The agent is not liable for tax for income earned on behalf of the principal but only for the charges received from principal fro his service

IN THE INCOME TAX APPELLATE TRIBUNAL,

MUMBAI BENCH ‘C’

BEFORE SHRI G.E. VEERABHADRAPPA (PRESIDENT) AND

SHRI B.R.MITTAL (JUDICIAL MEMBER)

S.A.No.183/M/2012

(Arising out of ITA No.2985/Mum/2012)

Assessment Year: 2006-07

M/s. City & Industrial Development

Corporation of Maharashtra Ltd.,

Nirmal, 2nd floor, Nariman point,

Mumbai-400 021

PA No.AACCC 3303 K

(Appellant)

Vs.

ACIT 10(3)

Aayakar Bhavan, M.K. Road,

Mumbai.

(Respondent)

Appellant by: Shri S.E.Dastur

Respondent by: Shri B.K.B.Menon

Date of hearing: 11.5.2012

Date of pronouncement: 11. 5.2012

ORDER

Per B.R.Mittal, JM:

By way of this stay application, the assessee has prayed the stay of recovery of  demand of Rs.4,53,09,55,332 till the disposal of appeal filed by the assessee being I.T.A. No.2985/M/2012 for assessment year 2006-07.

2. The relevant facts giving rise to this appeal are that the assessee is a company registered under the Companies Act, 1956. The shares of the assessee are wholly owned by the Government of Maharashtra. The assessee has been appointed as the New Town Development Authority and Special Planning Authority for development of various areas in the State of Maharashtra under section 40(b) read with section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966 (hereinafter referred to as the ‘MRTP Act’). Pursuant to above, the assessee has been appointed as the New Town Development Authority for the Navi Mumbai Region by way of a Government Resolution dated 18.3.1970 r.w. Notification dated 20.3.1971 and also has been appointed as Special Planning Authority for various areas such as Aurangabad, Nashik, Nanded, etc by separate Government notification.

3. For the assessment year 2006-07, the assessee did not file return of income under section 139(1) of the Act. Therefore, the AO issued notice under section 148 of the Act after recording reasons. Pursuant thereto, the assessee filed its return of income declaring loss of Rs.68,18,000. In the return filed, the assessee offered agency income received from the Government of Maharashtra for acting as its agent for carrying out the development activities under the MRTP Act. The assessee claimed that the assessee is acting as the New Town Development Authority/Special Planning Authority and as such, is only acting as an agent of the Government of Maharashtra. Hence, the assessee is not chargeable to tax for such activities. The AO did not accept the assessee as an agent of Govt. of Maharashtra and computed the total income at Rs.638.12 crores and raised a total demand of tax and interest aggregating to Rs.453.00 cores (approx). Ld CIT(A) also confirmed the action of Assessing Officer. Hence, the appeal filed by assessee is pending before the Tribunal.

4. At the time of hearing, ld A.R. submitted that for A.Ys. 2003-04 to 2005-06, the department has accepted the assessee as an agent of Govt. of Maharashtra for the Navi-Mumbai Project. He submitted that during the pendency of appeal before ld CIT(A), the assessee field writ petition before Hon’ble Jurisdictional High Court being Writ Petition (L) No.2297 of 2011 praying to grant stay of recovery of demand as ld CIT(A) declined to grant the stay. Ld A.R. referred to order of Hon’ble Jurisdcitional High Court in the above writ petition dated 21.10.2011, copy of which is placed at pages 42 to 57 of PB and submitted that Hon’ble High Court granted the stay to the assessee pending disposal of appeal by first appellate authority with a direction that the disposal of appeal be expedited by the CIT(A). He submitted that Hon’ble High Court was satisfied that the issue raised by the assessee merits serious consideration. Ld A.R. submitted that the assessee has a prima facie case and if the stay is not granted for recovery of the demand, it will cause not only financial hardship but also will cause irreparable loss to the assessee. He submitted that the stay be granted and appeal be taken up for early hearing.

5. Ld D.R. submitted that the assessee is not an agent of Govt. of Maharashtra and there is no prima facie case in its favour to grant the stay. He submitted that he has no objection if the appeal is taken for early hearing.

6. On consideration of facts of the case and submissions of representatives of parties and the fact that department accepted the contention of the assessee in the preceding assessment years viz; A.Ys. 2003-04, 2004-05 and 2005-06, that assessee is an agent of Government of Maharashtra and also considering the fact that Hon’ble High Court granted stay to the assessee for the recovery of the demand when the appeal was pending before ld CIT(A), we hold that the assessee has a prima facie case for grant of stay for recovery of the dues pending disposal of appeal before the Tribunal. Hence, we grant stay for recovery of the demand for A.Y. 2006-07 for a period of 6 months or till disposal of the appeal whichever is earlier. At the time of hearing, it was agreed by both parties that the appeal be taken for early hearing on 11.6.2012 and, accordingly, we direct the Registry to fix the appeal before ‘C’ Bench for hearing on 11.6.2012. Since the above date was announced in the presence of both the parties, it was made clear that no separate notice of hearing will be issued fixing the date of hearing on 11.6.2012. It is also made clear that if any of the party or representative of any party is not present on the date fixed for hearing or such other dates, as may be fixed, the appeal will be decided exparte.

8. In the result, stay application is allowed.

Pronounced in the open court on 11th May, 2012

                                               Sd/-                                      Sd/-

                         (G.E.VEERABHADRAPPA)        (B.R. MITTAL)

                                       PRESIDENT                     Judicial Member

Mumbai, Dated 11th May, 2012

Parida

Copy to:

1. The appellant

2. The respondent

3. Commissioner of Income Tax (Appeals), 22, Mumbai

4. Commissioner of Income Tax, 10, Mumbai

5. Departmental Representative, Bench ‘C’ Mumbai

//TRUE COPY//

BY ORDER

ASSTT. REGISTRAR, ITAT, MUMBAI