD NOT LEAD TO A PRESUMPTION THAT THE SAME HAD BEEN DISPOSED BY THE ASSESSEE CORPORATION AS AN OWNER. WE THUS , ARE OF THE CONSIDERED VIEW THAT AS THE RELIANCE PLACED BY THE REVENUE ON THE AFORESAID PRINCIPLE VIZ. NEMO DAT QUOD HABET IS DEVOID OF ANY FORCE, HE NCE THE SAME IS REJECTED. 19 . WE SHALL NOW DELIBERATE ON THE RELIANCE PLACED BY THE LD. D.R ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF M/S SKODA AUTO INDIA PVT. LTD. VS. THE STATE OF MAHARASHTRA [WRIT PETITION NO. 4513 OF 2010; DATED 31.01.2011 ] . AS REGARDS THE REFERENCE TO PA RA 6 OF THE SAID DECISION, WE FIND THAT THE HIGH COURT WHILE REFERRING TO THE FACTS OF THE CASE HAD OBSERVED THAT THE STATE GOVERNMENT OF MAHARASHTRA AFTER ACQUIRING THE LAND AFTER FOLLOWING THE DUE PROCESS UNDER SEC. 32(2) OF THE MIDC ACT, VIDE NOTIFICATION DATED 04.12.1997, HAD HANDED OVER THE SAME TO THE ASSESSEE CORPORATION VIZ. MIDC, WHICH THEREAFTER HAD LEASED THE SAME TO SKODA AUTO INDIA PVT. LTD. WE ARE OF THE CONSIDERED VIEW THAT SUCH ACQUIRI NG OF LAND BY THE STATE GOVERNMENT AND HAND ING OVER OF THE SAME TO THE ASSESSEE CORPORATION, WHICH THEREAFTER HAD LEASED IT TO THE AFOREMENTIONED PRIVATE PARTY IS ABSOLUTELY IN ACCORD WITH THE SCHEME OF THE MIDC ACT, AS HAD BEEN AVERRED BY THE ASSESSEE BEF ORE US. WE ARE UNABLE TO COMPREHEND THAT AS TO HOW THE LD. D.R HAD CONSTRUED THE SAID FACTS FOR ARRIVING AT A SELF SUITING, P A G E | 37 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) BUT A BASELESS OBSERVATION THAT THE SAME PROVED THAT THE ASSESSEE CORPORATION WAS THE OWNER OF THE LAND UNDER CONSIDERATION. STILL F URTHER, ON A PERUSAL OF PARA 16 OF THE DECISION OF THE HIGH COURT AS HAD BEEN REFER R ED TO BY THE LD. D.R ONLY REVEALS THE CONTENTION OF THE COUNSEL FOR THE PETITIONER, WHEREIN HE HAD AVERRED BEFORE THE COURT THAT THE PROPERTY IS VESTED IN THE STATE GOVERNM ENT/MIDC. WE ARE OF THE CONSIDERED VIEW THAT THE SAID CONTENTIONS OF THE COUNSEL BEFORE THE COURT CANNOT PERSUADE US TO CONCLUDE THAT MIDC HAD BEEN HELD TO BE THE OWNER OF THE LAND UNDER CONSIDERATION. RATHER, WE FIND THAT THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS REGARDS THE LIABILITY OF THE PETITIONER VIZ. SKODA AUTO INDIA PVT. LTD TO PAY LUMP SUM CONTRIBUTION IN LIEU OF TAXES AS PER SEC. 125 OF BVP ACT, IN THE BACKDROP OF THE AGREEMENT THAT WAS ENTERED INTO BY IT WITH THE GRAM PANCHAYAT, AGREEING TO PAY SUCH AMOUNT. WE ARE OF THE CONSIDERED VIEW THAT THE RELIANCE PLACED BY THE REVENUE ON THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY NOT BEING IN CONTEXT OF THE ISSUE UNDER CONSIDERATION, THUS WOULD NOT ASSIST THE CASE OF THE REVENUE. 20 . WE SHALL NOW ADVERT TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIGAMBER & ORS. VS. STATE OF MAHARASHTRA & ORS [CIVIL APPEAL NO. 5346 OF 2013; DATED 01.08.2013 ] RELIED UPON THE LD. D.R . WE FIND THAT THE APPELLANT IN THE SAID CASE HAD ASSAILED BEFORE THE HONBLE APEX COURT THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY WHICH HAD SET ASIDE THE JUDGMENT AND AWARD OF THE LEARNED CIVIL JUDGE, SENIOR DIVISION ENHANCING THE COMPENSATION AWARDED BY THE SPECIAL LAND ACQUISITION OFFICER, NANDED IN RESPECT OF LAND ACQUIRED BY THE STATE GOVERNMENT OF MAHARASHT RA IN FAVOUR OF THE ASSESSEE CORPORATION VIZ. MIDC. WE FIND ON A PERUSAL OF PARA 9 OF THE JUDGMENT OF THE HONBLE APEX COURT AS HAD BEEN REFERRED TO BY THE LD. D.R, THAT THE SAME NARRATING THE FACTS THEREIN STATES THAT THE STATE GOVERNMENT OF MAHARASHTRA I N EXERCISE OF ITS STATUTORY POWERS HAD ACQUIRED THE LANDS IN FAVOUR OF MIDC FOR THE PURPOSE OF INDUSTRIAL DEVELOPMENT BY THE CORPORATION IN THE STATE OF MAHARASHTRA , BY PUBLISHING A NOTIFICATION IN THE GOVERNMENT GAZETTE ON 07.09.1991, AND A FINAL NOTIFICA TION PUBLISHED IN THE OFFICIAL GAZETTE ON 12.07.1992. WE FIND THAT THE AFORESAID ACQUIRING OF LAND P A G E | 38 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) BY THE STATE GOVERNMENT OF MAHARASHTRA FOR THE PURPOSE OF DEVELOPMENT BY THE CORPORATION IS IN ABSOLUTE CONFORMITY WITH SEC. 32 OF THE MIDC ACT AND THE SAME IS NOT IN DISPUTE BEFORE US. WE THUS ARE UNABLE TO COMPREHEND THAT AS TO HOW THE REFERENCE TO THE AFORESAID FACTS INVOLVED IN THE CASE BEFORE THE HONBLE SUPREME COURT WOULD ADVANCE THE CASE OF THE REVENUE IN CONTEXT OF THE ISSUE UNDER CONSIDERATION ?. AS R EGARDS THE OBSERVATIONS OF THE HONBLE SUPREME COURT AT PARA 25 OF ITS DECISION AS HAD BEEN RELIED UPON BY THE LD. D.R, WHEREIN THE COURT HAD DIRECTED MIDC TO ISSUE THE DEMAND DRAFT IN RESPECT OF THE COMPENSATION TO THE APPELLANT, WE ARE OF THE CONSIDERED VIEW THAT THE SAME ALSO WOULD NOT ADVANCE THE CASE OF THE REVENUE AND THEREIN PROVE THAT THE ASSESSEE CORPORATION WAS HELD TO BE THE OWNER OF THE LAND UNDER CONSIDERATION. WE MAY HEREIN OBSERVE, THAT A PERUSAL OF THE ACCOUNTS OF THE ASSESSEE CORPORATION WH ICH ARE SUBJECT TO AUDIT BY C & AG, REVEALS THAT THE ASSESSEE CORPORATION HAD CONSISTENTLY BEEN MAKING PAYMENTS/ADVANCES ON BEHALF OF THE STATE GOVERNMENT WHICH ARE REFLECTED AS RECOVERABLE ON THE ASSET SIDE OF ITS BALANCE SHEET. THUS, IN THE BACKDROP OF THE AFORESAID FACTS, IN THE ABSENCE OF DETAILS AS REGARDS THE TREATMENT GIVEN BY THE ASSESSEE CORPORATION TO THE AFORESAID PAYMENT, THE CLAIM OF THE REVENUE THAT THE ASSESSEE CORPORATION IS PROVED TO BE THE OWNER OF THE LAND CANNOT BE ACCEPTED. 