MAHARASHTRA EX-SERVICEMEN CORPORATION LTD, Pune V. Income Tax Officer, Ward-14(4), Pune, Pune

ITA 217/PUN/2023

AI Insights

The case involves the Maharashtra Ex-servicemen Corporation Ltd., which appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which denied them exemption under section 10(26BBB) of the Income Tax Act, 1961 for the Assessment Year 2019-20. The Corporation argued that it is an arm of the State Government of Maharashtra and thus should be exempt under Article 289 of the Constitution of India. The NFAC held that the Corporation was not established by an Act of the Central, State, or Provincial government but by a resolution of the Maharashtra State Government, and therefore not eligible for the exemption claimed. The Tribunal noted that the issue of the Corporation's eligibility for registration under section 12AA, which could affect its tax exemption status, was pending and had been previously remanded for re-adjudication.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124351 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-04-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 21-02-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 11; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER AND SHRI G.D. PADMAHSHALI, ACCOUNTANT MEMBER ITA No. 217/PUN/2023 : Assessment Year : 2019-20 Maharashtra Ex-servicemen Corpn. Ltd. Raigad, Opp. National War Memorial, Ghorpadi, Pune. PAN: AADCM 4072 C Appellant Vs. The I.T.O. Ward 14(4) Pune Respondent Appellant by : None Respondent by : Shri Keyur Patel CIT-DR Date of Hearing : 18-04-2023 Date of Pronouncement : 19-4-2023 ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the assessee emanates from the order of NFAC, Delhi dated 08-02-2023 for Assessment Year 2019-20 on the following grounds of appeal. “1. Learned ClT (A) & CPC, Bangalore herein after referred as "Learned AD" erred in law and on facts in not appreciating that, the appellant is a State or Arm of the State Government of Maharashtra / Extended arm of State Government of Maharashtra as per Article 12 of Constitution of India and consequently, the income of Appellant is not under ambit of taxation as per Article 289 of Constitution of India .. 2. The learned ClT(A)-NFAC, Delhi erred in law and on facts in upholding order of learned AO of assessing the taxable income of the appellant to the tune of Rs. 14,78,04,093/-by denying exemption u/s 10(26BBB) of ITA, 1961. 3. Learned CIT(A) erred in law & on facts denying exemption u/s 10(26BBB) of ITA, 1961 by holding that, the appellant is not formed under Central, State or Provisions Act &, but formed under Maharashtra State Government Resolution (GR) thereby, not eligible to claim exemption u/s 10(26BBB). 4. The learned IT authorities erred in law and on facts in not appreciating that, object, intent& purpose of formation of appellant and activities carried out by the appellant are identical with the 'Intent of Legislature' deliberated u/s 10(26BBB) of ITA, 1961. The learned IT authorities ought to have appreciated that, beneficial/exemption provisions of Income Tax Act ought to be read with 'Purposive Rule of Interpretation & Intent of Statute' instead of the plain & literal interpretation. 5. The learned AO erred in law and on facts in holding that, the appellant has been established with profit motive despite observing that, the appellant is carrying out activity for welfare of the ex-Ex- 2 ITA No. 217/PUN/2023 Mah. Ex-servicemen Corpn. A.Y. 2019-20 Servicemen. 6. Without prejudice to grounds of appeal no. 1 to 5; Appellant submits that, Appellant's application for registration u/s 12AA is pending before the learned CIT (Exemption), Rune on the basis of directions of Honourable ITAT; Pune vide its order dated 16/06/2021 in Appellant's own case. Appellant further contends that, if registration u/s 12AA is granted, Appellant will be eligible of exemption u/s 11 r.w. section 12A(2) of ITA, 1961, for AY 2019-20, since, objects of the Appellant are same and unchanged. 7. The appellant craves leave to add, alter, clarify, explain, modify, delete any of the grounds of appeal, and to seek any just and fair relief.” 2. At the time of hearing, none appeared for the assessee nor any written submissions have been filed. There is no evidence also on record to suggest that hearing notice was not served properly on the given address of the assessee. The submissions of the ld. D.R and the documents/materials on record are considered and the matter is decided on merits. 3. That, on perusal of grounds of appeal, the first and foremost grievance of the assessee is denial of exemption u/s 10(26BBB) of the Income-tax Act, 1961 (hereinafter referred to as the “Act‟) by the NFAC holding that the assessee is not formed under Central, State or Provincial Act but formed under a resolution passed by the Government of Maharashtra and thereby not eligible for exemption u/s 10(26BBB) of the Act. That, without prejudice to the grounds raised on this issue, the assessee also submitted that an application for registration u/s 12AA of the Act is pending before the ld. CIT Exemption, Pune, on the basis of directions of Pune Tribunal vide order dated 16-06-2021 in assessee‟s own case. 4. We have perused the order of the NFAC and we observe from therein that the relevant facts relating to the issue of claiming deduction/s 10(26BBB) of the Act is that the assessee is the Corporation established by Government of Maharashtra vide resolution dated 18-01-2002 and within the meaning of sec. 3 ITA No. 217/PUN/2023 Mah. Ex-servicemen Corpn. A.Y. 2019-20 2(45) of the Companies Act, 2013. The assessee has filed its return of income on 20-03-2020. The assessee had claimed deduction of Rs. 14,78,04,090/- u/s 10(26BBB) of the Act which was not allowed during processing of return of income and the processing u/s 143(1)(a) of the Act was completed on 15-01- 2021 on the total income of Rs. 14,78,04,090/-. Therefore, the matter went on