Wp/2626/2013 Of Mumbai Metropolitan Region Development Authority v. The Dey. Director Of Income Tax And 3 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO.2158 OF 2013 Mumbai Metropolitian Region Development Authority ….Petitioner. V/s.The Deputy Director of Income Tax(Exemption-1(1) & Others….Respondents. Mr. S. E. Dastur, Sr. Advocate i/b. A. K. Jasani, for the Petitioner.Mr. A. R. Malhotra with Mr. N. A. Kazi, for the Respondents. CORAM : MOHIT S. SHAH, C.J. ANDM.S. SANKLECHA, J.DATE :18 November 2013 DATE : PC: What is challenged in this writ petition under Section 226 of the Constitution of India filed by Mumbai Metropolitan Region Development Authority (MMRDA) is the order dated 4 September 2013 of the Director of Income Tax (Exemption) Mumbai, granting conditional stay against the recovery of tax in respect of the assessment year 2010-11 on condition that the petitioner pays the outstanding tax amount of Rs.654.16 Crores in 10 equal installments from the month of September 2013 to June 2014. 2)Mr. Dastur, learned Sr. Counsel for the petitioner submits that the petitioner is a statutory authority established under the Mumbai Metropolitan Regional Development Authority Act 1974. The petitioner has merely stepped into the shoes of the CIDCO by virtue of Notification dated 7 March 1977 under the provisions of the aforesaid Act as the Special Planning Authority. It is submitted that in the case of CIDCO itself, the revenue sought to subject it tax in the Assessment Year 2006-07 and stay of the demand had been rejected, just as in this case. This Court by order dated 21 October 2011 granted unconditional stay in favour of the petitioner pending the disposal of its Appeal by the Commissioner of Income Tax (Appeals). Thereafter, the dispute between CIDCO and revenue culminated by order dated 8 August 2012 of the Tribunal holding that CIDCO is an agent of the State Government and therefore, CIDCO is not liable to pay income tax. It is submitted that the matter is squarely covered in favour of the petitioner by the aforesaid order of the Tribunal and therefore, CIT (Exemption) ought to have granted complete stay against the coercive recovery. In the alternative, it it submitted that even otherwise the petitioner has been wrongly denied the benefit of Section 11 of the Income Tax Act,1961 (the Act). It is further submitted that in any view of the matter the department has already recovered from the petitioner a sum-of Rs.196.63 Crores by way of adjustment against the refund due to the petitioner for the Assessment Years 2008-09, 2009-10 and 2012-13 and therefore, also the stay as prayed for ought to have been granted. 3)On the other hand Mr. Malhotra, learned Counsel for the department vehemently opposes the petition and submit that the contention of the petitioner that it is an agent of the State Government was not raised before the Assessing Officer. Learned Counsel further 3)On the other hand Mr. Malhotra, learned Counsel for the department vehemently opposes the petition and submit that the contention of the petitioner that it is an agent of the State Government was not raised before the Assessing Officer. Learned Counsel further relied upon certain decisions in support of his contention that the petitioner assessee being a body corporate having perpetual succession is a distinct legal entity and therefore, it cannot claim any exemption from tax as an agent of the State Government. It is further submitted that the exemption has rightly been denied to the petitioner in view of the amendment in Section 2(15) of the Act by addition of a proviso with effect from 12 April 2013. It is also submitted by the learned Counsel for the department that the petitioner has not only been collecting large sums for development of the property but it has also even received interest income to the tune of Rs.134 Crores from the loans, advances made to other parties. The decision of the Tribunal in the matter of CIDCO(supra) is sought to be distinguished on the ground that there is no issue of earning of interest on advances in the case of CIDCO(supra) as in this case. Therefore, it is submitted that all activities of the petitioner are not carried out as an agent of the State Government and its income is taxable. Besides, reliance is also placed upon the decision of this Court in the matter of Vidarbha Housing Board v/s. ITD 92 ITR 430whereinthe Vidabarbha Housing Board constituted under the M. P. Housing Board Act, 1950 was held to be an independent legal entity and not as agent of the Government. Therefore, there is no warrant to interfere with the order dated 4 September 2013. 4)In rejoinder learned Counsel for the petitioner submits that such loans are advanced to Government or Semi Government Authorities and whatever interest received the petitioner is liable to be passed over to the State Government. It is further submitted that upon completion of the work all the properties and funds of the petitioner 5)Having heard the learned Counsel for the parties, we find that the demand has been raised upon the petitioner consequent to the Assessment Order dated 11 March 2013. The issue of the petitioner being an agent of the Government was not raised before the Assessing Officer and thus not examined in the Assessment Order. The decision in the case of CIDCO (supra) of the Tribunal does prima facie appear to apply to this case, however, the same is subject to detailed examination of the activity of the petitioner in the context of being an Agent of the Government. This requires some factual examination and would be done by the Authorities. In view of the above, we were inclined to grant conditional stay of the demand upon deposit of 25% of the total tax demand. But we find that out of the total demand of Rs.850.69 Crores an amount of Rs.196.53 Crores has already been recovered by the department by way of adjusting the refund for other assessment years as indicated above. The petitioner has thus already paid almost about 23% of the total tax demand. We are informed that the appeal of the petitioner for the assessment year 2010-11 is already fixed for hearing before the CIT(Appeals) on 21 November 2013, when these issues would be considered in depth and decided. Therefore, in the present facts, the interests of justice would be served if the demand for the balance amount of Rs.656.14 Crores is stayed. 6)At this stage, Mr. Malhotra, learned Counsel for the revenue submits that the petitioner be directed not to take any adjournments at the hearing before the CIT(Appeals). At this stage, Mr. Dastur, learned Senior Counsel for the petitioner points out that their appeal 6)At this stage, Mr. Malhotra, learned Counsel for the revenue submits that the petitioner be directed not to take any adjournments at the hearing before the CIT(Appeals). At this stage, Mr. Dastur, learned Senior Counsel for the petitioner points out that their appeal challenging the order withdrawing the registration granted under Section 12A of the Act, has been heard by the Tribunal and the order is awaited. The decision of the Tribunal will have an impact on petitioner's submission that the income is exempted under Section 11 of the Act. In view of the above, it is directed that the CIT(Appeals) will take up the appeal for Assessment Year 2010-11 for expeditious hearing as soon as the Tribunal passes an order on the above appeal which has already been heard by the Tribunal. 7)Petition disposed of in above terms with no order as to costs. CHIEF JUSTICE (M.S. SANKLECHA, J.)