MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION,MUMBAI vs. COMMISSIONER OF INCOME-TAX (EXEMPTIONS), MUMBAI, MUMBAI

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ITA 5931/MUM/2026Status: DisposedITAT Mumbai22 July 2026AY 2022-239 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that statutory industrial development corporations like MIDC are considered charitable institutions advancing general public utility. Their receipts from statutory functions are not commercial and therefore not hit by the proviso to Section 2(15). The Principal CIT was not justified in invoking Section 263.

What were the facts?

The assessee, Maharashtra Industrial Development Corporation (MIDC), claimed exemption under Section 11. The Assessing Officer completed the assessment accepting the exemption. The Principal CIT invoked Section 263, viewing the assessment order as erroneous and prejudicial to revenue due to insufficient inquiry into the nature of activities and commercial receipts.

What were the issues?

Whether the Principal CIT was justified in invoking Section 263 to revise an assessment order where the assessee, a statutory industrial development corporation, claimed exemption under Section 11, and whether its activities were commercial in nature.

Which sections of the Income-tax Act were involved?

Section 11,Section 2(15),Section 263,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI SIDDHARTHA NAUTIYAL

For Respondent: Shri Prasanna Prakash Tewari, Sr.DR

आदेश / ORDER

PERSHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:

This appeal is filed by the assessee against the order of Ld. CIT (Exemptions), dated 25-03-2026 for the Assessment Year 2022-23. The assessee has raised the following grounds of appeal:

1.

That on the facts and circumstances of the case and in law, the Ld. CIT(E) erred in passing the Impugned Order, setting aside the Assessment Order and directing a de novo assessment. The impugned order is bad in law, without jurisdiction, illegal, and deserves to be quashed and set aside in its entirety. Grounds relating to the proceedings being void, as the notice was never served on the Appellant in the manner prescribed in Rule 127 of the IT Rules 2. That on the facts and in the circumstances of the case and in law, the show-cause notice proposing to exercise jurisdiction u/s 263 of the Act was never served upon the Appellant in the manner prescribed under Rule 127 of the IT Rules, and hence the Impugned Order is clearly invalid. Grounds relating to the proceedings being void, as the Impugned Order was never served on the Appellant in the manner prescribed in Rule 127 of the IT Rules 3. That on the facts and in the circumstances of the case and in law, the impugned order passed u/s 263 of the Act was never served upon the Appellant in the manner prescribed under Rule 127 of the IT Rules, and hence the Impugned Order is clearly invalid. Grounds relating to exercise of jurisdiction by the Respondent 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(E) grossly erred in concluding that the Ld. AO failed to make necessary inquiries or verification regarding the nature of the Appellant's charitable activities, whereas the same were specifically looked into by the Ld. AO during the course of assessment proceedings. 5. That on the facts and in the circumstances of the case and in law the Assessment Order results from due inquiry and application of mind to the material on record, and cannot be termed 'erroneous' merely because the superior authority holds a different view, and thus, the Impugned Order is bad in law, without jurisdiction, illegal, and deserves to be quashed and set aside in its entirety. 6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(E) erred in not following the decision of this Tribunal in the Appellants own case for AY 2018- 19 [ITA No. 2838/Mum/2024] wherein this Tribunal has set-aside the order of the Ld. CIT(E) passed u/s 263 of the Act. 7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(E) erred by failing to appreciate that the Appellant is a statutory corporation set up under the MID Act and it is well settled that statutory corporations engaged in similar activities of industrial development for the benefit of the public at large are entitled to be considered as a charity advancing an objective of general public utility. 8. That on the facts and circumstances of the case and in law, the Ld. CIT(E) erred by failing to appreciate that the Appellant is owned and controlled by the Government of Maharashtra and is undertaking activities in furtherance of its functions and objectives under the MID Act, which is driven by public requirements, and not as a commercial venture. Grounds relating to violation of natural justice 9. That on the facts and circumstances of the case and in law, the Impugned Order is vitiated and bad in law since no adequate opportunity of being heard was provided by the Ld. CIT(E), in a gross violation of the principles of natural justice. The Appellant craves leave to add or alter, by deletion, substitution, or otherwise, any or all of the foregoing grounds of appeal at or before the hearing, and to submit such statements, documents, and papers as may be considered necessary either at or before the appeal hearing. 2. The brief facts of the case are that the assessee, Maharashtra Industrial Development Corporation (MIDC), filed its return of income for the impugned Assessment Year (2022-23) declaring “nil” income after claiming exemption under section 11 of the Income-tax Act, 1961 (“the Act”). The case was selected for complete scrutiny and the Assessing Officer completed the assessment under section 143(3) of the Act without making any additions and also accepted the claim of exemption under section 11 of the Act. The Assessing Officer did not make any addition in the assessment order passed u/s 143(3) of the Act.

