The Dy. Commissioner of Income Tax (Exemptions), Circle-1, Ahmedabad V. Gujarat Industrial Development Corporation, Gandhinagar

CO 56/AHD/2017

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 5567 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-10-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N R SONI
• Assessee Lawyers: S N SOPARKAR
• Keywords: Set aside
• Section: 143(3); 113; 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) C.O. NO: 56/AHD/2017 ( IN ITA NO. 427/AHD/17) (ASSESSMENT YEAR: 2013-14) ACIT, (EXEMPTIONS), CIRCLE-1, AHMEDABAD V/S GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION 2 ND FLOOR, BLOCK NO. 4, UDHYOG BHAVAN, SECTOR-11, GANDHINAGAR (APPELLANT) (RESPONDENT) PAN: AABCG 8033D APPELLANT BY : SHRI N.R. SONI, CIT/DR RESPONDENT BY : SHRI S. N. SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 10 -10-201 9 DATE OF PRONOUNCEMENT : 21 -10-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. C.O. NO. 56/AHD/2017 HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE LD. CIT(A) AND FOLLOWING GROUNDS HAS BEEN TA KEN: I. THE APPELLANT PRAYS THAT THE HON'BLE TRIBU NAL BE PLEASED TO PERMIT TO ADMIT THE FOLLOWING GROUNDS C.O. NO. 56/ AHD/2017 . A.Y. 2013-14 2 I) THE RESPONDENT ASSESSEE HAS VIOLATED THE P ROVISIONS OF SECTION 11(5) OF THE ACT AND THAT PROVISIONS OF SECTION 13(1 )(D) OF THE ACT WERE APPLICABLE. II) THE RESPONDENT ASSESSEE HAS FAILED TO INVE ST ITS FUNDS AS PER THE MODES PRESCRIBED U/S 11(5) OF THE INCOME TAX ACT AND THER EFORE THE PROVISIONS OF SECTION 13(L)(D) OF THE ACT ARE ATTRACTED. III) THE EXEMPTIONS CLAIMED BY THE ASSESSEE U/ S 11 OF THE ACT BE DISALLOWED IN VIEW OF SECTION 13(L)(D) OF THE ACT, SINCE THE RESP ONDENT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION ' 11(5). II. THE APPELLANT PRAYS THAT THE ABOVE GROUNDS BE A DMITTED IN VIEW OF THE RATIO LAID DOWN BY THE FULL BENCH OF HON'BLE MUMBAI HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD VS CIT, 199 ITR 351. III. THE APPELLANT ALSO SEEKS RELIANCE UPON DECI SION OF ITAT, MADRAS IN THE CASE OF ACIT VS AMARNATH REDDY 126 ITD 113 AND SET ASIDE THE ASSESSMENT TO THE FILES OF THE A.O FOR THE ISSUE TO BE RE-EXAMINED. IV. THE APPELLANT ALSO PRAYS TO DRAW ATTENTION OF THE HON'BLE ITAT TO THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF HUKAMCHAND MILLS LTD VS CIT (1967) 63 ITR 232. 'ACCORDING TO SUPREME COURT IN HUKAMCHAND MILLS LTD . VS. CIT (1967) 63 ITR 232 (SC), THE WORDS OF SECTION 254(1) PASS SUCH ORDERS THEREON AS IT THINKS FIT1 INCLUDE ALL THE POWERS-EXCEPT POSSIBLY THE POWER ENHANCEMENT -WHICH ARE CONFERRED UPON THE DEPUTY COMMISSIONER ( APPEALS) BY SECTION 251. THE INCOME TAX TRIBUNAL RULES, 1963 ARE NOT EX HAUSTIVE OF THE POWERS OF THE TRIBUNAL. THE RULES ARE MERELY PROCED URAL IN CHARACTER AND DO NOT IN ANY WAY, CIRCUMSCRIBE OR CONTROL THE POWE R OF THE TRIBUNAL.' IN THIS CASE ASSESSMENT FOR A.YS 2013-14 WAS FINALI ZED U/S 143(3) OF THE INCOME TAX ACT VIDE ORDER DATED 28.03.2016 THEREBY MAKING VARIOUS ADDITIONS AND DISALLOWANCES. THE APPEAL FILED BY THE ASSESSEE BEFORE THE CIT(A) WAS DECIDED BY THE CIT(A) VIDE ORDER NO.CIT(A) 9/111 /D CIT(E)CIR-L72016-17 DATED 28/12/2016 WITH THE CIT(A) HOLDING THAT THE A SSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 & 12 AND THE INCOME BE COMPUTE D AS PER PROVISIONS OF SECTION 28 TO 44 OF THE ACT. C.O. NO. 56/ AHD/2017 . A.Y. 2013-14 3 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y 2014-15, IT WAS NOTICED THAT THE ASSESSEE HAD MADE INVESTMENTS IN A NUMBER OF COMPANIES WHICH DID NOT COMPLY WITH THE PROVISIONS OF SECTION 11(5) OF THE ACT AS THESE COMPANIES WERE NOT 'PUBLIC SECTOR COMPANIES' AS DEF INED IN SECTION 2(36A) OF THE INCOME TAX ACT. SECTION 11(5) OF THE INCOME TAX ACT PRESCRIBES THE MODES IN WHICH A TRUST SHALL INVEST ITS FUNDS. ONE OF THE MODES IS INVESTMENT IN THE SHARES OF PUBLIC SECTOR COMPANIES. IN VIEW OF THE V IOLATION OF PROVISIONS OF SECTION! 1(5), THE CONTENTIONS OF THE ASSESSEE IN R EGARD TO APPLICABILITY OF PROVISIONS OF SECTION 13(1 )(D) WERE CAREFULLY CONS IDERED, AND WAS FOUND TO BE CORRECT ONLY IN A FEW CASES. 2.1 THE SHARE HOLDING PATTERNS OF VARIOUS COMPANIES IN WHICH THE ASSESSEE HAS INVESTED ITS FUNDS REVEALED THAT SOME COMPANIES HAD CEASED TO BE 'PUBLIC SECTOR COMPANIES' MUCH BEFORE 31.12.2011, BASED ON THEIR SHAREHOLDING PATTERN, AND HENCE THE ASSESSEE HAD CLEARLY COMMITT ED DEFAULT IN COMPLYING WITH PROVISIONS OF SECTION 11(5) OF INCOME TAX ACT. THEREFORE IT IS EVIDENT THAT THE PROVISIONS OF SECTION 13(L)(D) ARE VERY MUCH AT TRACTED BECAUSE OF VIOLATION OF SECTION 11(5) OF THE ACT. 2.2 THESE VERY FACTS WERE ALSO OBSERVED IRI THE CAS E OF GUJARAT MARITIME BOARD (GMB). THE FACTS WERE BROUGHT TO THE NOTICE OF THE CIT(A)-9, AHMEDABAD BEFORE WHOM THE APPEALS FILED BY THE GMB WERE PENDI NG FOR A.YS 2012-13 AND 2013-14. WHILE DECIDING THE APPEALS (CIT (A)-9/ 1053L/DCIT(E)CIR-L/16- 17 DATED 31.01.2017 FOR A.Y 2013-14), HAS FINALLY H ELD THAT' I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS FAILED TO ESTABLISH ITSELF IN PROVING THAT THE INVESTMENTS MADE BY IT WERE AS PER SECTION LL(2)(B) R.W.S 11(5) OF THE ACT'. C.O. NO. 56/ AHD/2017 . A.Y. 2013-14 4 2.3 SOME SPECIFIC FINDINGS OF CIT(A)-9, A'BAD IN TH E CASE OF GMB WHICH ARE RELEVANT IN THE ASSESSEE APPELLANT'S CASE ALSO, ARE AS UNDER: I) NONE OF THE 10 COMPANIES HAVE BEEN ESTABLISHED U NDER ANY CENTRAL OR STATE OR PROVINCIAL ACT. (II) AS PER ANALYSIS MADE BY THE AO AS WELL AS THE SHARE HOLDING PATTERN SUBMITTED BY THE APPELLANT, REFLECTS THAT EXCEPT FO R GSFC, NEITHER THE CENTRAL GOVERNMENT NOR THE STATE GOVERNMENT HOLD MINIMUM 51 % OF THE PAID SHARE CAPITAL IN ANY OF THE REMAINING 9 COMPANIES, (IN) AS SUBSIDIARY OF ANY ONE 'HOLDING' COMPANY. TH E 'GOVERNMENT OF GUJARAT' IS NOT A COMPANY AND CANNOT BE CONSIDERED AS THE HO LDING COMPANY IN TERMS OF DEFINITION OF SUBSIDIARY COMPANY. IV) WHILE DOING THE ANALYSIS OF SHARE HOLDING PATTE RN OF INVESTMENTS OF THE APPELLANT, THE AO HAS FURTHER GIVEN THE CONSIDERATI ON OF ADOPTING THE MOST LIBERAL VIEW THAT THE SO CALLED GOVERNMENT COMPANIE S IN WHICH INVESTMENTS HAVE BEEN MADE BY APPELLANT, MAY BE TREATED 'AT PAR ' WITH THE CENTRAL/STATE GOVERNMENT FOR IDENTIFYING WHETHER THE CUMULATIVE S HAREHOLDING OF GOVERNMENT COMPANIES ARE MORE THAN 51% OF PAID UP S HARE CAPITAL OR NOT. I DO NOT AGREE WITH THE INTERPRETATION OF AO OF THE SECT ION 617 OF THE COMPANIES ACT, 1956. CENTRAL/STATE GOVERNMENT IS NOT A 'CORPO RATION UNDER 2(36A) OF THE I T ACT. SECTION 617 CATEGORICALLY SPEAKS OF CE NTRAL OR STATE GOVERNMENT IN THE DEFINITION OF GOVERNMENT COMPANY. CENTRAL OR ST ATE GOVERNMENT CAN NEVER BE TREATED 'AT PAR WITH' THE GOVERNMENT COMPA NIES. (V) THE AO BY ADOPTING THE LIBERAL INTERPRETATION, AS DISCUSSED EARLIER, IS ESTABLISHING THAT EVEN AS PER LIBERAL INTERPRETATIO N OF DEFINITION OF GOVERNMENT COMPANIES, 51% OF STAKE IN THE PAID CAPITAL IS NOT HELD BY THE GOVT. COMPANIES. C.O. NO. 56/ AHD/2017 . A.Y. 2013-14 5 3. IN THE LIGHT OF THE ABOVE FINDINGS OF VIOLATION OF PROVISIONS OF SECTION 11(5) OF THE ACT, THE APPLICABILITY OF PROVISIONS OF SECT ION 13(1 )(D) OF THE ACT NEEDS TO BE EXAMINED IN A.Y 2012-13 AND 2013-14 IN THE CA SE OF APPELLANT ASSESSEE, ALSO. APPEAL FILED BY THE ASSESSEE IS PENDING BEFOR E THE HON'BLE ITAT IN ITA NO.427/AHD/2017 FOR A.Y 2013-14. 4. AT THE OUTSET, LD. A.R. STATED THAT MATTER IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE FOR A.Y. 2013-14 WHEREIN MATTER HAS BEEN D ECIDED IN FAVOUR OF THE ASSESSEE IN ITA NO. 427/AHD/2017. IT IS PERTINENT T O MENTION THAT ASSESSEES MATTER STILL PENDING BEFORE THE ITAT IN ITA NO. 427 /AHD/2017. 5. NOW MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE FOR STATISTICAL PURPOSE WITH FOLLOWING OBSERVATION: 6. THUS IN PARITY WITH THE AFORESAID ORDER, WE SET ASI DE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION AND FOR DE NOVO FRAMING OF THE ASSESSMENT ORDER. 7. IN THE RESULT, C.O. FILED BY THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 10- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 21/10/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT.