In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Mumbai bench has granted relief to the Maharashtra Industrial Development Corporation (MIDC) and held that the entity is not liable to pay income tax for the income generated from lease rent and development charges on the land acquired by them.
The assessee a state-run corporation, has built 289 industrial areas with 66273.82 hectares of land. The land acquired by the MIDC has increased from a modest 2450 hectares to 66273.82 hectares by the year 2017. During the relevant year, the Assessing Officer had assessed the income of assessee at Rs. 1,212 crores.
Before the Tribunal, the corporation pleaded that the ownership of the lands is with the state government and the income from lease premiums and all other consequential incomes are not taxable.
The bench accepted the contention of the corporation 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.
The bench observed that “as a conjoint reading of Sec. 20 r.w Sec. 19 of the MIDC Act nowhere reveals vesting of the ownership of the amounts received on the sale 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 accepted and is therefore rejected.”
MIDC hopes similar relief for rest of the assessment years between 2006 and 2016 and for which a total demand raised by the income tax department comes at Rs 9,311 crore.
Subscribe Taxscan Premium to view the Judgment