3.

Thereafter, the Principal Commissioner of Income-tax (Exemptions), Mumbai, examined the assessment records under section 263 of the Act and formed a prima facie view that the assessment order was erroneous in so far as it was prejudicial to the interests of the Revenue. According to the Principal CIT, the Assessing Officer had completed the assessment without making the enquiries which were necessary in the assessee’s set of facts. The Principal CIT observed that the assessee was engaged in activities coming under the residual limb of "advancement of any other object of general public utility" under section 2(15) of the Act and not under any of the specified charitable purposes such as relief of the poor, education, medical relief, yoga, preservation of environment or preservation of monuments. The Principal CIT further observed that the assessee had earned receipts from activities which were in the nature of trade, commerce or business and such commercial receipts appeared to have exceeded the statutory threshold prescribed under the proviso to section 2(15) during the relevant financial year. According to the Principal CIT, the Assessing Officer had neither examined the true nature and character of the assessee's activities nor verified the proportion of commercial receipts vis-à-vis the total receipts. Consequently, the applicability of the proviso to section 2(15), which directly affects the eligibility for exemption under section 11, was not examined by the Assessing Officer. The Principal CIT held that the Assessing Officer did not carry out proper examination on the issue of exemption under section 11 of the Act which led to under-assessment of income to the tune of ₹11,93,465/-, thereby causing loss of Revenue to that extent.

4.

The assessee is in appeal before us against the order passed by Principal CIT.

5.

We have heard the rival contentions and perused the material on record. The issue for consideration before us is whether the Principal CIT(Appeals) was correct in invoking provisions of section 263 of the Act in the instant facts. Relevant portion of Section 263(1) of the Act reads as under:

"The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the interests of the Revenue, he may, after giving the assessee an opportunity of being heard, pass such order thereon as the circumstances of the case justify..."

6.

Explanation 2 to section 263 further provides that an order shall be deemed to be erroneous if it is passed without making enquiries or verification which ought to have been made or by allowing relief without examining the claim. However, Explanation 2 does not do away with the primary condition that the Principal CIT must first demonstrate, in the facts of the assessee’s case that the Assessing Officer omitted to make enquiries which were necessary for completion of assessment proceedings and such omission rendered the assessment both erroneous and prejudicial to the interests of the Revenue.

7.

In the present case, the basis of passing of the 263 order by the Principal CIT is on the ground that the activities of the assessee are commercial in nature and, therefore, the Assessing Officer failed to examine the applicability of the proviso to section 2(15) of the Act.

8.

The Hon'ble Supreme Court in Assistant Commissioner of Income-tax (Exemptions) v. Ahmedabad Urban Development Authority(2022) 449 ITR 1 (SC) held that statutory corporations, boards and authorities constituted for housing development, town planning and industrial development perform functions which advance objects of general public utility. The Supreme Court further held that receipts recovered by such statutory bodies in discharge of their statutory functions cannot be characterised as commercial receipts so as to attract the proviso to section 2(15) of the Act. The Court held that statutory corporations engaged in industrial development are not driven by profit motive and qualify as institutions constituted with the object of general public utility. The Hon'ble Supreme Court further held at paragraph 190 that statutory corporations, boards and authorities in the industrial development sector are entitled to be considered charitable institutions under the GPU category.

9.

The assessee, Maharashtra Industrial Development Corporation has been constituted under the Maharashtra Industrial Development Act for planned industrial development in the State. The assumption of Principal CIT that receipts of the assessee are prima facie commercial receipts is contrary to the law laid down by the Hon'ble Supreme Court in Ahmedabad Urban Development Authority (supra), wherein statutory industrial development corporations have been specifically held to qualify as institutions carrying on charitable objects of general public utility.

10.

The Hon'ble Karnataka High Court in CIT v. Karnataka Industrial Areas Development Board (2023) 151 taxmann.com 429 (Karnataka) (later affirmed by the Hon'ble Supreme Court in (2023) 151 taxmann.com 430 (SC)), held that statutory industrial development authorities carry out charitable activities and are not hit by the proviso to section 2(15) of the Act.

11.

The Hon'ble Gujarat High Court in CIT (Exemptions) v. Gujarat Industrial Development Corporation (Tax Appeal No.1169 of 2024), held that industrial development corporations do not carry on commercial activities only because they recover statutory charges in discharge of their statutory functions.

12.

We also find support from the recent decision of the Ahmedabad Bench of the Tribunal in The Dy. Commissioner of Income Tax (Exemption) v. Gujarat Maritime Board in ITA Nos. 440/Ahd/2022, 561/Ahd/2022, 117 & 118/Ahd/2023 and 211 & 212/Ahd/2023 vide order dated 13.05.2026 in which the Ahmedabad Tribunal held that statutory authorities constituted under State Acts for development and infrastructure-related public functions are Institutions set up for advancing the object of general public utility and are therefore entitled to exemption under sections 11 and 12 of the Act. The Ahmedabad Tribunal observed that while applying the proviso to section 2(15) of the Act, the test is not merely the quantum of receipts or surplus generated but whether the receipts arise from activities intrinsically connected with the statutory objects, whether the statutory authority functions under Government control, whether the charges collected are authorised under the parent Statute, and whether the surplus is mandatorily utilised for achieving the statutory purposes for which the authority has been constituted. The Ahmedabad Tribunal further held that receipts collected by Statutory authorities in discharge of their statutory obligations cannot be characterised as commercial receipts only because substantial revenue or surplus is generated. Applying the ratio of Ahmedabad Urban Development Authority (supra), the Ahmedabad Tribunal held that the assessee was entitled to the claim of exemption under sections 11 and 12 of the Act.

13.

The Counsel for the assessee has brought to our notice that on identical facts the Principal CIT had invoked section 263 of the Act for Assessment Year 2018-19 for the same reasons. The Mumbai ITAT in the assessee's own case in ITA No.2838/Mum/2024 (reported in 170 taxmann.com 637 (Mumbai- Tribunal), set aside the order passed under section 263 of the Act after considering the judgment of the Hon'ble Supreme Court in Ahmedabad Urban Development Authority (supra). The Ld. DR has not brought any material to show that the said decision has been stayed or dismissed by Hon'ble High Court in appeal.

14.

Accordingly, in view of the above decisions of the Hon'ble Supreme Court in ACIT (Exemptions) v. Ahmedabad Urban Development Authority (2022) 449 ITR 1 (SC), the Hon'ble Karnataka High Court in CIT v. Karnataka Industrial Areas Development Board (affirmed by the Hon'ble Supreme Court), the Hon'ble Gujarat High Court in CIT (Exemptions) v. Gujarat Industrial Development Corporation, the Ahmedabad Bench of the Tribunal in Dy. CIT (Exemption) v. Gujarat Maritime Board, and the Coordinate Bench decision in the assessee's own case for Assessment Year 2018-19 reported in (2025) 170 taxmann.com 637 (Mumbai-Trib.), we are of the considered view that that the Principal CIT was not justified in invoking the provisions of section 263 of the Act, looking into the instant facts.

15.

The assessee has also raised several additional grounds challenging the jurisdiction of the Principal Commissioner under section 263 on various legal grounds. Since we have allowed the appeal on merits and have quashed the revision order itself, we do not consider it necessary to adjudicate the remaining jurisdictional grounds raised by the assessee.

16.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 28.07.2026

Sd/- Sd/- VIKRAM SINGH YADAV SIDDHARTHA NAUTIYAL ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 28.07.2026 KRK, Sr. PS Copy to:

INCOME TAX OFFICER - 9(2)(1), R.NO.622, 6TH FLOOR, AAYAKAR BHAVAN, 1 MUMBAI-400020, MAHARASHTRA

DHANANJAY CHANDU SHETTY , B 602 THE ARK NEHRU ROAD VAKOLA 2 SANTACRUZ (E), MUMBAI-400055, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE

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