2 1 . WE SH ALL NOW ADVERT TO THE CLAIM OF THE LD. A.R THAT IN THE ABSENCE OF PUBLISHING OF A NOTIFICATION CONTEMPLATED IN SEC. 32(7) AND SEC. 43 - 1A OF THE MIDC AC T , IT COULD SAFELY BE CONCLUDED THAT LANDS ACQUIRED OR BELONGING TO THE STATE GOVERNMENT OF MAHARASHTRA H AD NEVER BEEN TRANSFERRED TO THE ASSESSEE. BEFORE FURTHER PROCEEDING, WE MAY HEREIN OBSERVE THAT THE ASSESSEE CORPORATION IN ORDER TO BUTTRESS ITS AFORESAID CLAIM HAD FILED BEFORE US AN AFFIDAVIT OF ONE MRS. VAIDEHI RANADE, GENERAL MANAGER (LAND ACQUISIT ION). THAT AS THE AFFIDAVIT OF MRS. VAIDEHI RANADE (SUPRA) WAS CLEARLY IN THE NATURE OF AN ADDITIONAL EVIDENCE, HENCE THE ADMISSION OF THE SAME WAS VEHEMENTLY OBJECTED TO BY THE LD. D.R. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD NOT FILED ANY APPLICATION UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES, 1963 SEEKING LIBERTY OF THE TRIBUNAL FOR ADMISSION P A G E | 39 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) OF THE AFFIDAVIT AS AN ADDITIONAL EVIDENCE , HENCE THE SAME WAS LIABLE TO BE SUMMARILY DISMISSED ON THE SAID COUNT ITSELF. ALTERNATIVELY, IT WAS THE CONTENTION OF THE LD. D.R THAT EVEN OTHERWISE AS THE AFFIDAVIT FILED BY THE ASSESSEE REFERRED TO THE PERIOD POST 2014, HENCE THE SAME WAS NOT RELEVANT FOR ADJUDICATION OF THE PRESENT APPEAL. THE LD. A.R REBUTTING THE AFORESAID CONTENTION OF THE RE VENUE SUBMITTED THAT AS THE AFFIDAVIT OF MRS. VAIEDEHI RANADE, GENERAL MANAGER (LAND ACQUISITION) WAS ONLY SUPPORTING A FACT ALREADY STATED, HENCE IT COULD NOT BE REGARDED AS A N ADDITIONAL EVIDENCE. STILL FURTHER, THE LD. A.R AVERRED THAT THE DEPOSITION OF MRS. VAIEDHI RANADE THAT NO NOTIFICATION CONTEMPLATED IN SEC. 32(7) AND SEC. 43 - 1A OF THE MIDC ACT WAS ISSUED WAS ON THE BASIS OF HER KNOWLEDGE ACQUIRED FROM HER EMPLOYMENT SINCE NOVEMBER, 2014, THUS IT COULD NOT BE CONSTRUED AS PERTAINING TO THE PERIOD P OST 2014. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE UNDER CONSIDERATION AND FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION OF THE LD. D.R THAT AS THE AFFIDAVIT OF MRS. VAIEDHI RANADE, GENERAL MANAGER (LAND ACQUISITION), DATED 18.11.201 7, FILED BY THE ASSESSEE BEFORE US IS CLEARLY IN THE NATURE OF AN ADDITIONAL EVIDENCE, HENCE THE ASSESSEE FOR SEEKING ADMISSION OF THE SAME REMAINED UNDER A STATUTORY OBLIGATION TO HAVE SOUGHT THE LIBERTY OF THE TRIBUNAL FOR PLACING IT ON RECORD AS PER RUL E 29 OF THE APPELLATE TRIBUNAL RULE, 1963. HOWEVER, AS THE ASSESSEE IN ALL ITS WISDOM HAS DISPENSED WITH THE REQUIREMENT OF FILING AN APPLICATION UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES, 1963 FOR ADMISSION OF THE SAID AFFIDAVIT, THEREFORE, WE ARE CON STRAINED TO DECLINE TO CONSIDER THE SAME. BE THAT AS IT MAY, WE ARE OF THE CONSIDERED VIEW THAT NOT ONLY THE ASPECT AS REGARDS PUBLISHING OF A NOTIFICATION CONTEMPLATED IN SEC. 32(7) R.W SEC. 43 - 1A OF THE MIDC ACT COULD BE SUCCESSFULLY ESTABLISHED OR DISLODGED BY THE PARTIES BEFORE US IN SUPPORT OF THEIR RESPECTIVE CLAIMS RAISED TO THE CONTRARY, BUT EVEN OTHERWISE , TO OUR UNDERSTANDING THE ADJUDICATION OF THE ISSUE UNDER CONSIDERATION I.E AS TO WHETHER THERE WAS A TRANSFER OF THE OWNERSHIP OF THE LANDS ACQUIRED BY/VESTED WITH THE STATE GOVERNMENT TO THE ASSESSEE CORPORATION BY PLACING THE SAME AT ITS DISPOSAL FOR THE FURTHERANCE OF THE OBJECTS OF THE MIDC ACT , HAS TO GATHERED ON A PERUSAL OF THE SCHEME OF THE SAID ACT. P A G E | 40 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) 2 2 . WE HAVE FURTHER DELIBERATED ON THE CONTENTION OF THE LD. D.R THAT AS SEC. 39(1)(A) OF THE MIDC ACT EMPOWERS THE ASSESSEE TO DISPOSE OFF THE LAND TRANSFERRED TO IT WITHOUT DEVELOPMENT, HENCE IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE WAS THE OWNER OF THE SAID LAND. WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SAID CLAIM OF THE REVENUE. WE FIND THAT SEC. 39(1) CONTEMPLATES THAT SUBJECT TO ANY DIRECTIONS GIVEN BY THE STATE GOVERNMENT UNDER THE MIDC ACT, THE ASSESSEE CORPORATION MAY DISPOSE OFF THE LANDS ACQUIR ED BY THE STATE GOVERNMENT AND TRANSFERRED TO IT VIZ. ( A ). WITHOUT UNDERTAKING OR CARRYING OUT ANY DEVELOPMENT THEREON; OR (B). AFTER CARRYING OUT SUCH DEVELOPMENT AS IT THINKS FIT. WE ARE OF THE CONSIDERED VIEW THAT NOT ONLY THE OWNERSHIP OF THE LANDS BY THE ASSESSEE CORPORATION IS AT ALL DISCERNIBLE FROM THE MERE FACT THAT THE ASSESSEE AS PER THE FIRST LIMB VIZ. SEC. 39(1)(A) IS VESTED WITH THE POWER TO DISPOSE OFF THE LAND WITHOUT CARRYING OUT ANY DEVELOPMENT THEREON, BUT RATHER THE LD. D.R WHILE RAISING THE SAID CLAIM BEFORE US HAD LOST SIGHT OF THE MATERIAL FACT THAT SUCH LAND COULD ONLY DISPOSED OFF BY THE ASSESSEE CORPORATION SUBJECT TO THE DIRECTIONS GIVEN BY THE STATE GOVERNMENT. WE THUS, DECLINE TO ACCEPT THE AFORESAID SELF SUITING INTERPRETATION A RRIVED AT BY THE LD. D.R BY DIVORCING FEW WORDS FROM THE TEXT. 2 3 . THAT IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION THAT THE LANDS UNDER CONSIDERATION WERE ACQUIRED ON BEHALF OF THE ASSESSEE CORPORATION, THE LD. D.R HAD DRAWN OUR ATTENTION TO THE COPY OF RECORD OF RIGHTS ( PAGE 802 - 805 OF APB). THE LD. D.R TAKING US THROUGH PAGE 803 DREW OUR ATTENTION TO THE FACT THAT AS AGAINST THE MENTION POSSESSION OF THESE LANDS HAS BEEN OBTAINED AND GIVEN TO THE AC QUIRING BODY THE NAME OF THE ASST. GENERAL MANAGER OF THE ASSESSEE CORPORATION WAS STATED. THE LD. D.R BY TAKING SUPPORT OF HIS AFORESAID CONTENTION HAD THUS TRIED TO IMPRESS UPON US THAT THE LAND UNDER CONSIDERATION WAS PROVED TO THE HILT TO HAVE BEEN AC QUIRED BY THE ASSESSEE CORPORATION VIZ. MIDC. HOWEVER, THE LD. A.R REBUTTING