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DNA EXCLUSIVE: MIDC exempted from Income Tax payment on land lease receipts

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.

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Land acquired by MIDC rose from 2,450 hectare to 66,273.82 hectare by 2017
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Funds generated from lease rent and development charges on the land acquired by state-run Maharashtra Industrial Development Corporation (MIDC) will not be liable to pay income tax in the state. In a path breaking order, the Income Tax Appellate Tribunal (ITAT) has provided relief to MIDC by upholding its stand as state entity and its income cannot be assessed as profit.

ITAT has delivered its order last week for the assessment year 2011-12 in which the income tax was assessed at Rs 1,212 crore. ITAT's verdict was confirmed by MIDC's law department head Smita Chawre.

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.

MIDC has built 289 industrial areas with 66273.82 hectare of land. The land acquired by the MIDC has increased from a modest 2450 hectares to 66273.82 hectares by the year 2017.

State industries minister Subhash Desai told DNA,''MIDC being an executive arm of the state government is engaged in industrial development across the state.ITAT's judgement will benefit all state government undertakings including Mumbai Metropolitan Region Development Agency, City and Industrial Development Corporation and Maharashtra Housing & Area Development Authority who work on similar footing. Besides, similar undertakings in other states will also benefit.''

MIDC during hearing submitted 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. ''MIDC formed under the MIDC Act,1961 is engaged in development of industrial areas and estates by providing basic infrastructure amenities like land, roads, street lights, water supply and drainage. The undertaking is maintaining these facilities and collects charges for the same. The industrial plots are allotted on receipt of lease premium and rent. However, it is shown as liability in the balance sheet as the deposits belonged to the state government,'' the MIDC officer said.

Desai said that MIDC's involvement in the allotment of land does not fall in the category of trade, commerce or business and thus it was not entitled for payment of income tax. He informed that MIDC Act is vested with the powers of acquiring and holding property on behalf of the state government and lease them up to 95 years.

''The land on which industrial area and estate was developed belonged to the state government and not by MIDC. The income was received by MIDC on behalf of the state government and not in its capacity as owner. Therefore the same is shown as a liability in MIDC's balance sheet,'' the MIDC officer said.

EXEMPTION ORDER

  • ITAT delivered its order last week for the assessment yr 2011-12, in which the I-T was assessed at Rs 1,212 Cr
     
  • ITAT’s verdict was confirmed by MIDC’s law department head Smita Chawre
     
  • MIDC hopes for relief for assessment yrs between 2006 & 2016 for which total demand raised by I-T dept amounts to Rs 9,311 crore  
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