KUWAIT INVESTMENT AUTHORITY, MUMBAI V. ADIT (IT) RG 3(1), MUMBAI

ITA 3081/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3130 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 20-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T R PAITESR
• Keywords: Principle of natural justice
• Section: 143(3); 2

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL - LBENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AM IT SHUKLA,JUDICIAL MEMBER ./I.T.A./3081 /MUM/2011, / ASSESSMENT YEAR: 2008-09 KUWAIT INVESTMENT AUTHORITY BSR & CO., LODHA EXCELUS, 2ND FLOOR,APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAKSHMI, MUMBAI-400 011. PAN:AAATK 3858 Q VS. ADIT (INTL. TAXATION), RANGE-3(1) MUMBAI-400058. (APPELLANT) ( RESPONDENT) REVENUE BY: SHRI T.R. PAITE-SR.AR ASSESSEE BY: SHRI FARROKH IRANI / DATE OF HEARING: 20.09.2016 / DATE OF PRONOUNCEMENT: 20.09.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, A.M. - CHALLENGING THE ORDER,DATED 1/03/2011,OF THE CIT (A )-10,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE,AN APPROVED FOREIGN INSTITU TIONAL INVESTOR (FII) , WAS REGISTERED WITH SEBI TO CARRY ON INVESTMENT ACTIVITIES IN THE INDIA N SECURITIES MARKET.IT FILED ITS RETURN ON 31/07/2008,DECLARING TOTAL INCOME OF RS.1,61,18,61, 706/-.THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON 07.12. 2011,U/S.143 (3) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 161.18 CRORES. 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT TREATING TH E ASSESSEE IS A TRUST AND NOT AS AN CORPORATE ENTITY.WHILE COMPLETING THE ASSESSMENT OR DER,THE AO HELD THAT ASSESSEE WAS A TRUST AS IT WAS REGISTERED WITH THE SEBI.AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).B EFORE HIM,IT WAS ARGUED THAT ASSESSEE WAS PART OF THE SOVEREIGN I.E.STATE OF KUWAIT, THAT IT WAS AN ARTIFICIAL PERSON, THAT IT WAS NOT A PERSON SPECIFICALLY DEFINED WITHIN THE CATEGORIES L ISTED IN THE DEFINITION OF PERSON UNDER SECTION 2(31) OF THE ACT,THAT IT SHOULD BE TREATED AS ARTIFICIAL JURIDICAL PERSON.ALTERNATIVELY, IT WAS ARGUED THAT THE ASSESSEE COULD BE TREATED AT BE ST A COMPANY, AS PER THE PROVISIONS OF SECTION 2 (17) OF THE ACT THAT DEFINED THE WORD COM PANY, THAT THE AO WAS NOT JUSTIFIED IN TREATING THE ASSESSEE AS A TRUST. 3081/M/11-KUWAIT INVESTMENT 2 3. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT ASSESSEE WAS ENGAGED IN INVESTMENT ACTIVITIES AND WAS REGISTERED WITH SEBI AS FII, THAT THE FIIS, REGISTERED WITH THE SEBI, WERE TO BE TREA TED AS TRUST UNDER THE ACT, THAT THE AO HAD RIGHTLY HELD THAT STATUS OF THE ASSESSEE WAS OF A T RUST, THAT PRINCIPLES OF RES JUDICATA WERE NOT APPLICABLE TO INCOME TAX PROCEEDINGS, THAT DECISION TAKEN IN THE EARLIER YEARS WAS NOT RELEVANT FOR THE YEAR UNDER CONSIDERATION ABOUT THE STATUS O F THE ASSESSEE. FINALLY, HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) REFERRED TO THE OFFICIAL GAZETTE OF THE GOVERNMENT OF KUWAIT (PAGES .1-2 OF THE PAPER BOOK) AND STATED THAT ASSESSEE WAS PART OF KUWAIT GOVERNMENT,THAT IT WAS A PUBLIC AUTHORITY RESIDENT IN THE STATE OF KUWAIT,THAT IN THE EARLIER YEARS THE AO HIMSELF HAD TREATED THE ASSESSEE AS COMPANY,WHILE PASSING THE ORDERS UNDER SECTION 143(3) OF THE ACT, THAT IN THE SUBSEQUENT YEARS ALSO THE AO HAD TREATED THE ASSESSEE HAS COMPANY.THE DEPARTMENT AL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE IS REGISTERED AS FII WITH THE SEBI, THAT T HE GOVERNMENT OF KUWAIT HAD ESTABLISHED THE ENTITY AS A PUBLIC AUTHORITY. IN THE OFFICIAL GAZET TE, DATED 20/06/ 1982,THE MINISTRY OF INFORMATION OF GOVERNMENT OF KUWAIT RECTIFIED THE E STABLISHMENT OF A PUBLIC AUTHORITY IS AN INDEPENDENT JUDICIAL PERSON.AS PER THE ARTICLE 3 OF THE GAZETTE THE AUTHORITY WAS TO BE MANAGED BY THE BOARD OF DIRECTORS CONSISTING OF MIN ISTER OF FINANCE,MINISTER OF OIL AND OTHER MEMBERS TO BE APPOINTED BY GOVERNMENT.THIS, CLEARLY ESTABLISHES THE FACT THAT ASSESSEE WAS PART OF THE STATE OF KUWAIT. IT IS ALSO A FACT THAT IN THE EARLIER AND SUBSEQUEN T YEARS THE AO HAS TREATED THE ASSESSEE AS A CORPORATE ENTITY.WHILE COMPLETING THE ASSESSMENT OR DECIDING THE APPEAL,THE AO/FAA HAS NOT MENTIONED AS TO HOW THE FACTS OF THE CASE UNDER CON SIDERATION WERE DIFFERENT FROM THE FACTS OF THE EARLIER ASSESSMENT YEARS, AS FAR AS THE STATUS OF THE ASSESSEE WAS CONCERNED. IT IS NOT THE CASE OF THE DEPARTMENT THAT IN THE EARLIER YEARS TH E RETURNS FILED BY THE ASSESSEE WERE PROCESSED UNDER SECTION 143 (1) OF THE ACT.THERE IS NO DOUBT THAT PRINCIPLES OF THE RES JUDICATA DO NOT APPLY TO THE INCOME TAX PROCEEDINGS. BUT, IT IS EQUALLY TRUE THAT PRINCIPLES OF CONSISTENCY ARE APPLICABLE TO PROCEEDINGS CARRIED O UT UNDER THE ACT.WITHOUT ASSIGNING ANY REASON AND WITHOUT DISTINGUISHING THE FACTS OF THE EARLIER YEARS, THE AO/FAA CANNOT ALTER THE STATUS OF AN ASSESSEE AS PER THEIR WISHES.IN THE CA SE OF GALILEO NEDERLAND BV ,(367 ITR 319),THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER : 3081/M/11-KUWAIT INVESTMENT 3 DECISION ON AN ISSUE OR QUESTION TAKEN IN EARLIER YEARS THOUGH NOT BINDING SHOULD BE FOLLOWED AND NOT IGNORED UNLESS THERE ARE GOOD AND SUFFICIENT REASONS TO TAKE A DIFFERENT VIEW. SAID PRINCIPLE IS BASED UPON RULES OF CERTAINTY AND THAT A DECISION TAKEN AFTER DUE APPLICATION OF MIND SHOULD BE FOLLOWED CONSISTENTLY AS THIS LEA D TO CERTAINTY, UNLESS THERE ARE VALID AND GOOD REASONS FOR DEVIATING AND NOT ACCEPTING EARLIE R DECISION. THE HONBLE BOMBAY HIGH COURT IN THE MATTER OF ARON I COMMERCIALS LTD.(362 ITR 403) HAS DEALT THE ISSUE OF CONSISTENCY AS FOLLOW: THOUGH THE PRINCIPLE OF RES JUDICATA IS NOT APPLICA BLE TO TAX MATTERS AS EACH YEAR IS SEPARATE AND DISTINCT,NEVERTHELESS WHERE FACTS ARE IDENTICAL FROM YEAR TO YEAR,THERE HAS TO BE UNIFORMITY AND IN TREATMENT. PRINCIPLES OF NATURAL JUSTICE DEMANDS THAT A REASON ORDER HAS TO BE PASSED BY THE TAX AUTHORITIES.JUST MENTIONING THAT DECISION TAKEN ABO UT THE STATUS OF THE ASSESSEE IN THE EARLIER YEARS WOULD NOT BE APPLICABLE FOR THE YEAR UNDER CO NSIDERATION IS NOT ENOUGH.SUCH AN ORDER IS A NON-SPEAKING ORDER HAVING NO REASONING AND THEREF ORE, IT CANNOT BE ENDORSED.WE ARE UNABLE TO AGREE WITH THE ARGUMENT OF THE FAA THAT R EGISTRATION OF AN INSTITUTION WITH THE SEBI RESULTS IN ASSESSING THE ASSESSEE AS A TRUST. THE P ROVISIONS THE ACT OR THE SEBI REGULATIONS DO NOT STIPULATE THAT FIIS HAD TO BE TREATED AS TRUSTS .THEREFORE,REVERSING THE ORDER OF THE FAA WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEAL FILE D BY THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH ,SEPTEMBER, 2016. 20, , 2016 SD/- SD/- ( / AMIT SHUKLA ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :20.09.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR L BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.