THE SAID CONTENTION OF THE REVENUE SUBMITTED THAT THE LANDS WERE ACQUIRED BY THE STATE GOVERNMENT AND THE ASSESSEE CORPORATION WAS MERELY PUT INTO POSSESSION OF THE SAME IN FURTHE RANCE OF THE OBJECTS OF THE ACT. THE LD. A.R IN ORDER TO P A G E | 41 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) FORTIFY HIS AFORESAID CONTENTION DREW OUR ATTENTION TO PAGE 804 - 805 OF THE SAME DOCUMENT, WHICH REVEALED THAT THE LANDS PURSUANT TO THE ACQUISITION WERE OWNED BY THE STATE GOVERNMENT. WE HAVE PERUSED AT LENGTH THE COPY OF RECORD OF RIGHTS AT PAGE 803 - 805 OF THE APB AND ARE PERSUADED TO BE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT THE LAND UNDER CONSIDERATION , SUBSEQUENT TO ACQUISITION OF THE SAME FROM A PRIVATE PARTY WAS VESTED WITH THE STATE GOVERNMENT OF MAHARASHTRA AS THE OWNER OF THE SAME. IN THIS REGARD IT WOULD BE RELEVANT TO REFER TO PARA VIII OF THE SAID DOCUMENT, WHICH READS AS UNDER: VIII. A S FULL COMPENSATION IS NOW BEING PAID IN RESPECT OF THESE LANDS, RIGHTS SHOULD BE EXTINGUI SHED AND THE LANDS SHOULD BE SHOWN IN THE NAME OF THE STATE GOVERNMENT IN INDUSTRIES AND LABOUR DEPARTMENT, IF NOT ALREADY DONE . ACTION SHOULD ALSO BE TAKEN FOR REDUCTION OF LAND REVENUE ON SAID LANDS. ON A CAREFUL PERUSAL OF THE AFORESAID NOTINGS, WE ARE OF THE CONSIDERED VIEW THAT NOT ONLY THE CLAIM OF THE REVENUE THAT THE LAND UNDER CONSIDERATION HAD BEEN ACQUIRED ON BEHALF OF THE ASSESSEE CORPORATION AS A N OWNER FAILS, BUT RATHER THE CLAIM OF THE ASSESSEE CORPORATION THAT THE LAND ACQUIRED WAS OW NED BY THE STATE GOVERNMENT AND ONLY POSSESSION OF THE SAME WAS DELIVERED TO IT FOR THE PURPOSE OF FURTHERANCE OF THE OBJECTS OF THE MIDC ACT, STANDS FURTHER SUBSTANTIATED. 2 4 . THE LD. D.R BY REFERRING TO THE GOVERNMENT OF MAHARASHTRA, RESOLUTION NO. IDC 1067/38498 - IND I; DATED 16.08.1967 ( PAGE 860 - 861 OF APB) IN SUPPORT OF HIS CONTENTION THAT THE STATE GOVERNMENT HAD STATED THAT IT WOULD CHARGE INTEREST AT THE RATE OF 7% ON THE ADVANCES GIVEN BY IT TO THE ASSESSEE CORPORATION, HAD THUS TRIED TO IMP RESS UPON US THAT AS THE INTEREST BEARING LOANS ADVANCED BY THE STATE GOVERNMENT WERE DEPLOYED BY THE ASSESSEE CORPORATION FOR ACQUIRING THE LAND UNDER CONSIDERATION , THUS IT PROVED THAT THE SAID LAND WAS NOT OWNED BY THE STATE GOVERNMENT, BUT BY THE ASSES SEE CORPORATION. THE LD. A.R REBUTTING THE SAID CONTENTION OF THE REVENUE HAD SUBMITTED BEFORE US THAT NO SUCH LOAN WAS EVER TAKEN BY THE ASSESSEE CORPORATION FROM THE STATE GOVERNMENT. WE HAVE PERUSED THE RECORDS AND SPECIFICALLY THE FINANCIAL STATEMENTS OF THE ASSESSEE CORPORATION AND ARE PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE LD. A.R THAT NO SUCH P A G E | 42 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) INTEREST BEARING LOAN WAS EVER RAISED BY THE ASSESSEE FROM THE STATE GOVERNMENT. RATHER, ON A PERUSAL OF THE AFORESAID RESOLUTION WE FIND THAT CONTEMPLATING ADVANCING OF INTEREST BEARING LOANS BY THE STATE GOVERNMENT TO THE ASSESSEE CORPORATION IS NOT FOR THE PURPOSE OF ACQUISITION OF LAND, BUT RATHER IS SPECIFICALLY STATED TO BE IN REFERENCE TO AND IN CONTEXT OF DE VELOPMENT OF INDUSTRIAL AREAS AND SIMILAR OT HER PURPOSES UNDER THE MIDC ACT. WE THUS ARE OF THE CONSIDERED VIEW THAT AS THE RELIANCE PLACED BY THE REVENUE ON THE AFORESAID RESOLUTION NO. IDC 1067/38498 - IND I; DATED 16.08.1967, DOES NOT SUPPORTS ITS CLAIM, HENCE NO ADVERSE INFERENCE IS LIABLE TO BE D RAWN ON THE SAID COUNT AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE LAND UNDER CONSIDERATION ARE OWNED BY THE STATE GOVERNMENT AND ONLY THE POSSESSION OF THE SAME IN FURTHERANCE OF THE OBJECTS OF THE MIDC ACT WAS DELIVERED TO IT. RATHER, A PERUSAL OF PARA 2(II) OF THE SAID RESOLUTION ( PAGE 862 OF APB) PROVIDES THAT THE ASSESSEE CORPORATION SHALL FROM THE PROCEEDS COLLECTED OUT OF DISPOSAL OF LANDS RECOUP THE DEVELOPMENT COST INCLUDING ADMINISTRATIVE EXPENSES BEFORE REMITTING THE REMAINDER TO THE GOVERNME NT. WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID FACT THAT THE ENTITLEMENT OF THE ASSESSEE ON DISPOSAL OF LAND IS RESTRICTED TO RECOUPMENT OF THE DEVELOPMENT COSTS AND ADMINISTRATIVE EXPENSES BORNE BY IT, WHILE FOR THE REMAINDER AMOUNT I.E THE SURPLUS IS TO BE REMITTED TO THE GOVERNMENT, FURTHER ADVANCES THE CLAIM OF THE ASSESSEE CORPORATION THAT THE LAND IS OWNED BY THE STATE GOVERNMENT AND IT IS ONLY PUT INTO POSSESSION OF THE SAME IN FURTHERANCE OF THE OBJECTS OF THE MIDC ACT. 2 5 . WE SHALL NOW ADVERT TO THE GOVERNMENT REGULATIONS VIZ. (I) GOVERNMENT REGULATION NO. IDC/067/38498; DATED 16.08.1967; AND (II). GOVERNMENT REGULATION NO. IDC/1079(1966)/ - IND - 14; DATED 11.09.1986 AS HAD BEEN RELIED UPON BY THE LD. A.R TO DRIVE HOME HIS CONTE NTION TH AT THE ASSESSEE WHICH WAS ONLY HANDED OVER THE POSSESSION OF THE LAND COULD NOT BE REGARDED AS THE OWNER OF THE SAME. WE FIND THAT GOVERNMENT REGULATION NO. IDC/067/38498; DATED 16.08.1967 ( PAGE 860 - 863 OF APB) AND GOVERNMENT REGULATION NO. IDC/1079(1966 )/ - IND - 14; DATED 11.09.1986 ( PAGE 869 - 877 OF APB) BOTH PROVIDES THAT AS THE ASSESSEE IS ONLY PUT INTO POSSESSION OF THE P A G E | 43 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) LAND FOR DEVELOPMENT OF INDUSTRIAL AREAS AND FOR SIMILAR OTHER PURPOSES UNDER THE MIDC ACT, HENCE MERELY ON THE SAID COUNT IT COULD NO T BE HELD AS THE OWNER OF THE SAME. WE FIND THAT THE LD. D.R HAD OBJECTED TO THE RELIANCE PLACED BY THE ASSESSEE ON THE AFORESAID GOVERNMENT REGULATIONS