Maharashtra Industrial Development Corporation Vs CIT (Exemptions) (ITAT Mumbai)
Conclusion: Lease premium and other charges received by assessee on behalf of the Government of Maharashtra and the ownership of the land remained with the State Government. Assessee’s role was confined to the development and management of industrial areas. Consequently, the lease premiums and related charges were not treated as the income of the assessee and were held to be non-taxable. Revisional order passed by CIT(E) under Section 263 was unjustified and was hereby quashed as CIT(E) was unable to identify any new income sources beyond what had already been disclosed by the assessee.
Held: Assessee was engaged in industrial infrastructure development and registered as a charitable organization under section 12AA. It had claimed exemption under section 10(20A) until assessment year 2002-03 and later under section 11. AO examined the exemption claim, referring to a prior ITAT ruling (ITA No. 4474/Mum/2017), which treated income from deposits, leases, rent, and interest as exempt. Revenue had previously argued that the assessee’s activities were commercial, making it ineligible for exemption. However, the ITAT ruling negated this, and assessee’s appeals in other years were accepted, remanding the matter for reconsideration. During the assessment, assessee submitted the ITAT order dated 07/09/2018 and responded to the notice under section 142(1). Assessee provided documents like the MIDC Act, registration under section 12AA, audited accounts, trustee details, and confirmed no donations were received. It was also mentioned that capital expenditure was claimed as an application of income for charitable purposes. After receiving a second notice on 09/04/2021, assessee submitted a reply on 15/04/2021, which was accepted. AO reviewed all the details and completed the assessment under section 143(3) with a returned income of Rs. NIL, finalizing the tax computation. CIT(E) noted that while assessee’s gross receipts were not taxed, AO had not verified the exemption under section 11. CIT(E) found that the assessee’s activities were not charitable and were commercial in nature. He concluded that the provisions of section 2(15) needed to be examined by the AO. Therefore, CIT(E) used his powers under section 263 to treat the assessment order as erroneous and prejudicial to the revenue and set it aside for a fresh assessment. On appeal. It was held that the primary issue under consideration was whether the lease premium and other charges received by the assessee on behalf of the Government of Maharashtra constituted taxable income. Assessee contended that these receipts were collected purely as an agent of the State Government and, therefore, could not be taxed in its hands. Assessee was merely a custodian of these funds, which were received on behalf of the State Government. It was noted that the ownership of the land remained with the State Government, and assessee’s role was confined to the development and management of industrial areas. Consequently, the lease premiums and related charges were not treated as the income of the assessee and were held to be non-taxable. CIT(E) directed AO to verify the exemption claimed under Section 11. However, the nature of gross receipts had already been examined in the ITAT’s ruling, which was duly followed by AO. Despite issuing notices under Section 263, CIT(E) was unable to identify any new income sources beyond what had already been disclosed by the assessee. Consequently, AO adhered to the directions of the higher authority. Respectfully relying on the rulings of the Hon’ble Supreme Court in Malabar Industrial Co. Ltd, the Hon’ble Bombay High Court in NYK Line (India) Ltd., and M/s Paul Brothers, as well as the Hon’ble Allahabad High Court in N.N. Agrawal , all of which underscore that Section 263 could not be invoked merely on the basis of a change of opinion. The direction to verify Section 11 was inapplicable in this case. Accordingly, the revisional order passed by CIT(E) under Section 263 was unjustified and was hereby quashed.
