Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 1968 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-09-2019
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
D
Assessment Year
2012-2013
Appeal Filed On
27-11-2017
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.2868/CHNY/2017 ! ' / ASSESSMENT YEAR : 2012-2013. TAMIL NADU INDUSTRIAL GUIDANCE & EXPORT PROMOTION BUREAU, NO.19A, RUKMANI, LAKSHMIPATHI SALAI, EGMORE, CHENNAI 600 008. VS. THE ASSISTANT DIRECTOR OF INCOME TAX, (EXEMPTIONS) WARD I, CHENNAI. [PAN AACCT 7538B] ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. B. SURESH, C.A. &' # $ % /RESPONDENT BY : SHRI. M.S. NETHRAPAL, IRS, JCIT. ( ) $ * /DATE OF HEARING : 20-08-2019 +,'! $ * /DATE OF PRONOUNCEMENT : 05-09-2019 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-17, CHENNAI (CIT(A) FOR SHORT) DATED 12.09.2017 FOR THE ASSES SMENT YEAR (AY) 2012-2013. ITA NO2868-17. :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1.THE ORDER OF CIT(A) IS ARBITRARY AND OPPOSED TO T HE SPIRIT OF LAW AND AGAINST THE FACTS. 2. ARTICLE 289 2.1 LD. CIT (A) ERRED IN NOT ADJUDICATING THE GROUN D THAT THE APPELLANT IS A STATE AND AS PER ARTICLE 289 OF CONS TITUTION OF INDIA APPELLANTS INCOME IS NOT SUBJECT TO INCOME TAX. 2.2 LD. CIT (A) ERRED IS NOT APPRECIATING THE FACT THAT THE APPELLANT IS A STATE AND AS PER ARTICLE 289 OF CONS TITUTION OF INDIA ITS INCOME IS NOT TAXABLE. 3. CHARITABLE 3.1 LD. CIT (A) ERRED IN MECHANICALLY FOLLOWING THE DECISION OF HON. ITAT CHENNAI FOR AY 2009-10 EVEN THOUGH IT WAS DEMONSTRATED THAT THE DECISION OF TRIBUNAL WAS BASE D ON ERRONEOUS ASSUMPTION OF FACTS AND AN INDEPENDENT DE CISION NEED TO BE TAKEN. 3.2 LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THERE IS NO COMMERCIALITY OR BUSINESS MOTIVE INVOLVED AT THE POINT OF TIME OF RECEIPT OF INCOME AS THERE IS NO SERVICE RENDERE D TO ANY INVESTOR. 3.3 LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT A REGULATORY AUTHORITY BEING A REPRESENTATIVE OF THE GOVT., OF TAMIL NADU CANT EMBARK ON ANY ACTIVITY WITH BUSINESS OR COMMERCIAL MOTIVE AND CANT WEAR A MASK OF BEING CHARITABLE AS MENTIONED IN CIRCULAR NO 11/2008 DT 19/12/2008 3.4 LD. CIT(A) HAS ERRED IN NOT UNDERSTANDING THE F ACT THAT SUCH REGULATORY WORK IS INCIDENTAL TO ITS MAIN OBJECT AN D CHARGES RECEIVED FOR SUCH REGULATORY WORK IS NOT HIT BY PRO VISO TO SEC.2(15). 3.5 LD. CIT(A) HAS ALSO NOT UNDERSTOOD WHAT IS SING LE WINDOW CLEARANCE AND ASSUMED THAT THE INCOME IS BY WAY OF GIVING SOME CONSULTATION WHICH IS CONTRARY TO TRUE AND ORDER BA SED ON SUCH ERRONEOUS FACT IS BAD IN LAW. 4. CORPUS DONATION 4.1 LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT IN ANY ORGANIZATION MONEY RECEIVED WITH A SPECIFIC DIRECTI ON OF ITS USAGE IS A CAPITAL RECEIPT AND NOT TAXABLE. ITA NO2868-17. :- 3 -: 4.2 LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT O NCE HE STARTED ASSESSING THE APPELLANT AS AOP THE PROVISIONS OF SE C. 2(24)(IIA), 11 & 12 ARE INOPERATIVE AND ADDITION/DISALLOWANCE C ANT BE MADE UNDER THESE SECTIONS. 4.3 LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THE CORPUS DONATION RECEIVED UNDER THE INSTRUCTION OF G OVT. OF TAMIL NADU IS NOT FOR ANY SERVICE AND IT IS OUTSIDE THE S COPE OF TAXATION. \ 5. DEPRECIATION 5.1 LD. CIT(A) HAS ERRED IN NOT ALLOWING THE DEPREC IATION AS THE RELEVANT AMENDMENT CAME ONLY IN FINANCE ACT 2014 WI THOUT ANY RETROSPECTIVE EFFECT AND IT IS A SETTLED POSITION. OF LAW THAT DEPRECIATION IS AN ALLOWABLE EXPENDITURE EVENTHOUGH THE COST OF RESPECTIVE ASSET WAS ALLOWED AS DEDUCTION IN EARLIE R YEARS. 5.2 LD. CIT(A) HAS FAILED TO UNDERSTAND THAT ONCE T HE ASSESSEE IS ASSESSED AS AOP ALL PROVISIONS WITH RESPECTS TO BLO CK OF ASSETS AND DEPRECIATION WILL BECOME MANDATORILY APPLICABLE AND DENIAL OF DEPRECIATION ON THE BASIS OF SECTION 11 & 12 IS INCORRECT AS THESE PROVISIONS ARE NOT APPLICABLE TO AOP. THE APPELLANT CRAVES FOR JUSTICE FOR THESE GROUNDS AND ON ADDITIONAL GROUNDS THAT MAY BE ADDUCED IN FUTURE, F OR WHICH LEAVE MAY PLEASE BE GRANTED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE NAMELY TAMIL NADU INDUSTRIAL GUIDA NCE & EXPORT PROMOTION BUREAU IS A SOCIETY FORMED BY GO VERNMENT OF TAMIL NADU FOR PROMOTING INDUSTRIAL GROWTH AND EXPORTS IN THE STATE OF TAMIL NADU. IT IS REGISTERED U/S.12A OF THE INCOME TAX A CT, 1961 (IN SHORT THE ACT). IT PERFORMS THE FUNCTION OF PROCESSI NG THE APPLICATION SUBMITTED BY THE BUSINESS ORGANIZATIONS AND VERIFY ING WHETHER THE APPLICATION IS IN CONFORMITY WITH THE RULES RELATIN G TO ENVIRONMENT, LOCAL AUTHORITY, FIRE PROTECTION, WATER, FOREST, POLICE E TC., AND THEN SUBMITS ITA NO2868-17. :- 4 -: TO THE GOVERNMENT OF TAMILNADU. ASSESSEE COLLECTS CONSIDERATION FOR RENDERING THIS SERVICE AS PROCESSING FEE PRESCRIBE D BY THE GOVERNMENT OF TAMIL NADU. THE RETURN OF INCOME FOR THE ASST. YEAR 2012-13 WAS FILED ON 04.01.2013 DISCLOSING NIL INCOME AFTER CLAIMING EXEMPTION U/S.11 OF THE ACT. AGAINST THE SAID RETURN OF INCOM E, THE ASSESSMENT WAS COMPLETED BY THE INCOME TAX OFFICER (EXEMPTION S) WARD-1, CHENNAI (HEREINAFTER REFERRED AS ASSESSING OFFICE R) VIDE ORDER DATED 24.03.2015 PASSED U/S. 143(3) OF THE ACT AT TOTAL INCOME OF F1,21,24,515/-. WHILE DOING SO, THE AO HAD BROUGHT TO TAX EXCESS OF INCOME OVER EXPENDITURE AND THE CORPUS DONATION OF F25,00,000/- WHILE DENYING THE EXEMPTION U/S.11 OF THE ACT BY HO LDING THAT ACTIVITIES OF THE ASSESSEE TRUST WAS NOT CHARITABLE IN NATURE AS IT IS RENDERING SERVICES TO THE BUSINESS ORGANIZATIONS. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE DISMIS SED THE APPEAL. 5. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE AP PELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT ASSESSEE SOCIETY WAS INSTRUMENTALITY OF THE STATE AS DEFINED IN ARTICLE 12 OF THE CONSTITUT ION AND DISCHARGING FUNCTION AS AN EXTENDED ARM OF THE STATE OF TAMIL NADU AND THEREFORE ITA NO2868-17. :- 5 -: EXCESS OF THE INCOME OVER EXPENDITURE CANNOT BE BRO UGHT TO TAX AS IT IS NOT ASSESSABLE ENTITY, IN SUPPORT OF THIS, HE PLAC ED RELIANCE ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASES OF RAJASTHAN ELECTRICITY BOARD, 3 SCR 377, SUKHDEV SINGH & OTHER S VS. BHAGATRAM SARDHAR SINGH, 3 SCR 619 (1925) AND PRADEEP KUMAR B ISWAS VS. INDIAN INSTITUTE OF CHEMICAL BIOLOGY & OTHERS 5 SCR 111 (2002). 6. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. ASSESSEE BEFORE US IS A SOCIETY FORMED BY GOVERNMENT OF TAMIL NADU WITH AN OBJECT OF PROMOTING INDUSTRIAL GROWTH AND EXPORTS IN THE STATE OF TAMIL NADU. IT PROCESS THE APPLICA TION SUBMITTED BY THE INDUSTRIAL ORGANIZATION AND VERIFY WHETHER THE APP LICATIONS ARE IN CONFORMITY WITH THE RULES RELATING TO ENVIRONMENT, LOCAL AUTHORITY, FIRE PROTECTION, WATER, FOREST, POLICE ETC. FEES WERE CHARGED FOR RENDERING THIS SERVICES AS PRESCRIBED BY THE TAMIL NADU GOVE RNMENT FROM THE INDUSTRIAL ORGANIZATION. ASSESSEE IS DULY REGISTE RED U/S.12A OF THE ACT. IT IS NOT THE CASE OF THE ASSESSEE THAT IT FALLS W ITHIN THE PREVIEW OF FIRST THREE LIMBS I.E. RELIEF FOR POOR, EDUCATION A ND HEALTH BUT UNDER PUBLIC GENERAL UTILITY. THEREFORE THE PROVISIONS OF SECTION 2(15) OF THE ACT ARE SQUARELY APPLICABLE. ACCORDING TO AO, PRO VISO TO SECTION 2(15) ITA NO2868-17. :- 6 -: OF THE ACT ARE APPLICABLE AS IT CHARGES FEES FROM THE BUSINESS ORGANIZATIONS FOR THE SERVICES RENDERED BY IT. EVE N THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER FOL LOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR EARLIER YEARS. NO ARGUMENT WERE ADVANCED AS TO HOW THE PROVISO TO SECTION 2(15)OF THE ACT IS NOT APPLICABLE TO THE CA SE OF THE ASSESSEE. THE WHOLE CASE OF THE ASSESSEE IS PREMISED ON THE A RGUMENT THAT IT IS INSTRUMENTALITY OF THE STATE COMING WITHIN THE MEAN ING OF ARTICLE 12 OF THE CONSTITUTION AND THEREFORE IT IS NOT AN ASSESSA BLE ENTITY. SUBMISSIONS MADE BY THE LD. COUNSEL CANNOT BE ACCEP TED EVEN THE STATE CORPORATION SOCIETIES CANNOT BE EQUATED WITH STATE GOVERNMENT THOUGH IT IS INSTRUMENTALITY OF THE STATE AS HELD B Y HON'BLE SUPREME COURT IN THE CASE OF ARUN KUMAR AND OTHERS VS. UNION OF INDIA AND OTHERS, (2006) 286 ITR 89 . FURTHER, THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF NATIONAL DIARY RESEARCH I NSTITUTE VS. ACIT (TDS), CIRCLE 18(1), BENGALURU (2018) 171 ITD 271, WHEREIN IT WAS HELD AS FOLLOW. 7. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIA L ON RECORD. THE ONLY ISSUE IN THE PRESENT CASE IS, FOR THE PURP OSE OF VALUING PERQUISITES OF THE ACCOMMODATION, PROVIDED TO EMPLO YEES OF THE ASSESSEE SOCIETY SHOULD BE DONE UNDER CLAUSE (I) OR CLAUSE (II) OF TABLE 1 OF RULE 3 OF THE INCOME-TAX RULES 1962. CLA USE (I) OF SUB- RULE (1) OF RULE 3 OF INCOME-TAX RULES IS APPLICABL E IN CASE OF EMPLOYEES OF CENTRAL GOVERNMENT OR STATE GOVERNMENT . CLAUSE (II) OF SUB-RULE (1) OF RULE 3 OF INCOME-TAX RULES IS APPLICABLE IN CASE OF OTHER THAN CENTRAL AND STATE GOVERNMENT EMP LOYEES. THEREFORE, THE ISSUE WHICH REQUIRES TO BE ADJUDICAT ED IS WHETHER THE EMPLOYEES OF ASSESSEE-SOCIETY ARE EMPLOYEES OF CENTRAL ITA NO2868-17. :- 7 -: GOVERNMENT OR NOT. NEEDLESS TO SAY THAT ONCE THE EM PLOYEES OF THE SOCIETY ARE TREATED AS EMPLOYEES OF THE CENTRAL GOVERNMENT FOR THE PURPOSE OF EVALUATING PERQUISITES OF RENT F REE ACCOMMODATION, RULES PRESCRIBED UNDER CLAUSE (I) OF SUB-RULE (1) OF RULE 3 OF INCOME-TAX RULES ARE TO BE ADOPTED. OT HERWISE CLAUSE (II) OF SUB-RULE (1) OF RULE 3 OF IT RULES IS TO BE ADOPTED. AN IDENTICAL ISSUE HAD COME BEFORE THE CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF CENTRAL FOOD TECHNOLOGY RES EARCH INSTITUTE (SUPRA) WHEREIN THIS TRIBUNAL TOOK A VIEW THAT THE EMPLOYEES OF THE CORPORATION FULLY CONTROLLED BY TH E CENTRAL GOVERNMENT CANNOT BE EQUATED WITH CENTRAL GOVERNMEN T EMPLOYEES THOUGH IT IS INSTRUMENTALITY OF THE STATE WITHIN THE MEANING OF ARTICLE 12 OF THE CONSTITUTION OF INDIA. '10. WE ARE OF THE VIEW THAT THE RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE AFORESAID DECISION IS OF ANY HELP TO THE PRESENT CASE. THE QUESTION IN THE CASE OF PR ADEEP KUMAR BISWAL (SUPRA) WAS REGARDING AS TO WHETHER CSIR IS 'STATE' WITHIN THE MEANING OF ARTICLE 12 OF THE CONSTITUTION OF IN DIA. AS BY THE LEARNED DR BEFORE US, THE MEANING OF THE WORD 'STAT E' HAS BEEN DEFINED IN ARTICLE 12 OF THE CONSTITUTION OF INDIA AND THE DECISION HAS TO BE CONFINED TO THOSE CASES AND CANNOT EXTENT TO INTERPRETATION OF RULE 3 OF THE IT RULES, 1962. PUB LIC CORPORATIONS ARE ESTABLISHED BY GOVERNMENT TO ACHIEVE PURPOSE OF WELFARE STATE. FINANCIAL AUTONOMY AND FUNCTIONAL AUTONOMY A RE REQUIRED FOR SUCH PURPOSE. THESE CORPORATIONS ARE COMMERCIAL CORPORATIONS, DEVELOPMENT CORPORATIONS, SOCIAL SERVICES CORPORATI ONS OR FINANCIAL CORPORATIONS. SUCH CORPORATIONS HAVE ALL TRAPPINGS OF GOVERNMENT BUT THEIR, EMPLOYEES CANNOT BE EQUATED WITH EMPLOYE ES EITHER HOLDING OFFICE OR POST IN CONNECTION WITH THE AFFAI RS OF THE UNION OR OF SUCH STATE. EMINENT AUTHOR SEERVAI IN HIS BOOK C ONSTITUTIONAL LAW OF INDIA, 1984 VOL. II PP. 2578-79 HAS DEDUCTED THE FOLLOWING PRINCIPLES WITH REGARD TO THE STATUS OF EMPLOYEES O F A STATUTORY CORPORATION (I) A STATUTORY CORPORATION HAS A SEPARATE AND INDEPEND ENT EXISTENCE AND IS A DIFFERENT ENTITY FROM THE UNION OR THE STATE G OVERNMENT WITH ITS OWN PROPERTY AND ITS OWN FUND AND THE EMPLOYEES OF THE CORPORATION DO NOT HOLD CIVIL POST UNDER THE UNION OR THE STATE ; (II) MAKES LITTLE DIFFERENCE IN THIS RESPECT, WHETHER TH E UNION OR THE STATE HOLDS THE MAJORITY SHARE OF THE CORPORATION AND CON TROLS ITS ADMINISTRATION BY POLICY DIRECTIVES OR OTHERWISE; (III) IT ALSO MAKES LITTLE DIFFERENCE IF SUCH A STATUTORY CORPORATION IMITATES OR ADOPTS THE FUNDAMENTAL RULES TO GOVERN THE SERVICE CONDITIONS OF ITS EMPLOYEES; ITA NO2868-17. :- 8 -: (IV) ALTHOUGH THE OWNERSHIP, CONTROL AND MANAGEMENT OF T HE STATOR CORPORATION MAY BE, IN FACT, VESTED IN THE UNION OR STATE, YET IN THE EYE OF LAW THE CORPORATION IS ITS OWN MASTER AND IS A SEPARATE ENTITY AND ITS EMPLOYEES DO NOT HOLD ANY CIVIL POST UNDER THE UNION OR THE STATE; IF, HOWEVER, THE STATE OR THE UNION CONTROLS A POST UNDER A STATOR CORPORATION IN SUCH A MANNER THAT IT CAN CREATE OR ABOLISH THE POST OR CAN REGULATE THE CONDITIONS SUBJECT TO WHICH THE POST I S OR WILL BE HELD AND IF THE UNION OR THE STATE PAYS THE HOLDER THE POST OUT OF ITS OWN FUNDS, THEN ALTHOUGH THE POST CARRIES THE NAME OF AN OFFICE OF THE STATUTORY CORPORATION, IT MAY BE A CIVIL POST UNDER THE STATE OR THE UNION. IN THE LIGHT OF THE ABOVE SETTLED LEGAL POSITIONS O F LAW, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWE R AUTHORITIES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED ON 5TH DAY OF SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /AC COUNTANT MEMBER -) / CHENNAI . / DATED:5TH SEPTEMBER 2019. KV /0 $0& *12032'* / COPY TO: 0 1 . # / APPELLANT 3. 0 ( 4*056 / CIT(A) 5. 278 0& * 9 / DR 2. &' # / RESPONDENT 4. 0 ( 4* / CIT 6. 8:0;) / GF