FOR THE REASON THAT THE TRIBUNAL IN THE FIRST ROUND OF APPEAL HAD CONCLUDED THAT THE REGULATIONS CANNOT OVERRIDE THE MIDC ACT. WE ARE UNABLE TO FIND OURSELVES AS BEING IN AGREEMENT WITH THE SAID OBJECTION OF THE REVENUE. WE FIND THAT THE TRIBUNAL IN THE FIRST ROUND OF APPEAL WHILE DISLODGING THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE CORPORATION WAS ACT ING AS AN AGENT OF THE STATE GOVERNMENT FOR DEVELOPMENT OF INDUSTRIAL AREA AND OTHER INFRASTRUCTURAL FACILITIES UNDER THE PROVISIONS OF THE MIDC ACT, HAD IN THE SAID CONTEXT OBSERVED THAT AS THE PROVISIONS OF THE MIDC ACT SHALL HAVE SUPREMACY OVER THE RESOLUT IONS PASSED BY THE STATE GOVERNMENT, HENCE THE RESOLUTIONS PASSED BY THE STATE GOVERNMENT WERE NOT TO BE CONSIDERED FOR DETERMINING THE STATUS OF THE AGENCY. HOWEVER, THE AFOREMENTIONED RESOLUTIONS VIZ. GOVERNMENT REGULATION NO. IDC/067 /38498; DATED 16.08 .1967 AND GOVERNME NT REGULATION NO. IDC/1079 (1966) / - IND - 14; DATED 11.09.1986 RELIED UPON BY THE ASSESSEE BEFORE US ONLY CLARIFIES THE POSITION THAT IS CONTEMPLATED IN THE MIDC ACT. RATHER, WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID RESOLUTIONS BEING IN CONFORMITY WITH THE PROVISIONS OF THE MIDC ACT, THEREIN STATES THAT THE LAND SHALL VEST WITH THE STATE GOVERNMENT AND THE POSSESSION THEREOF WOULD BE HANDED OVER TO THE ASSESSEE IN FURTHERANCE OF THE OBJECTS OF THE ACT. WE THUS, BEING OF THE CONSIDERED VIEW THAT THE AFOREMENTIONED GOVERNMENT REGULATIONS RELIED UPON BY THE ASSESSEE IN NO WAY MILITATES AGAINST THE PROVISIONS CONTEMPLATED IN THE MIDC ACT, HENCE THE RELIANCE PLACED BY THE ASSESSEE CORPORATION ON THE SAME IS WELL FOUNDED AND FURTHER SUPPLEME NTS ITS CLAIM THAT THE OWNERSHIP OF THE LANDS WAS VESTED WITH THE STATE GOVERNMENT AND ONLY THE POSSESSION OF THE SAME WAS DELIVERED TO THE ASSESSEE CORPORATION IN FURTHERANCE OF THE OBJECTS OF THE MIDC ACT. STILL FURTHER, WE FIND FROM A PERUSAL OF THE PO SSESSION LETTERS ( PAGE 800 - 801 OF APB) TO WHICH OUR ATTENTION WAS DRAWN BY THE LD. A.R, THAT THE ASSESSEE CORPORATION WAS ONLY DELIVERED THE POSSESSION OF THE LAND P A G E | 44 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) AFTER ISSUE OF NOTICE UNDER SEC. 32(1) OF THE MIDC ACT BY THE INDUSTRIES AND THE LABOUR D EPARTMENT OF THE STATE GOVERNMENT OF MAHARASHTRA. 2 6 . WE SHALL NOW ADVERT TO THE JUDICIAL PRONOUNCEMENTS WHICH HAD BEEN RELIED UPON BY THE LD. A.R TO BUTTRESS HIS CONTENTION THAT THE LAND WAS OWNED BY THE STATE GOVERNMENT AND NOT BY THE ASSESSEE CORPORATION . THE LD. A.R HAD IN SUPPORT OF HIS CLAIM RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TATA MOTORS LIMITED VS. TALATHI OF VILLAGE CHIKHALI & ORS. 2011 (7) SCC 839. IT WAS AVERRED BY THE LD. A.R THAT THE HONBLE APEX COURT HAD IN THE SAID DECISION OBSERVED THAT THE LESSEES OF THE ASSESSEE CORPORATION VIZ. MIDC WERE GOVERNMENT LESSEES AS THEY WERE EXEMPTED FROM PAYING THE NON - AGRICULTURAL ASSESSMENT . WE HAVE PERUSED THE AFORESAID JUDGMENT AND FIND THAT IN THE CASE BEFORE THE HONBLE APEX COURT THE APPELLANT VIZ. TATA MOTORS LTD. HAD TAKEN ON LEASE LAND MEASURING 164.5 ACRES IN SECTORS NO. 15 AND 15 - A IN VILLAGE CHIKHALI, TALUKA: HAVELI, DISTRICT: PUNE FOR A TERM OF 99 YEARS COMMENCING FROM 21.11.1994 FROM PIMPRI - CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY (FOR SHORT THE DEVELOPMENT AUTHORITY), WHICH WAS CONVERTED TO INDUSTRIAL USE. STILL FURTHER, THE ASSESSEE HAD ALSO TAKEN AN ADJOINING PLOT ON LEASE FROM THE ASSESSEE CORPORATION VIZ. MIDC FOR CONSTRUCTION OF ITS FACTORY. THE AP PELLANT WAS SERVED WITH A DEMAND NOTICE DATED 26.02.2002 BY THE GAR KAMGAR TALATHI, CHIKHALI, DEMANDING A PAYMENT OF RS. 45,25,538/ - AS NON - AGRICULTURAL CESS AND ADDITIONAL NON - AGRICULTURAL CESS, FOR THE PERIOD 1995 - 96 TO 2001 - 02. ON AN APPEAL ASSAILING TH E LIABILITY TO PAY THE AFORESAID AMOUNT , IT WAS OBSERVED BY THE HONBLE APEX COURT THAT A GOVERNMENT LESSEE WAS NOT LIABLE TO PAY ANY LAND REVENUE. IN THE BACKDROP OF THE AFORESAID OBSERVATION IT WAS HELD THAT IN RESPECT OF THE LANDS TAKEN ON LEASE BY THE ASSESSEE FROM PIMPRI - CHINCHWAD NEW TOWN DEVELOPMENT AUTHORITY THE SAID DEVELOPMENT AUTHORITY WAS THE LESSOR, HENCE AS THE SAID LEASED LANDS WERE NOT THE GOVERNMENT LANDS AND THE LESSOR WAS NOT THE GOVERNMENT, THEREFORE, THE APPELLANT COULD NOT CALL ITSEL F AS A GOVERNMENT LESSEE IN RESPECT OF THE SAID LANDS. HOWEVER, IN RESPECT OF THE LANDS TAKEN BY THE ASSESSEE CORPORATION ON LEASE FROM MIDC, THE HONBLE APEX COURT AFTER REFERRING TO A P A G E | 45 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) CIRCULAR DATED 29.03.1975 OBSERVED THAT AS MIDC BEING THE AGENT OF THE STATE GOVERNMENT WAS NOT LIABLE TO PAY ANY ASSESSMENT TO THE GOVERNMENT IN RESPECT OF THE LANDS HELD BY IT AS AN AGENT OF THE STATE GOVERNMENT, THEREFORE, ANY LESSEE UNDER MIDC WOULD BECOME A GOVERNMENT LESSEE AND WILL NOT BE LIABLE TO PAY THE NON - AGRICUL TURAL ASSESSMENT UNDER THE PROVISIONS OF THE MAHARASHTRA LAND REVENUE CODE, 1966. WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID OBSERVATIONS OF THE HONBLE APEX COURT, THOUGH ADMITTEDLY RENDERED IN CONTEXT OF THE ISSUE AS REGARDS THE LIABILITY OF THE LE SSEES OF MIDC TO PAY NON - AGRICULTURAL ASSESSMENT UNDER THE MAHARASHTRA LAND REVENUE CODE, 1966, HOWEVER, ESTABLISHES THAT THE OWNERSHIP OF THE LANDS LEASED BY MIDC REMAINS VESTED WITH THE STATE GOVERNMENT OF MAHARASHTRA. 2 7 . THE LD. A.R HAD FURTHER IN ORDER TO IMPRESS UPON US THAT ONLY THE POSSESSION OF THE LAND WAS DELIVERED TO THE ASSESSEE AND THE OWNERSHIP REMAINED VESTED WITH THE STATE GOVERNMENT, RELIED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF FRUIT AND VEGETABLE MERCHANTS UNION VS. DELHI IMPROVEMENT TRUST AIR 1957 SC 344. ON A PERUSAL OF THE AFORESAID DECISION IT E MERGES THAT IN THE SAID CASE CERTAIN AREA OF LAND ADMITTEDLY BELONGING TO THE GOVERNMENT AND COMPENDIOUS LY REFERRED TO AS THE NAZUL ESTATE, WAS PLACED AT THE DISPOSAL OF THE DELHI IMPROVEMENT TRUST (FOR SHORT T RUST) FOR THE ORDERLY EXPANSION OF DELHI UNDER THE SUPERVISION OF A SINGLE AUTHORITY. BY A LETTER DATED MAY 1/2, 1939 THE CHAIRMAN OF THE T RUST FO RWARDED A COPY OF A RESOLUTION NO. 551, DATED 24.04.1939 TO THE CHIEF COMMISSIONER OF DELHI FOR THE CONSTRUCTION OF THE NEW SUBZIMANDI FRUIT MARKET ON A GROSS AREA OF 10.87 ACRES INCLUDING CERTAIN LANDS WHICH TILL THEN DID NOT VEST IN THE T RUST. SUBSEQUE NTLY, ADDITIONAL AREA WAS PLACED AT THE DISPOSAL OF THE T RUST FOR THE SETTING UP OF THE MARKET . THE CHIEF COMMISSIONER SANCTION ED UNDER SEC. 22 - A OF THE TRUST LAW THE SCHEME OF THE NEW FRUIT & VEGETABLE MARKET AS PROPOSED IN THE RESOLUTION, SUBJECT TO TH E REMARKS VIZ. (I). THAT THE WHOLE OF THE LAND REQUIRED FOR THE CONSTRUCTION OF THE MARKET IS THE PROPERTY OF THE GOVERNMENT, AND (II). THAT THE TRUST WILL ADMINISTER THE NEW MARKET ON ITS COMPLETION. THAT PURSUANT TO LITIGATION P A G E | 46 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) EMERGING FROM THE ACTIO N THEREAFTER TAKEN BY THE TRUST FOR EVICTING THE PLAINTIFF FROM THE MARKET, THE ISSUE CAME UP BEFORE THE HONBLE SUPREME COURT THAT AS TO WHETHER THE PROPERTY IN DISPUTE BELONGED TO THE GOVERNMENT WITHIN THE MEANING OF SECTION 3(A) OF THE RENT CONTROL ACT, 1952. IT IS IN THE BACKDROP OF THE AFORESAID ISSUE THAT THE HONBLE APEX COURT DELIBERATING ON THE SCOPE AND GAMUT OF THE TERM VEST , OBSERVED THAT THE SAID TERM HAS NOT GOT A FIXED CONNOTATION, MEANING IN ALL CASES THAT THE PROPERTY IS OWNED BY THE PERS ON OR THE AUTHORITY IN WHOM IT VESTS. IT MAY VEST IN TITLE , OR IT MAY VEST IN POSSESSION , OR IT MAY VEST IN A LIMITED SENSE, AS INDICATED IN THE CONTEXT IN WHICH IT MAY HAV E BEEN USED IN A PARTICULAR PIECE OF LEGISLATION . ON THE BASIS OF ITS AFORESAID DELI BERATIONS, THE HONBLE APEX COURT REFERRING TO THE PROVISIONS OF THE IMPROVEMEN T TRUST ACT, PARTICULARLY SECTIONS 45 TO 49 AND SEC. 54 AND SE. 54 - A OBSERVED THAT WHEN THEY SPEAK OF A CERTAIN BUILDING OR STREET OR SQUARE OR OTHER LAND VESTING IN A MUNICIPAL ITY OR OTHER LOCAL BODY OR IN A TRUST, IT WOULD NOT NECESSARILY MEAN THAT OWNERSHIP HAD PASSED TO ANY OF THEM. WE HAVE DELIBERATED AT LENGTH ON THE AFORESAID JUDGMENT AND THOUGH ARE NOT OBLIVIOUS OF THE FACT THAT THE SAID JUDICIAL PRONOUNCEMENT WAS RENDERE D IN CONTEXT OF THE PROVISIONS OF THE IMPROVEMENT TRUST ACT AND THUS WOULD NOT BE SQUARELY APPLICABLE FOR ADJUDICATING THE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE BEFORE US, BUT THE GAMUT OF THE TERM VEST AS HAD BEEN DELIBERATED UPON BY THE HONBLE AP EX COURT AND HELD TO HAVE VARIED MEANINGS IN CONTEXT I N WHICH IT HAD BEEN USED IN A PARTICULAR LEGISLATION WILL HAVE A STRONG BEARING ON THE ADJUDICATION OF THE ISSUE INVOLVED IN THE CASE BEFORE US. WE FIND THAT THE TERM VEST USED IN SUB - SEC . (4) OF SEC. 3 2 OF THE MIDC ACT, WHICH THEREIN CONTEMPLATES THAT WHEN A NOTICE UNDER SUB - SECTION (1) IS PUBLISHED IN THE OFFICIAL GAZETTE, THE LAND SHALL, ON AND FROM THE DATE OF SUCH PUBLICATION, VEST ABSOLUTELY IN THE STATE GOVERNMENT FREE FROM ALL ENCUMBRANCES , CAN S AFELY BE CONSTRUED AS VESTING IN TITLE IN THE CONTEXT IN WHICH IT HAS BEEN USED THEREIN. STILL FURTHER, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, AS PER SUB - SEC. (7) OF SEC. 32, THE TRANSFER OF THE LAND TO THE ASSESSEE CORPORATION VIZ. MIDC, FOR THE PURPOSE FOR WHICH IT HAS BEEN ACQUIRE D HAS TO BE CONSTRUED AS TRANSFER OF POSSESSION, WITH THE VESTING OF THE TITLE OF THE P A G E | 47 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) PROPERTY REMAINING WITH THE STATE GOVERNMENT OF MAHARASHTRA. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE COR PORATION THAT THE OWNERSHIP OF THE LAND IS VESTED WITH THE STATE GOVERNMENT, WHILE FOR ONLY THE POSSESSION OF THE SAME IS DELIVERED TO THE ASSESSEE CORPORATION IN FURTHERANCE OF THE OBJECTS OF THE MIDC ACT, DRAWS FORCE FROM OUR AFORESAID OBSERVATIONS . 2 8 . WE FURTHER FIND THAT IT IS THE CONTENTION OF THE LD. D.R BEFORE US THAT AS PER SEC. 20 OF THE MIDC ACT, THE MONEY RECEIVED FROM THE SALE OF PLOTS BECOMES THE ASSESSES OWN MONEY BY OPERATION OF LAW, HENCE THE CLAIM OF THE ASSE SSEE CORPORATION THAT IT IS ONLY PUT INTO THE POSSESSION OF LAND AND THE SALE PROCEEDS OF LAND RECEIVED BY IT WERE HELD ON THE BEHALF OF THE STATE GOVERNMENT IN A FIDUCIARY RELATION UNDER TRUST WAS CLEARLY DISLODGED. THE LD A.R HAD REBUTTED THE SAID CONTE NTION OF THE REVENUE ON THE GROUND THAT SEC. 20 OF THE MIDC ACT ONLY EMPOWERED THE ASSESSEE CORPORATION TO KEEP WITH IT THE FUNDS RECEIVED ON SALE OF LAND, AND THE SAME COULD BY NO STRETCH OF IMAGINATION BE CONSTRUED AS VESTING OF OWNERSHIP OVER THE SAID S ALE RECEIPTS WITH THE ASSESSEE CORPORATION. WE HAVE CAREFULLY PERUSED SEC. 20 OF THE MIDC ACT AND FIND SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R. WE FIND THAT SEC. 20 OF THE MIDC ACT ONLY CONTEMPLATES MAINTAINING BY THE ASSESSEE CORPORATI ON OF ITS OWN FUND TO WHICH THE RECEIPTS SPECIFIED THEREIN