appeal before the first appellate authority. The provisions of sec. 10(26BBB) of the Act provides any income of a corporation established by Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen being the citizens of India. This section essentially provides for the conditions for eligibility in regard to claiming exemption therein. Thereafter, the explanation defines ex-servicemen and accordingly who can be termed as „ex-serviceman‟ for the purpose of the provision has been specifically enumerated. The NFAC correctly held that as evident from the said provision i.e. sec. 10(26BBB) of the Act that any income of corporation which is established either by Central, State or Provincial Act only is exempted u/s 10(26BBB) of the Act. In this case, the assessee-corporation has come into existence by a Resolution of Government of Maharashtra and not by any Act of Central, State or Province. We are of the considered view that whenever a financial legislation is interpreted, it has to be interpreted literally or in other words there has to be literal interpretation of the said provision. Meaning thereby what exactly is the intention of the legislature in respect of that particular provision, that exactly has to be read into it and one cannot improvise through judicial activism or otherwise extending or reducing the scope of such financial legislation. As per section 10(26BBB) of the Act it has been categorically mentioned as per the wisdom of the legislature that the corporation claiming exemption under this provision has to be brought in and established either by Central, State of Provincial Act but does not refer to creation of such corporation by any resolution, circular, notification, or through 4 ITA No. 217/PUN/2023 Mah. Ex-servicemen Corpn. A.Y. 2019-20 any other means except only through an “Act”. If the intention of the legislature were to expand the scope of this provision then along with the word “Act” the said section would have also included resolution, notification, etc. but which they have not done. Therefore, in order to claim exemption, the corporation has to be established only through the Act and not by any other means. Therefore, the NFAC has given a correct interpretation of the said section. Having said so the first matter in assessee‟s own case had come up before this Tribunal in ITA No. 129/PUN/2021, order dated 16-06-2021, this appeal was filed for denying grant of registration/s 12AA of the Act to the assessee. In this order, the Tribunal had remanded the matter back to the file of CIT Exemption for de novo consideration and re-adjudicating the issue for grant of registration u/s 12AA of the Act. Thereafter, a group of seven appeals of the same assessee came up before this Tribunal in a common order passed on 24-11- 2022 in ITA No. 384/PUN/2019, 245/PUN/2020, 640/PUN/2019, 641/PUN/2019 to 644/PUN/2019 wherein the ld. Counsel for the assessee appraised the Bench regarding earlier order of Pune Tribunal in ITA No.129/PUN/2021 (supra) and submitted that all these cases which were before the Tribunal for adjudication pertains to assessment taken place prior to the order passed by the Pune Bench of the Tribunal (supra). That whether now the assessee would get registration u/s 12AA of the Act that would have bearing on all these cases. Accordingly, the ld. Counsel for the assessee prayed that the matters may be remanded to the file of the ld. A.O. with a proper direction for re-adjudication based on determination of the status of the assessee as regards the issue of grant of registration u/s 12AA of the Act. The Tribunal after considering the submissions of the parties therein in that order had remanded all the matters to the file of the ld. A.O to re-adjudicate the issue as per law on the basis of findings of the ld. CIT Exemption determining the issue of grant of registration 5 ITA No. 217/PUN/2023 Mah. Ex-servicemen Corpn. A.Y. 2019-20 u/s 12AA of the Act vis-à-vis the assessee. Even before us also, the assessee has taken a ground that the issue of grant of registration u/s 12AA is pending before the ld. CIT Exemption as per the basis of directions of Pune Tribunal vide order dated 16-06-2021 in assessee‟s own case. Having considered this development and the chain of events in assessee‟s own case, we find it deem and appropriate in the interest of justice to remand this matter also to the file of the ld. A.O to re-adjudicate as per law based on the outcome of the decision in the earlier matters of the assessee as has been examined in the preceding paras. We order accordingly. Before parting, we also observe that both the provisions i.e. sec. 12AA and sec. 10(26BBB) of the Act are independent and separate provisions having been incorporated in the Act for specific purposes. There is no bar cast on one provision by the other. Meaning thereby, the corporation may be registered u/s 12AA and at the same time it can apply for exemption u/s 10(26BBB) of the Act but both the issues have to be examined independently on the basis of specific requirement and eligibility of the said provisions. The grounds of appeal are allowed for statistical purposes. 5. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on this 19 th day of April 2023. Sd/- sd/- (G.D. PADMAHSHALI) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated, the 19 th day of April 2023. Ankam 6 ITA No. 217/PUN/2023 Mah. Ex-servicemen Corpn. A.Y. 2019-20 Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The NFAC Delhi 4. Pr. CIT concerned. 5. The D.R. ITAT „A Bench Pune. 6. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune. /// TRUE COPY /// 7 ITA No. 217/PUN/2023 Mah. Ex-servicemen Corpn. A.Y. 2019-20 Date 1 Draft dictated on 18-04-2023 Sr.PS/PS 2 Draft placed before author 18-04-2023 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 19-04-2023 Sr.PS/PS 7 Date of uploading of order 19-04-2023 Sr.PS/PS 8 File sent to Bench Clerk 19-04-2023 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order