Hyderabad Metropolitan Water Supply And Sewerage Board V. Assistant Commissioner of Income-tax, Circle 6 (I), Hyderabad

WP/9267/2012

AI Insights

The case involves the Hyderabad Metropolitan Water Supply and Sewerage Board (the petitioner) challenging a garnishee notice issued by the Assistant Commissioner of Income Tax, Circle 6 (I), Hyderabad, which attached the petitioner's bank account for recovery of a disputed tax amounting to Rs.29,42,47,025. The petitioner argued that it is a local authority and thus exempt from income tax, a status allegedly supported by amendments to the Income Tax Act and pending registration as a charitable institution. The court did not delve into the substantive issues of the tax exemption but focused on the procedural aspect of allowing the appeal to be heard without immediate financial coercion.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 799620 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 10-04-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: B NARSIMHA SARMA
• Assessee Lawyers: K VASANT KUMAR
• Keywords: Charitable institution; Garnishee notice; Income tax exemption; Local authority; Public Utility
• Section: 147; 148; 143(3); 12AA; 142(2A); 10(20); 226(3)

Judgement Text

" THE HON'BLE MR JUSTICE V ESWARAIAH And THE HON’BLE SRI JUSTICE K.G.SHANKAR W.P.No.9627 of 2012 DT.10-04-2012 Between: Hyderabad Metropolitan Water Supply And Sewerage Board, Khairatabad, Hyderabad Represented by its Managing Director Sri Adhar Sinha s/o Badrinarain aged about 49 years. … Petitioner And Assistant Commissioner of Income-tax, Circle 6 (I), 7th Floor, I.T. Towers, A.C.Guards, Hyderabad and others. … Respondents Counsel for the Appellant: Sri K.Vasantkumar Counsel for respondent: Sri The Court made the following ORDER: THE HON'BLE MR JUSTICE V ESWARAIAH And THE HON’BLE SRI JUSTICE K.G.SHANKAR W.P.No.9627 of 2012 O R D E R: (Per the Hon’ble Sri Justice V.Eswaraiah) Heard the learned Advocate General appearing for the petitioner as well as Sri B.Narsimha Sarma, learned counsel appearing for respondents 1 and 2. The Hyderabad Metropolitan Water Supply and Sewerage Board (for short ‘the petitioner Board’) represented by its Managing Director filed this Writ in the nature of Mandamus to declare the action of the 1st respondent/Assistant Commissioner of Income Tax, Circle 6 (1), Hyderabad in issuing the garnishee notice dated 30-3-2012 under Section 226 (3) of the Income Tax Act, 1961 in F.No.AABCH36591/226(3)/AC-6(1)/11-12) to the 3rd respondent herein attaching the P.D Account GA 09 (2/287) of the petitioner Board maintained with the State Bank of Hyderabad, Treasury Branch, Gunfoundry, Hyderabad/4th respondent herein for recovery of disputed tax of Rs.29,42,47,025/- allegedly due from the petitioner Board as illegal, arbitrary, unreasonable and against the provisions of the Income Tax Act, 1961 and to direct the 1st respondent herein/Assistant Commissioner of Income Tax, Circle 6 (1), Hyderabad not to insist upon for payment of the said disputed tax till the disposal of the appeal filed by the petitioner Board before the Commissioner of Income Tax (Appeals)-IV, Hyderabad against the assessment order dated 17-08-2011 for the assessment year 2003-2004. The petitioner Board earlier filed W.P.No.27783 of 2011 questioning the assessment order dated 17-08-2011 under Section 143 (3) read with Section 147 of the Income Tax Act, 1961 for the Assessment year 2003-2004 as illegal and arbitrary and the said writ petition was dismissed. It is stated that similar assessment orders were made for subsequent years, against which appeals were filed before the Commissioner of Income Tax (Appeals)-IV, Hyderabad. After dismissal of the said writ petition on 27-3-2012, the petitioner Board filed appeal against the said assessment year Before the Commissioner of Income Tax (Appeals)-IV, Hyderabad on 26-3-2012 raising various questions contending that the petitioner Board is a local authority established by an Act of Government of A.P entrusted with the work of maintenance of Sewerage lines and supply of drinking water to the twin cities and surrounding municipalities. It has filed return of income admitting loss of Rs.148,81,31,695/- and assessment was made after determining the loss of Rs.102,01,84,502/-. The Assessing Officer issued notice under Section 148 and the petitioner Board filed its return of income admitting the same loss as determined by the original assessment and obtained the reasons recorded for initiating proceedings under Section 147. The Assessing Officer referred the matter for special audit under Section 142 (2A), and after receiving the audit report, the assessment order was passed determining the income at Rs.43,16,07,010/-. Various issues have been raised contending that the case of the petitioner Board falls under proviso to Section 147, but the Assessing Officer had erroneously relied on the internal audit, and therefore, there is a factual error on the part of the Assessing Officer in assessing the same. We are not concerned with various grounds raised in the appeal filed before the Commissioner of Income Tax (Appeals)-IV, Hyderabad as it is for the appellate authority to appreciate the said contentions and pass appropriate orders. It is not in dispute that when the petitioner Board has approached the Commissioner of Income Tax - III, Hyderabad seeking grant of stay of recovery of demanded tax during the pendency of the contemplated appeal to be filed before the Commissioner of Income Tax (Appeals)-IV, Hyderabad, the Commissioner of Income Tax-III, Hyderabad by his proceedings No.CIT-III/Hyd/Stay/2011-12 dated 10-10-2011 kept 50% of the demanded tax in abeyance subject to the condition that remaining 50% shall be paid by the petitioner Board in equal monthly installment of Rs.2 crores per month, the first installment to be paid in the month of April 2011 and the remaining installments from November 2011 onwards shall be paid before 10th of each month and for remaining 50% bank guarantee shall be furnished for six months. As the petitioner Board was not in a position to pay the said amount, it has filed the writ petition questioning the assessment order as stated above. After dismissal of the writ petition, an appeal has been filed on 26-3-2012 before the Commissioner of Income Tax (Appeals) - IV. The learned Advocate General appearing for the petitioner Board submits that the issue whether the petitioner Board is a local authority or not is yet to be decided and the petitioner Board was constituted pursuant to Act 15 of 1989, and hitherto it was part and parcel of Hyderabad Municipal Corporation. Earlier the supply of water and maintenance of the sewerage used to be taken care of by the Municipal Corporation of Hyderabad and as the activities of the Municipal Corporation have become unmanageable, part of its functions relating to the supply of Water and maintenance of sewerage has been separated by enacting the Hyderabad Metropolitan Water Supply and Sewerage Board Act, 1989. It is stated that the petitioner Board is not a profit making organization and is meant for the public utility. It is stated that hitherto the local authorities are exempted from the provisions of the Income Tax Act, 1961, but only pursuant to the amendment of Section 10 (20) of Finance Act, 2002 with effect from 1-4-2003, the Panchayats as defined in Clause (d) of Article 243, municipalities as defined in Clause (e) of Article 243 (p), Municipal Committee and the District Board, Cantonment Board etc., have been exempted from the provisions of the Income Tax Act, 1961 as they come within the definition of local authorities. The learned Advocate General also submits that in view of amendment of Income Tax Act, 1961 by Finance Act, 2002, as the petitioner Board is a service oriented organization, an application has been filed on 26-5-2010 under Section 12AA of the Income Tax Act, 1961 to register it as a charitable institution and the said application is pending consideration before the Central Board of Direct Taxes. It is stated that the petitioner Board is not a profit making organization and the service rendered by it is not commercial and is running under heavy loss on the funds allocated by the Government. We are not inclined to express any opinion on various contentions advanced by the learned Advocate General on behalf of the petitioner Board, as it is stated that the Commissioner of Income Tax (Appeals)-IV may be directed to dispose of the appeal and pending disposal of the appeal the same relief that was granted by the Commissioner of Income Tax-III before filing the appeal may be extended. Having regard to the facts and circumstances of the case, we are of the opinion that it is just and proper to grant stay of the impugned garnishee order dated 30-3-2012 under Section 226 (3) of the Income Tax Act, 1961 in F.No.AABCH36591/226(3)/AC-6(1)/11-12) dated 30-3- 3012 of the 1st respondent herein/Assistant Commissioner of Income Tax, Circle 6 (1), Hyderabad and the subsequent attachment orders pending disposal of the appeal before the Commissioner of Income Tax (Appeals)-IV subject to condition the petitioner pays 50% of the demanded tax at the rate of Rs.2 crores per month commencing from May 2012 payable by 5th of every month. The Commissioner of Income Tax (Appeals)-IV is directed to dispose of the appeal as expeditiously as possible preferably within a period of 3 (three) months from today. The writ petition is accordingly disposed of. No costs. ______________ V. ESWARAIAH,J _______________ K.G.SHANKAR,J Dt:10-04-2012 grk THE HON'BLE MR JUSTICE V ESWARAIAH And THE HON’BLE SRI JUSTICE K.G.SHANKAR (The Judgment of the Bench delivered by Hon’ble Sri Justice V.Eswaraiah) W.P.No.9267 of 2012 DT.10-04-2012 "