ARE TO BE CREDITED. AS PER CLAUSE (C) OF SEC. 20(1) OF THE MIDC ACT, ALL MONIES RECEIVED BY THE CORPORATION FROM THE DISPOSAL OF LANDS, BUILDINGS AND OTHER PROPERTIES MOVABLE AND IMMOVABLE, AND O THER TRANSACTIONS IS PERMITTED TO BE CREDITED. THERE IS NOTHING WHICH COULD PERSUADE US TO CONCLUDE THAT THE OWNERSHIP OF THE RECEIPTS CREDITED BY THE ASSESSEE IN THE AFORESAID FUND WOULD STAND VESTED WITH THE ASSESSEE CORPORATION. RATHER, ON THE CONTRARY A PERUSAL OF SEC 19 OF THE MIDC ACT REVEALS THAT ALL PROPERTY, FUND AND OTHER ASSETS VESTING IN THE ASSESSEE CORPORATION SHALL BE HELD AND APPLIED BY IT, SUBJECT TO THE PROVISIONS AND FOR THE PURPOSES OF THE ACT. STILL FURTHER, A PERUSAL OF SUB - SECTION (2) OF SEC. 20 OF THE MIDC ACT PROVIDES THAT THE ASSESSEE CORPORATION IS PERMITTED TO KEEP A PRESCRIBED SUM OF MONEY OUT OF ITS FUND IN THE CURRENT DEPOSIT OR DEPOSIT ACCOUNT, WHILE FOR THE MONEY IN P A G E | 48 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) EXCESS OF THE SAID SUM SHALL BE INVESTED IN SUCH MANNER AS M AY BE APPROVED BY THE STATE GOVERNMENT. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT AS A CONJOINT READING OF SEC. 20 R.W SEC. 19 OF THE MIDC ACT NOWHERE REVEALS VEST ING OF THE OWNERSHIP OF THE AMOUNTS RECEIVED ON THE SAL E OF PLOTS WITH THE ASSESSEE CORPORATION, BUT RATHER ONLY CONTEMPLATES THE MODE OF PARKING OF SUCH FUNDS, THUS THE CLAIM OF THE REVENUE THAT THE OWNERSHIP OF THE PROCEEDS RECEIVED ON THE SALE OF PLOTS GETS VESTED WITH THE ASSESSEE CORPORATION CANNOT BE ACC EPTED AND IS THEREFORE REJECTED. 2 9 . WE SHALL NOW TAKE UP THE CONTENTION OF THE LD. D.R THAT THE ASSESSEE HAD WRONGLY CLAIMED THAT ITS CASE WAS COVERED BY SEC. 113(3 - A) OF THE MUNICIPAL REGIONAL TOWN PLANNING ACT (FOR SHORT MRTP), AS THE SAID STATUTORY PROVISION ONLY DEALT WITH DEVELOPMENT OF NEW TOWNS. IT WAS THE CLAIM OF THE LD. D.R THAT THE CASE OF THE ASSESSEE WAS COVERED BY SUB - SECTION (1A) OF SEC. 40 OF THE MRTP ACT, WHICH WAS MADE AVAILABLE ON THE STATUTE IN THE YEAR 1994 AND GRANTED THE ASSESSEE THE STATUS OF A SPECIAL PLANNING AUTHORITY. THE LD. D .R FURTHER SUBMITTED THAT POST 1994, AS PER SUB - SEC. (1A) OF SEC. 40 OF THE MRTP ACT , NO NOTIFICATION WAS NEEDED TO VEST THE LAND IN THE ASSESSEE. IT WAS FURTHER AVERRED BY THE LD. D.R THAT THE DEFINITION OF PLANNING AUTHORITY UNDER SEC. 2(19) OF THE MRTP ACT ALSO INCLUDED A SPECIAL PLANNI NG AUTHORITY. THE LD. D.R SUBMITTED THAT THOUGH MRTP ACT WAS A GENERAL LAW WHILE FOR THE MIDC ACT WAS A SPECIFIC LAW, HOWEVER AS HELD BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF RAJIV M O HAN MISHRA VS. CIDCO [PIL NO. 80 OF 2013; DATED 24.03.2017] I N THE EVENT OF CONFLICT BETWEEN THE TWO ACTS , THE MRTP ACT WAS TO PREVAIL. THE LD. D.R FURTHER TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TRIG GUARDS FORCE LTD. VS. MIDC [CIVIL APPEAL NOS. 984 - 986 OF 2005; DATED 06.12.2007] SU BMITTED THAT A PERUSAL OF THE SAID JUDGMENT REVEALED THAT MIDC WAS ITSELF USING THE POWERS GIVEN UNDER THE MRTP ACT. THE LD. A.R REBUTTING THE AFORESAID CONTENTION OF THE REVENUE SUBMITTED THAT THE ASSESSEE HAD NEVER CLAIMED THAT ITS CASE WAS COVERED UNDER SEC. 113(3 - A) OF THE MRTP ACT. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE LAND UNDER P A G E | 49 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) CONSIDERATION WAS NOT ACQUIRED UNDER THE MRTP ACT BUT UNDER THE MIDC ACT, HENCE THE PROVISIONS OF THE MRTP ACT WOULD NOT BE APPLICABLE IN ITS CASE. IT WAS AVERRED BY THE LD. A.R THAT THE REVENUE HAD FAILED TO SHOW THAT THE LAND UNDER CONSIDERATION WAS ACQUIRED FOR THE PURPOSE OF MIDC ACT UNDER THE MRTP ACT. IN THE BACKDROP OF HIS AFORESAID SUBMISSIONS , IT WAS THE CLAIM OF THE LD. A.R THAT WHILE FOR THE SCOPE AND AMBIT OF THE MIDC ACT WAS IN RESPECT OF ACQUISITION AND DEVELOPMENT OF INDUSTRIAL LANDS, WHEREAS THE MRTP ACT GOVERNED THE PLANNING AND DEVELOPMENT OF THE IDENTIFIED TOWN/AREA. IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE CORPORATION DOES NOT EXERCISE JURISDIC TION UNDER THE MRTP ACT TO ACQUIRE ANY LAND THAT IS REQUIRED FOR DEVELOPMENT. THE LD. A.R FURTHER SUBMITTED THAT THE EXERCISE OF POWERS UNDER THE MRTP ACT BY THE ASSESSEE WERE ONLY TO THE EXTENT OF THE NOTIFIED TOWNS FALLING UNDER THE INDUSTRIAL AREAS DEVE LOPED BY THE ASSESSEE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. A.R THAT AS THE LANDS WERE ACQUIRED IN THE CASE OF THE ASSESSEE CORPORATION UNDER THE MIDC ACT, THEREFORE THE PRO VISIONS OF THE MRTP ACT WHICH GOVERNS THE PLANNED DEVELOPMENT OF THE IDENTIFIED TOWN/AREA WOULD NOT BE APPLICABLE. IN TERMS OF OUR AFORESAID OBSERVATIONS THE CONTENTION ADVANCED BY THE LD. D .R FAILS AND IS THUS RESULTANTLY REJECTED. 30 . WE SHALL NOW TAKE UP THE CONTENTION OF THE LD. A.R THAT THE A.O HAD ERRED IN BRINGING TO TAX REIMBURSEMENTS /RECOOUPING OF EXPENSES AMOUNTING TO RS. 32,28,67,135/ - WHICH WERE INCURRED BY THE ASSESSEE ON BEHALF OF THE USERS OF THE LAND DEVELOPED BY IT. IT IS SUBMITTED BY THE LD. A.R THAT THE SPECIFIC COSTS INCURRED BY THE ASSESSEE ON BEHALF OF THE USERS OF LAND WOULD BE SHOWN ON THE ASSET SIDE OF THE BALANCE SHEET, WHICH ON BEING RECOUPED FROM SUCH PARTIES WAS THEREAFTER SHOWN AS DEDUCTION IN THE BALANCE SHEET FROM THE ASSET SIDE. IT IS THE CLAIM OF THE LD. A.R THAT THE SAID AMOUNTS RECEIVED BY THE ASSESSEE TOWARDS REIMBURSEMENT OF COSTS INCURRED HAD WRONGLY BEEN BROUGHT TO TAX BY THE A.O. THE LD. D.R THOUGH DID NOT CONTROVERT THE CLAIM OF THE ASSESSEE THAT THE REIMBURSEMENT OF COST RECEIVED BY THE ASSESSEE COULD NOT BE SUBJECTED TO TAX, HOWEVER SUBMITTED THAT THE P A G E | 50 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) SURPLUS RECEIPTS ON THE SAID COUNT WERE LIABLE TO B E ASSESSED AS THE INCOME OF THE ASSESSEE. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION AND FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R THAT THE REIMBURSEMENT OF COSTS CANNOT BE SUBJECTED TO TAX. HOWEVER, AS THE RE QUISITE DETAILS WHICH WOULD JUSTIFY THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT THE AFORESAID AMOUNT RECEIVED FROM THE USERS OF LAND WAS IN THE NATURE OF COST TO COST REIMBURSEMENT INVOLVING NO MARK UP ARE NOT AVAILABLE BEFORE US, HENCE WE RESTORE THE M ATTER TO THE FILE OF THE A.O. THE A.O IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE AFORESAID AMOUNT RECEIVED FROM THE USERS OF LAND WAS IN THE NATURE OF REIMBURSEMENT OF COST AND DID NOT INVOLVE ANY ELEMENT OF INCOME. THE A.O IS HEREIN DIRECTED THAT I N CASE THE AFORESAID AMOUNT RECEIVED BY THE ASSESSEE CORPORATION IS PROVED TO BE TOWARDS REIMBURSEMENT OF COSTS INVOLVING NO ELEMENT OF INCOME, THEN NO ADDITION ON THE SAID COUNT SHALL BE MADE IN THE HANDS OF THE ASSESSEE. THE GROUND OF APPEAL NO. 1 0 IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 31 . WE SHALL NOW ADVERT TO THE CONTENTION OF THE ASSESSEE THAT THE A.O WHILE GIVING EFFECT TO THE ORDER DATED 27.03.2015 PASSED BY THE TRIBUNAL IN THE FIRST ROUND OF APPEAL HAS TRAVERSED BEYOND THE DIRECTIONS GIVEN BY THE TRIBUNAL AND HAD ENHANCED THE INCOME OF THE ASSESSEE, AS AGAINST THAT ASSESSED IN THE COURSE OF THE ORIGINAL PROCEEDINGS. THE LD. A.R IN SUPPORT OF HIS CONTENTION THAT NO SUCH ENHANCEMENT OF INCOME WAS PERMISSI BLE, RELIED ON THE JUDGMENT OF THE HIGH COURT OF MYSORE IN THE CASE OF PATHIKONDA BALASUBBA SETTY VS. CIT (1967) 65 ITR 252 (MYSORE) AND THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF KELLOGG INDIA (P) LTD. VS. ACIT (2012) 19 ITR (T) 220 (MUM). WE HAVE DE LIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION. W E FIND FROM A PERUSAL OF THE RECORDS THAT THE INCOME OF THE ASSESSEE CORPORATION WAS ORIGINALLY ASSESSED BY THE A.O AT RS. 1701,76,74,360/ - , VIDE HIS ORDER PASSED UNDER SEC. 143(3), DATED 28.02.2014. T HE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE CIT(A) BY HIS ORDER DATED 29.09.2014. SUBSEQUENTLY, ON FURTHER APPEAL BY THE ASSESSEE TH OUGH TH E ORDER OF THE CIT(A) WAS UPHELD BY THE TRIBUNAL, HOWEVER FOR TWO ISSUES VIZ. (I). P A G E | 51 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) CONSIDERING THE CLAIM OF THE ASSESSEE CORPORATION THAT IT WAS CARRYING OUT THE ACTIVITIES BOTH ON ITS OWN ACCOUNT AS WELL AS ON BEHALF OF THE GOVERNMENT OF MAHARASHTRA; AND (II). FOR ALLOW ING THE DEPRECIATION CLAIMED BY THE ASSESSEE CORPORATION UNDER SEC. 32 OF THE INCOME - TAX ACT , 1961, WHILE COMPUTING ITS INCOME , THE MATTER WAS RESTORED TO THE FILE OF THE A.O . THUS, IN THE BACKDROP OF ITS AFORESAID OBSERVATIONS THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED BY THE TRIBUNAL FOR STATISTICAL PURPOSE, VIDE ITS ORDER DATED 27.03.2015. THEREAFTER, THE A.O WHILE PASSING THE ORDER AS PER DIRECTION OF HONBLE ITAT MUMBAI B BENCH, ASSESSED THE INCOME OF THE ASSESSEE CORPORATION AT RS. 2456,45,98,700/ - , VIDE HIS ORDER PASSED UNDER SEC. 143(3) R.W.S 254; DATED 15.03.2016. THE AFORESAID ASSESSMENT FRAMED BY THE A.O WAS CONFIRMED ON APPEAL BY THE CIT(A) BY HIS ORDER DATED 12.04.2017. 3 2 . WE ARE OF THE CONSIDERED VIEW THAT FROM A PERUSAL OF THE AFORESAID FACTS IT CAN SAFELY BE GATHERED THAT THE A.O WHILE GIVING EFFECT TO THE DIRECTIONS GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 27.03.2015 PASSED IN THE FIRST ROUND OF APPEAL , HAD RAISED THE ORIGINALLY ASSESSED INCOME OF RS. 1701,76,74,360/ - TO AMOUNT OF RS. 2456,45,98,700/ - , VIDE HIS ORDER PASSED UNDER SEC. 143(3) R.W.S 254; DATED 15.03.201 6. ON A PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL IN THE FIRST ROUND OF APPEAL THOUGH NO ENHANCEMENT OF THE INCOME IS DISCERNIBLE, BUT THE A.O IN THE GARB OF GIVING EFFECT TO THE DIRECTIONS OF THE SAID ORDER UNDER SEC. 143(3) R.W.S 254; DATED 15.03.2016 IS FOUND TO HAVE ENHANCED THE ORIGINAL LY ASSESSED INCOME FROM AN AMOUNT OF RS. 1701,76,74,360/ - TO AMOUNT OF RS. 2456,45,98,700/ - . WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO SUCH EXERCISE OF ENHANCEMENT CARRIED OUT BY THE A.O WHILE GIVING EFFECT T O THE ORDER PASSED BY THE TRIBUNAL. WE ARE OF THE CONSIDERED VIEW THAT THE WORST DETRIMENT WHICH THE TRIBUNAL MAY VISIT ON AN APPELLANT IS TO DISMISS THE APPEAL WITH A DIRECTION IN AN APPROPRIATE CASE TO PAY COSTS. HOWEVER, AN ORDER ADVERSE TO THE INTERES TS OF THE APPELLANT IN THE SENSE THAT IT TAKES AWAY FROM HIM A BENEFIT WHICH HE HAS ALREADY ACQUIRED UNDER THE ORDER APPEALED FROM IS POSSIBLE ONLY BY MEANS OF AN ORDER MADE EITHER UPON A CROSS - APPEAL FILED BY THE OTHER SIDE OR P A G E | 52 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) ON THE BASIS OF A CROSS - OBJE CTIONS PRESENTED BY HIM. WE ARE OF THE VIEW THAT THOUGH THE TRIBUNAL IS VESTED WITH THE POWER TO MAKE A REMAND, BUT THE EXERCISE OF THE SAID POWER HAS TO BE EXERCISED IN AID OF THE MAIN POWER AND NOT IN EXCESS OF IT. WE FIND THAT OUR AFORESAID VIEW IS FORT IFIED BY THE JUDGMENT OF THE HIGH COURT OF MYSORE IN THE CASE OF PATHIKONDA BALASUBBA SETTY VS. CIT (1967) 65 ITR 252 (MYSORE) AND THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF KELLOGG INDIA (P) LTD. VS. ACIT (2012) 19 ITR (T) 220 (MUM) WE THUS, IN THE B ACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE INCOME OF THE ASSESSEE AFTER HAVING BEEN SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE A.O ON THE AFOREMENTIONED LIMITED ISSUES , IN ANY CASE COULD NOT HAVE BEEN ASSESSED AT AN AMOUNT IN EXCESS OF THAT AT WHICH WAS ORIGINALLY ASSESSED BY MAKING FRESH ADDITIONS WHICH WERE NOT THERE IN THE IMPUGNED ORDER . IN TERMS OF OUR AFORESAID OBSERVATIONS WE DIRECT THE A.O TO CONSIDER OUR AFORESAID OBSERVATIONS WHILE GIVING APPEAL EFFECT TO OUR ORDER PASSED WHILE DISPOSING OFF THE PRESENT APPEAL. THE GROUND OF APPEAL NO. 12 IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 3 3 . WE SHALL NOW ADVERT TO THE CLAIM OF THE ASSESSEE THAT EVEN IF IT WAS TO BE ASSUMED, THOUGH NOT ADM ITTED, THAT THE ASSESSEE CORPORATION WAS CARRYING ON TRADE OR COMMERCE, EVEN THEN IT WOULD DULY BE ENTITLED TO DEPRECIATION ON THE ASSETS WHICH WERE USED BY IT IN CARRYING ON THE ALLEGED TRADE OR COMMERCE. IN THE BACKDROP OF HIS AFORESAID CONTENTION IT WAS SUBMITTED BY THE LD. A.R THAT THOUGH THE TRIBUNAL HAD VIDE ITS ORDER DATED 27.03.2015 ALLOWED THE CLAIM OF DEPRECATION OF THE ASSESSEE, HOWEVER BOTH THE A.O AND THE CIT(A) HAD ERRED IN NOT FOLLOWING THE DIRECTIONS OF THE TRIBUNAL AND HAD WRONGLY DECLINED THE DEPRECIATION OF RS. 12,34,18,456/ - AS CLAIMED BY THE ASSESSEE. WE HAVE PERUSED THE ORDER DATED 27.03.2015 PASSED BY THE TRIBUNAL IN THE FIRST ROUND OF APPEAL AND FIND SUBSTANTIAL FORCE IN THE AFORESAID CONTENTION OF THE ASSESSEE. WE FIND THAT THE TRIBU NAL WHILE DELIBERATING ON THE CLAIM OF DEPRECIATION OF THE ASSESSEE, HAD THEREIN OBSERVED AT PAGE 43 PARA 35 OF ITS ORDER THAT DEPRECIATION COMPUTED UNDER SEC. 32 OF THE INCOME - TAX ACT, 1961 SHOULD BE DEDUCTED FOR THE PURPOSE OF P A G E | 53 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) ARRIVING AT THE INCOME OF THE ASSESSEE. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R AND ARE PAINED TO OBSERVE THAT DESPITE SPECIFIC DIRECTIONS BY THE TRIBUNAL TO ALLOW DEPRECIATION TO THE ASSESSEE WHILE COMPUTING ITS INCOME UNDER THE PROVISIONS OF THE INCOME - TAX ACT, THE SAME HAD NOT BEEN ALLOWED BY THE LOWER AUTHORITIES. WE THUS, HEREIN RESTORE THE MATTER TO THE FILE OF THE A.O WITH A CLEAR D IRECTION TO ALLOW THE CLAIM OF DEPRECIATION OF THE ASSESSEE , AS PER LAW . THE GROUND OF APPEAL NO. 13 IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 3 4 . THAT AS WE HAVE OBSERVED THAT THE INCOMES ARISING FROM THE LANDS UNDER CONSIDERATION VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME ON BANK DEPOSITS ETC. , WERE NOT THE INCOME OF THE ASSESSEE AND HAD RIGHTLY BEEN SHOWN BY IT AS ACCRETION IN THE LIABILITIES IN THE BALANCE SHEETS, HENCE WE REFRAIN FROM ADVERTING TO AND ADJUDICATING UPON THE CONTENTIONS ADVANCED BY THE LD. A.R BEFORE US IN RESPECT OF QUANTIF ICATION OF THE ADDITIONS ON MERITS ON THE SAID COUNT. THE GROUND OF APPEAL NO. 11 IS DISPOSED OFF IN TERMS OF OUR AFORESAID OBSERVATIONS. 3 5 . WE FURTHER FIND THAT AS CLAIMED BY THE LD. A.R BEFORE US, THE REVENUE HAD CONSISTENTLY FOR THE LAST MANY DECADES A CCEPTED THE CLAIM OF THE ASSESSEE THAT THE INCOMES ARISING FROM THE LANDS UNDER CONSIDERATION VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME ON BANK DEPOSITS ETC. , WERE NOT THE INCOME OF THE ASSESSEE CORPORATION AND HAD RIGHTLY BEEN SHOWN BY IT AS ACC RETION IN THE LIABILITIES IN THE BALANCE SHEETS FOR THE SAID RESPECTIVE YEARS. RATHER, THE ASSESSEE CORPORATION AS A MATTER OF FACT HAD BEEN PREPARING ITS ACCOUNTS IN FORM C I.E THE MANNER PRESCRIBED IN THE MIDC RULES SINCE THE YEAR 1961, WHICH WERE CO NSISTENTLY ACCEPTED BY THE C & AG AS WELL AS BY THE INCOME - TAX DEPARTMENT FOR THE LAST MORE THAN 50 YEARS. HOWEVER, WITHOUT POINTING OUT ANY CHANGE OF FACTS, THE REVENUE AUTHORITIES HAD DURING THE YEAR UNDER CONSIDERATION ADOPTED AN INCONSISTENT APPROACH A ND DISLODGED THE SAID CLAIM OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY THE H O NBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) THAT THOUGH R ES JUDICATA DOES NOT P A G E | 54 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) APPLY TO INCOME - TAX PROCEEDINGS AN D EACH ASSESSMENT YEAR IS A N INDEPENDENT UNIT, THUS WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR , BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. THUS, IN THE BACKDROP OF THE FACT THAT THE REVENUE AUTHORITIES IN THE CASE OF THE ASSESSEE HAD FOR DECADES ADMITTEDLY ACCEPTED THAT THE INCOME ARISING FROM THE LANDS UNDER CONSIDERATION VIZ. LEASE PREMIUMS, RENT, INTEREST INCOME ON BANK DEPOSITS ETC. , AS CLAIMED BY THE ASSESSEE WERE NOT LIABLE TO BE ASSESSED AS ITS INCOME, HENCE IN THE ABSENCE OF ANY MATERIAL CHANGE IN THE FACTS THE INCONSISTENT APPROACH ADOPTED BY THE REVENUE AUTHORITIES DURING THE YEAR UNDER CONSIDERATION BY BRINGING THE AFORESAID RECEIPTS TO TAX AS THE INCOME OF THE ASSESSEE CORPORATION WAS EVEN ON THE SAID COUNT NOT JUSTIFIED. THE GROUND OF APPEAL NO. 9 IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 3 6 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE O PEN COURT ON 0 7 /0 9 /2018. S D / - S D / - (G.S.PANNU) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 07 .0 9 .2018 PS. ROHIT P A G E | 55 ITA NO. 4474/MUM/2017 A.Y 2011 - 12 MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) - 2(1) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI