M/s Thiruvanathapuram Dev. Authority (TRIDA), Trivandrum V. ACIT, Trivandrum

ITA 423/COCH/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4592 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C SONKAR
• Assessee Lawyers: T M SREEDHARAN ADV
• Keywords: Benefit of exemption
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.A. NOS. 423 & 424/COCH/2009 ASSESSMENT YEARS : 2005-06,& 2006-07, M/S. THIRUVANANTHAPURAM DEVELOPMENT AUTHORITY (TRIDA), VAZHUTHACAUD, TRIVANDRUM 695 010. [PAN: AAALT 0409J] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI T.M.SREEDHARAN, ADV.-AR REVENUE BY SHRI S.C.SONKAR, CIT-DR O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE ASSE SSEE , I.E., FOR TWO CONSECUTIVE YEARS (A.Y. 2005-06 & A.Y. 2006-07), CONTESTING THE REVISION OR DER U/S. 263 OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER) PASSED BY THE COMMISS IONER OF INCOME-TAX, TRIVANDRUM (CIT FOR SHORT) DATED 12.5.2009 IN ITS CASE FOR T HE SAID YEARS. THE ISSUES ARISING BEING COMMON, THE APPEALS WERE HEARD TOGETHER AND ARE BEI NG DECIDED BY A COMMON, CONSOLIDATED ORDER, EVEN AS WAS DONE BY THE REVISIO NARY AUTHORITY. 2. THE ASSESSEE STANDS ASSESSED AS A `LOCAL AUTHORI TY VIDE ASSESSMENTS FRAMED U/S. 143(3) OF THE ACT FOR THE SAID YEARS. THE SAID STA TUS STOOD ACCORDED TO IT AS THE SAME CAME INTO EXISTENCE VIDE NOTIFICATION U/S. 53A OF T HE TOWN PLANNING ACT 1108ME, A STATE LEGISLATION, IN MAY, 1980. THE ASSESSEE IS THEREBY CHARGED WITH THE RESPONSIBILITY OF TOWN PLANNING FOR AREAS COVERED BY THE TERRITORIAL JURISDICTION OF THE CORPORATION OF TRIVANDRUM AND TEN PANCHAYATHS SURROUNDING THE LIMI TS OF THE CORPORATION. OPENING HIS ARGUMENTS ON BEHALF OF THE ASSESSEE, IT WAS SUBMITT ED BY THE LD. AR, ITS COUNSEL, THAT IT STANDS RIGHTLY ACCORDED THE STATUS OF A LOCAL AUTHO RITY, HAVING BEEN CONSTITUTED BY VIRTUE OF A STATE LEGISLATION. THE AO HAS TAKEN ONE OF THE VIEWS POSSIBLE AND IT WAS, THEREFORE, ITA NOS. 423 & 424/COCH/2009 2 NOT PERMISSIBLE FOR THE LD. CIT TO HAVE SUBSTITUTED HIS VIEW THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE SAID STATUS. IN ANY CASE, THE ASS ESSEE HAS NOT BEEN ALLOWED ANY RELIEF OR EXEMPTION U/S. 10(20), SO THAT THERE IS NO LOSS OF TAX AND, ACCORDINGLY, NO PREJUDICE STANDS CAUSED TO THE REVENUE ON IT BEING ACCORDED THE STAT US OF A `LOCAL AUTHORITY. HE RELIED ON THE DECISION IN THE CASE OF CIT VS. MAX INDIA LTD . (2007) 295 ITR 282 (SC). THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT THERE IS A PAT ENT ERROR OF LAW IN THE INSTANT CASE BY THE ASSESSING AUTHORITY IN ASSESSING THE ASSESSEE A S A `LOCAL AUTHORITY. THE STATUS AND THE INCOME ASSESSED ARE TWO COMPONENTS OF THE ASSESSMEN T ORDER, AND ARE NOT TO BE CONFUSED WITH EACH OTHER. FURTHER, THE SAID STATUS IS A PERQ UISITE FOR THE APPLICATION OF SECTION 10(20). READING THE SECTION, HE POINTED OUT THAT S ECTION 10(20) WAS AMENDED VIDE FINANCE ACT, 2002 W.E.F. 1.4.2003, TO BE APPLICABLE ONLY TO ENTITIES DEFINED AS LOCAL AUTHORITIES THERE-UNDER, NAMELY, PANCHAYAT (FOR DEV ELOPMENT OF RURAL AREAS); MUNICIPAL COMMITTEES, DISTRICT BOARDS AND MUNICIPALITIES (FOR DEVELOPMENT OF TOWNS AND CITIES); AND CANTONMENT BOARD (FOR CANTONMENTS). SIMULTANEOU SLY, SECTION 10(20), GRANTING EXEMPTION UNDER THE ACT FOR ANY INCOME OF ANY AUTHO RITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW FOR THE PURPOSE OF, INTER ALIA , PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, STOOD OMITTED. IN VIEW OF THE S PECIFIC MEANING ACCORDED TO THE TERM LOCAL AUTHORITY UNDER THE ACT, THE ASSESSEES CLA IM FOR THE STATUS OF A `LOCAL AUTHORITY ON THE BASIS OF A NOTIFICATION UNDER THE STATE LEGISLA TION IS OF NO CONSEQUENCE. A NOTIFICATION BY THE STATE GOVERNMENT, IT WAS AVERRED BY HIM, COU LD NOT ACCORD THE STATUS OF A LOCAL AUTHORITY TO ANY BODY, THE SAME BEING ONLY WITHIN T HE COMPETENCE OF THE PARLIAMENT (THROUGH A CENTRAL ACT) OR THE CONSTITUTION OF INDI A (COI). HE PRAYED THAT THE COURT MAY DIRECT THE ASSESSEE TO PRODUCE THE NOTIFICATION, WH ICH HAS NOT BEEN BROUGHT ON RECORD BY IT. THE ASSESSEE HAD BEFORE THE AO CITED THE DECIS ION IN THE CASE OF KRISHI UDYOG EVAM SURAKSHA UDYOG PRADESHINI , 128 ITR 214 (ALL.), AND IT WAS ON THAT BASIS THAT I T STOOD ALLOWED THE STATUS OF A LOCAL AUTHORITY. THE SAID DECISION IS IN RESPECT OF A DISTRICT BOARD, WHICH IS ONE OF THE ENTITIES SPECIFIED U/S. 10(20), WHILE THE ASSESSEE IS ADMITTEDLY NOT ONE, SO THAT THE SAID DECISION IS INAPPLICABLE IN THE PR ESENT CASE, AND A MISTAKE OF, OR AN INCORRECT APPLICATION OF LAW, WOULD MAKE HIS ORDER ERRONEOUS. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. ITA NOS. 423 & 424/COCH/2009 3 3.1 WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER. THE TERM `LOCAL AUTHORITY IS DEFINED IN THE ACT ONLY U/S. 10(20), VIDE EXPLANATION THERETO, SO THAT THE SAME HAS TO BE CONSIDERED AS THE MEANING OF THE SAID TERM FOR THE PURPOSES OF THE ACT, WHERE-UNDER THE ASSESSMENT, DEEMED ERRONEOUS, STANDS FRAMED. WE ARE ONLY CONCERNED WITH THE STATUS OF THE ASSESSEE UNDER THE ACT, BEING DEFINED THERE-UND ER, AND NOT UNDER THE GENERAL LAW, AS, SAY, S. 53A OF THE TOWN PLANNING ACT 1108ME; THE DE FINITION PROVIDED UNDER THE ACT TO THE TERM, AS ALSO EXPLAINED BY THE LD. CIT, BEING A N EXHAUSTIVE DEFINITION AND NOT AN INCLUSIVE ONE. FURTHER, THE SAME STANDS ACCOMPANIED BY THE SIMULTANEOUS OMISSION OF THE WORDS `OTHER AUTHORITY IN S. 3(31) OF THE GENERAL CLAUSES ACT, 1897, WHICH ASSUMES RELEVANCE IN VIEW OF THE LIBERAL INTERPRETATION ACC ORDED TO THE SAID TERM BY THE VARIOUS HIGH COURTS IN THE ABSENCE OF ANY CLEAR DEFINITION THEREOF UNDER THE ACT, I.E., PRIOR TO FINANCE ACT, 2002, W.E.F. 1/4/2003. THE MATTER IS N OT VIRGIN, AND STANDS EXAMINED BY THE APEX COURT PER ITS DECISIONS IN THE CASE OF AGRICULTURAL PRODUCE MARKETING CO., NARELA V. CIT (2008) 305 ITR 1 (SC) AND ADITYAPUR INDUSTRIAL DEVELOPMENT AUTHORITY VS. UNIO N OF INDIA (2006) 283 ITR 297 (SC), (BESIDES IN THE CASE OF R.C. JAIN - NO CITATION GIVEN), RELIED UPON BY THE LD. CIT, WHO HAS CONSIDERED THE ASSESSMENT ORDERS AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON TWO COUNTS, I.E., THE GRANT OF THE SAID STATUS, AND THE TREATING THE ASSESSEE AS A TAX-EXEMPT PERSO N U/S. 10(20). THE DIFFERENCE BETWEEN THE TWO IS PURELY ACADEMIC. AS AFORE-STATED, WE ARE ONLY CONCERNED WITH THE SCOPE OF THE WORD LOCAL AUTHORITY UNDER THE ACT, I.E., U/S 10( 20), SO THAT ONE FOLLOWS THE OTHER. THE DISTINCTION WOULD HAVE BEEN RELEVANT IF THE ACT PRO VIDED FOR A LARGER DEFINITION OF THE TERM LOCAL AUTHORITY (AS, PER S. 2(31)) THAN THAT DEFINED U/S.10(20), SO THAT THE GRANT OF THE STATUS OF A `LOCAL AUTHORITY MAY NOT BY ITSELF SIGNIFY THE SATISFACTION OF THE ELIGIBILITY CRITERION U/S. 10(20) OF THE ACT, WHICH MAY IN FACT NOT OBTAIN. THIS IS NOT THE CASE HERE, AND THE DEFINITION OF `LOCAL AUTHORITY UNDER THE A CT IS ONLY PER S. 10(20), ACCORDING THEREBY A TAX-EXEMPT STATUS QUA CERTAIN INCOMES. 3.2 CONTINUING FURTHER, THE SAID STATUS IS A PER QUISITE FOR THE GRANT OF BENEFIT OF THE SAID SECTION TO ANY PERSON. AS SUCH, INASMUCH AS THE AS SESSEE IS ACCORDED THE SAID STATUS, ITS CLAIM FOR RELIEF U/S. 10(20) IS ACCEPTED TO THAT EX TENT, SO THAT THE TWO ARE INTIMATELY CONNECTED. THAT THE ASSESSEE STOOD DENIED EXEMPTION U/S. 10(20), NEVERTHELESS, AND FOR ITA NOS. 423 & 424/COCH/2009 4 WHICH IT IS IN APPEAL, WOULD BE A DIFFERENT MATTER ALTOGETHER, NOT ARISING OUT OF THE PRESENT PROCEEDINGS OR ONE WHICH WOULD HAVE A BEARING THERE ON, FOR US TO BE CONCERNED THEREWITH. THE ASSESSEE MAY OR MAY NOT SUCCEED ON M ERITS OF ITS CASE BEFORE THE ASSESSING AUTHORITY OR IN APPELLATE PROCEEDINGS; OUR PURVIEW IN THE PRESENT PROCEEDINGS BEING LIMITED TO THE GRANT TO IT OF THE TAX-EXEMPT STATUS OF A `LOCAL AUTHORITY U/S. 10(20), I.E., WHETHER THE SAME HAS BEEN GRANTED ON DUE DELIBERATI ON, CONSIDERING THE FACTS IN LIGHT OF THE AMENDED LAW, BY THE AO, OR NOT, IN WHICH CASE I T COULD BE SUBJECT TO EXAMINATION ONLY THROUGH THE REVISIONARY PROCEEDINGS. TOWARD THIS, WE FIND THE ASSESSEE, THROU GH THE LD. AR, ARGUES THAT THE SAME TO BE IN CONSISTENCE WITH THE STATUS ACCEPTED BY THE REVE NUE IN ITS CASE FOR PAST YEARS, I.E., AY 2002-03 ONWARDS. THE AO HAS, AS SUCH, ADOPTED ONE O F THE POSSIBLE VIEWS, EXCLUDING ACTION U/S. 263. IN THIS REGARD, FIRSTLY, ONLY THE ASSESSMENTS AY 2003-04 ONWARDS WOULD BE RELEVANT; THERE BEING A CHANGE IN THE RELEVANT P ROVISION OF LAW W.E.F 01/4/2003. SECONDLY, THERE IS NO REFERENCE TO ANY SUCH ASSESSM ENT/S IN THE ASSESSMENT ORDER/S FOR THE CURRENT YEAR/S NOR ANY OF THEM STAND BROUGHT ON REC ORD BY THE ASSESSEE, SO AS TO EXHIBIT WHETHER THERE HAS BEEN A PROPER CONSIDERATION OF TH E AMENDED LAW AT ANY STAGE. ALSO, EVEN SO, THE TWO CITED JUDGMENTS BY THE APEX COURT, BOTH OF WHICH ARE IN CONTEXT OF THE AMENDED LAW, BEING DATED 3/5/2006 AND 21/8/2008, WO ULD MERIT CONSIDERATION; THE ASSESSMENTS UNDER REFERENCE FOR THE TWO CONSECUTIVE YEARS BEING DATED 23/11/2007 (WRONGLY STATED IN THE IMPUGNED ORDER AS 23/3/2007) AND 31/12/2008 RESPECTIVELY. THE DECISION BY THE APEX COURT IN THE CASE OF CIT V. G.M. MITTAL STAINLESS STEEL (P.) LTD . (2003) 263 ITR 255 (SC) RELIED UPON BY THE ASSESSEE , PRECLUDING THE CONSIDERATION OF THE SUBSEQUENT JUDGEMENTS BY THE APEX COURT BY THE REVE NUE IN SUPPORT OF REVISION, BUT ONLY THOSE AVAILABLE WITH THE REVISIONARY AUTHORITY WHEN HE EXERCISED THE POWER (OF REVISION), WHICH IS IN MAY, 2009 IN THE INSTANT CASE, WOULD NO T BE APPLICABLE IN THE FACTS OF THE PRESENT CASE. TWO, THE ISSUE QUA WHICH THE REVISION WAS DIRECTED IN THE SAID CASE H AD CONCLUDED IN FAVOUR OF THE ASSESSES, AT LEAST INSOF AR AS THE CONCERNED STATE WAS CONCERNED, PRIOR TO THE RENDERING OF THE DECISION BY THE APEX COURT BEING RELIED UPON BY THE REVENUE, WHILE THE ISSUE UNDER CONSIDERATION IS A NASCENT ON E, WARRANTING A CLEAR EXPRESSION OF OPINION IN THE MATTER, BASED ON FACTS AND THE LAW I N THE MATTER. THIRD, THE APEX COURT ALSO FOUND THE REVISIONARY AUTHORITY TO HAVE NOT RECORDE D ANY REASON FOR COMING TO THE ITA NOS. 423 & 424/COCH/2009 5 CONCLUSION THAT THE ORDER OF THE AO WAS ERRONEOUS, WHILE THERE IS A CLEAR FINDING IN THE PRESENT CASE OF THE AO HAVING FAILED TO EXAMINE THE ISSUE ON BOTH ITS FACTUAL AND LEGAL ASPECTS BY THE LD. CIT. IN FACT, THE VERY FACT THAT THE AO GRANTS THE ASSESSEE THE STATUS OF A `LOCAL AUTHORITY AND, YET, DENIES IT TAX EXEMPTION U/S. 10(20) WITHOUT ASSIGNING ANY REASON FOR THE SAME, WOULD GO TO SHOW A COMPLETE OM ISSION TO CONSIDER THE SAID ASPECT BY HIM WHILE FRAMING THE ASSESSMENTS. THE DECISION BY THE HONBLE ALLAHABAD HIGH COURT RELATES TO THE PRE-AMENDED LAW AND, CONSEQUENTLY, I S OF LITTLE SIGNIFICANCE IN INTERPRETING THE EXTANT LAW. THERE IS, AS SUCH, NO QUESTION OF THE AO HAVING ADOPTED ONE OF THE TWO POSSIBLE VIEWS. 3.3 THE SECOND ARGUMENT ADVANCED IS THAT IT HAVING BEEN DENIED EXEMPTION U/S. 10(20) ANYWAY, WHERE IS THE PREJUDICE. WE FIND THE CLAIM W HOLLY UNTENABLE. NON-GRANT OF THE STATUS OF LOCAL AUTHORITY WOULD ALSO OUST THE ASS ESSEES CASE FOR THE BENEFIT OF EXEMPTION U/S. 10(20) AT THE THRESHOLD. THE ASSESSEE HAS BEEN ADMITTEDLY GRANTED THE TAX-EXEMPT STATUS OF A `LOCAL AUTHORITY WITHOUT EXAMINING THE FACTUAL POSITION WITH DUE REGARD TO THE AMENDED LAW AND THE JUDICIAL PRONOUNCEMENTS IN THE MATTER. IF, ACCORDING A TAX-EXEMPT STATUS TO A PERSON, TO WHICH IT MAY NOT BE ENTITLED IN LAW, IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, WE WONDER WHAT WOULD BE ? THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC) HAS CLARIFIED ON THE SCOPE OF THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE , HOLDING THAT IT IS NOT DEFINED IN THE ACT, AND NOT AN EXPRESSION OF ART; UNDERSTOOD IN IT S ORDINARY MEANING, IT HAS A WIDE IMPORT, AND IS NOT CONFINED TO THE LOSS OF TAX (PG. 87). IN FACT, AS AFORE-NOTED, THE SAID TERM BEING DEFINED UNDER THE ACT ONLY U/S. 10(20), THE GRANT OF THE SAID STATUS IMPLIES ACCEPTANCE OF THE ASSESSEES CLAIM U/S. 10(20) TO T HAT EXTENT. AS SUCH, WE ALSO CONSIDER IT TO BE ALSO A CASE OF LOSS OF TAX. THERE IS, THUS, A PATENT MISAPPLICATION OF LAW. 3.4 FINALLY, WE MAY CONSIDER THE ASSESSEES CAS E ON MERITS; IT CLAIMING TO BE A `LOCAL AUTHORITY IN TERMS OF THE EXPLANATION TO S. 10(20), I.E., AS AMENDED, IN VIEW OF BEING CONSTITUTED U/S. 53A OF THE TOWN PLANNING ACT, 1108 E. THE REVENUE REFUTES IT BY STATING THE SAME TO BE OF NO RELEVANCE IN VIEW OF THE SPECI FIC DEFINITION U/S. 10(20). IN THIS REGARD, WE FIND THE LD. CIT HAS ONLY DIRECTED THE A O TO MAKE PROPER INQUIRIES, AND REDO ITA NOS. 423 & 424/COCH/2009 6 THE ASSESSMENTS ACCORDINGLY. THE SAME WOULD ONLY IM PLY OF THEM BEING MADE IN ACCORDANCE WITH THE LAW, AS ENUNCIATED BY THE HIGHE R COURTS OF LAW, CONSIDERING ALL THE RELEVANT ASPECTS, INCLUDING THE SCOPE OF THE AMENDM ENT (I.E., WHAT WAS SOUGHT TO ACHIEVED THEREBY) AS WELL AS THE FACTS OF THE ASSESSEES CAS E, WHICH WOULD INCLUDE THE STATE LEGISLATION BEING RELIED UPON, MAKING DUE INQUIRIES , AND AFTER ALLOWING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE BEFORE HIM. THE RELEVANT QUESTION WOULD BE THE SATISFACTION OR OTHERWISE OF THE MANDATE OF THE DEF INING PROVISION. THAT THE (STATE) LEGISLATION WOULD LEGALLY ENTITLE THE `MUNICIPALITY , OR WOULD BE ENTRUSTED BY THE (STATE) GOVERNMENT, WITH THE MANAGEMENT AND CONTROL, UNDERS CORES THEIR RESPECTIVE RELEVANCE, AND FOR WHICH THE PROVISIONS OF THE COI (PART IXA ` MUNICIPALITIES) AS WELL AS THE KERALA MUNICIPALITIES ACT MAY HAVE TO BE REFERRED TO. THER E HAS BEEN NO EXPRESSION OF OPINION BY THE LD. CIT, TO REQUIRE ITS CONSIDERATION BY US, AND NEITHER DID THE PARTIES EITHER ARGUE OR WERE HEARD THEREON. THE ISSUE THUS MUST BE CONSI DERED AT LARGE; NEITHER HE NOR SHOULD WE, PER THE INSTANT ORDER, BE CONSTRUED AS HAVING E XPRESSED ANY OPINION IN THE MATTER; BUT ONLY HIGHLIGHTED THE RELATED ASPECTS AS BROUGHT TO OUR NOTICE OR DEEMED RELEVANT. 4. IN VIEW OF THE FOREGOING, WE FIND MERIT IN T HE IMPUGNED ORDER HOLDING THE ASSESSMENT/S AS ERRONEOUS AND PREJUDICIAL TO THE IN TERESTS OF THE REVENUE ON BOTH THE COUNTS. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEALS ARE DISMIS SED. . SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 19TH APRIL, 2011 GJ COPY TO: 1. M/S. THIRUVANANTHAPURAM DEVELOPMENT AUTHORITY (T RIDA), VAZHUTHACAUD, TRIVANDRUM 695 010. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(2), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER, ITA NOS. 423 & 424/COCH/2009 7