I-T Dept cannot levy tax on MIDC

ST Correspondent
Saturday, 22 September 2018

The income tax department had started tax collection on the leased rent amount on lands allotted by MIDC from 2006 to 2016. The department issued notices for the recovery of tax dues of last 10 years, which was worth Rs 9,000 crore. The department sealed the bank accounts of MIDC and and recovered Rs 395 crore.

Mumbai: The Income Tax (I-T) Department can’t levy income tax on the acquired land that was given on lease by Maharashtra Industrial Development Corporation (MIDC) for industrial purpose to others. 

It is a major relief to MIDC given by the income tax appellate tribunal. 
The tribunal further ordered a refund of income tax worth Rs 395 crore collected from the corporation with 12 per cent interest.

This order also cancelled the tax recovery of  Rs 9,000 crore for the last 10 years.

The ruling will also be beneficial for other authorities such as City and Industrial Development Corporation (CIDCO), Maharashtra Housing and Area Development Authority (MHADA) and MMRDA.

The income tax department had started tax collection on the leased rent amount on lands allotted by MIDC from 2006 to 2016. The department issued notices for the recovery of tax dues of last 10 years, which was worth Rs 9,000 crore. The department sealed the bank accounts of MIDC and and recovered Rs 395 crore.

After approaching the Supreme Court, the SC stayed the I-T Department’s order and referred the matter to Income Tax commissioner, where the appeal was rejected. The MIDC had challenged the decision of the income tax commissioner in the appellate tribunal of the income tax department. This case was heard a week before by a bench comprising GS Pannu and Ravi Sood. Advocate V Shreedharan pleaded for MIDC. 

After scrutinising the evidence provided by MIDC, the tribunal decided that the income tax department cannot levy a tax on the land leased amount, which was given on lease by MIDC.

The corporation acquires control of the land only and the land ownership remains with the State government. 

Since the corporation is a representative of the government, it does not use the lease amount commercially or to make a profit. Therefore, the court had taken the decision that the amount collected by the corporation is not eligible for tax determination. 

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