Astt. Commissioner of Income Tax, Lucknow V. M/s State Innovation In family planning Services Agency (SIFPSA), Lucknow

ITA 725/LKW/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0347 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Keywords: Rectification of order; Competent authority
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 725/LKW/2015 ASSESSMENT YEAR: 2010 - 11 ASSTT. CIT (EXEMPTION) LUCKNOW V. M/S STATE INNOVATION IN FAMILY PLANNING SERVICES 19, OM KAILASH TOWER VIDHAN SABHA MARG, LUCKNOW T AN /PAN : AABTS4498M (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI S. K. MADHUK, CIT (DR) RESPONDENT BY: SHRI S. C. DIXIT, ADVOCATE DATE OF HEARING: 19 0 3 201 9 DATE OF PRONOU NCEMENT: 29 0 3 201 9 O R D E R PER A. D. JAIN, V.P . : THIS IS REVENUE S APPEAL AGAINST THE ORDER OF THE LD. CIT(A) - 4, LUCKNOW DATED 16/9/2015 FOR ASSESSMENT YEAR 20 10 - 11 , TAKING THE FOLLOWING EFFECTIVE GROUNDS: 1. THE LD. CI T (A) HAS ERRED IN LAW IN ANNULL ING THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 DATED 30.03.2013. 2. THE LD. CTT(A) HAS ERRED IN LAW IN ALLOWING THE APPEAL O F ASSESSEE AGAINST THE ORDER OF THE A .O U /S 143(3) OF THE INCOME TAX ACT, 1961 WITHOUT TAKING COGNIZANCE OF THE ORDER MADE BY THE SAME A .O U/S 154 OF THE INCOME TAX ACT. 1961 ON THE APPLICATION OF ASSESSEE WHERE THE ASSESSEE'S SUBMISSION/RECORDS INCLUDING YEAR - WISE BREAKUP OF ACCUMULATED INCOME CLARIFIES ITSELF THAT THE ACCUMULATED INCOME PE RTAINING TO F.Y. 2002 - 03 IS RS. 15,58,53 ,973/ - AND THE BA LANCE ACCUMULATED INCOME OF RS. 36,41,91 , 502/ - PERTAINS TO F.Y. 2003 - 04. ITA NO.725/LKW/2015 PAGE 2 OF 6 2 . THE FACTS ARE THAT THE ASSESSEE IS A SOCIETY DULY REGISTERED UNDER SOCIETIES REGISTRATION ACT , 1860. IT HAD COME INTO EXISTENCE TO IMPLEMENT THE PROJECT GRANT SCHEME FOR THE 'INNOVATIONS IN FAMILY PLANNING SERVICES (IFPS), AS HAD BEEN SIGNED BETWEEN THE PRESIDENT OF INDIA, THROUGH MINISTRY OF FINANCE, DEPARTMENT OF ECONOMIC AFFAIRS, NORTH BLOCK, NEW DELHI AND UNITED STATE OF AMERICA, ACTING THROUGH THE AGENCY FOR INT ERNATIONAL DEVELOPMENT OF (USAID). THE SAID AGREEMENT ENVISAGED IMPLEMENTATION OF INNOVATION IN FAMILY PLANNING SERVICES (IEPS) PROJECT TO ASSIST THE STATE OF UTTAR PRADESH IN REDUCING THE RATE OF POPULATION GROWTH TO A LEVEL CONSISTENT WITH ITS SOCIAL AND ECONOMIC OBJECTIVES. 3 . THE SAID AGREEMENT, WHICH WAS INITIALLY FOR A DURATION OF TEN YEARS, ENVISAGED IMPLEMENTATION OF A PROJECT WHICH HAS BEEN DESCRIBED IN THE 'AMPLIFIED PROJECT DESCRIPTION' , AS UNDER: 'THE INNOVATIONS IN FAMILY PLANNING SERVICES (IFPS) PROJECT IS DESIGNED TO SERVE AS CATALYST FOR THE GOVERNMENT OF INDIA (GO I ) IN REORIENTING AND REVITALIZING THE COUNTRY'S FAMILY PLANNING SERVICES USING UTTAR PRADESH AS THE PRIMARY SITE AND TESTING GROUND FOR PROGRAMME INNOVATIONS. THE GOAL OF THE PROJECT IS TO ASSIST THE STATE OF UTTAR PRADESH IN REDUCING THE RATE OF POPULATION GROWTH TO A LEVEL CONSISTENT WITH THE SOCIAL AND ECONOMIC OBJECTIVES' 4 . AS PROVIDED IN THE SAID AGREEMENT, THE ASSESSEE SOCIETY IS CHAIRED BY THE CHIEF SECRETARY OF UTTAR PRADESH AND THE PRINCIPAL SECRETARY, MEDICAL HEALTH FAMI LY WELFARE AS ITS VICE CHAIRMAN . BESIDES, THE MEMBERSHIP OF THE G OVERNING B ODY IS BROAD , BASED WITH REPRESENTATIVE FROM NON - G OVERNMENTAL O RGANIZATIONS (NGOS), CHAMBERS AND EXPERTS MAKING UP THE MAJORITY. THE MANA GING DIRECTOR IS THE SECRETARY LEVEL IN THE SET UP OF INDIAN ADMINISTRATIVE SERVICE. 5 . AS FAR AS THE IMPLEMENTATION OF THE PROJECT IS CONCERNED, THE A MPLIFIED P ROJECT D ESCRIPTION ITSELF PROVIDES THAT THE PROJECT IS TO BE ITA NO.725/LKW/2015 PAGE 3 OF 6 IMPLEMENTED THROUGH A SOCI ETY REGISTE RED IN UTTAR PRADESH . THE I NITIAL DISBURSEMENTS TO THE SOCIETY WILL BE CONDITIONED ON IT BEING REGISTERED AS AN AUTONOMOUS SOCIETY, THE AUTONOMY OF THIS ORGANIZATION AND THE TECHNICAL CALIBER OF IT IS PERSONNEL AND IS CRITICAL TO SUCCESSFUL IMPLEMENTATION OF THE PROJECT. THE SOCIETY WOULD ESTABLISH ITS OWN PERSONNEL AND PROCUREMENT PROCEDURES AND HAVE THE AUTHORITY TO MANAGE ITS OWN BUDGET AND TO DISBURSE FUNDS TO GOVERNMENT AND NON - G OVERNMENT INSTITUTIONS IN SUPPORT OF THE P ROJECT OBJECTIVES. THE SOCIETY WOULD BE REGISTERED AND OPERATIONAL AS SOON AS PO SSIBLE AFTER EXECUTION OF THIS A GREEMENT. 6 . THE SOCIETY HAS A G OVERNING B ODY TO PROVIDE STRATEGIC AND PROGRAMMATIC DIRECTIONS IN SUCH AREAS AS THE DEVELOPMENT OF PERSONNEL AND PROCUREMENT POLICIES AND THE REVI EW OF TECHNICAL STRATEGIES FOR THE P ROJECT ACTIVITIES ; THAT T HE G OVERNING B ODY WOULD REVIEW AND APPROVE ANNUAL IMPLEMENTATION PLANS WHICH WOULD INCLUDE THE USE OF INDIAN AND FOREIGN CONSULTANTS AND THE USE OF THE FOREIGN EXCHANGE AND LOCAL CURRENCY BUDGETS FOR THE PROJECT ; THAT T HE G OVERNING B ODY WOULD OPERATE UNDER THE BROAD POLICY DIRECTIVES OUTLINED BY THE S TEERING C OMMITTEE ; AND THAT T HE G OVERNING B ODY WOULD BE CHAIRED BY THE CHIEF SECRETARY OF UTTAR PRADESH. 7 . THIS AGREEMENT, WHICH HAS BEEN CAPTIONED AS PROJECT GRANT AGREEMENT OF THE SAID AGREEMENT , WHEREIN THE PRESIDENT OF INDIA IS GRANTEE AND THE UNITED STATES OF AMERICA IS THE GRANTOR, PROVIDES VIDE SECTION B (4) THEREOF AS FOLLOWS: 'THIS AGREEMENT AND THE GRANT WILL BE FREE FROM ANY TAXATION OR FEES IMPOSED UNDER LAWS IN EFFECT IN THE TERRITORY OF THE GRANTEE' 8 . DURING THE ASSESSMENT PROCEEDINGS, THE A . O WAS OF THE O PINION THAT THE TAX EXEMPTION CANNOT BE GRANTED ON THE BASIS OF THIS AGREEMENT SIMPLICITER , AS THE SAME IS NOT PROVIDED IN THE ACT . ITA NO.725/LKW/2015 PAGE 4 OF 6 ACCORD INGLY , INVOKING THE PROVISIONS OF 11(3)(C) OF THE I . T ACT , HE WORKED OUT THE SHORTFALL IN THE UTILIZATION OF FUNDS OF THE SOCIETY AND MADE THE IMPUGNED ADDITION. 9 . BEFORE THE LD. CIT(A), THE ASSESSEE, INTER ALIA, CONTENDED THAT THE PROVISIONS OF THE PROVISO TO SECTION 143(3) OF THE ACT MANDATES THAT NO ORDER MAKING AN ASSESSMENT OF THE TOTAL INC OME OR LOSS OF A FUND OR THE INSTITU TION REFERRED TO IN SECTION 10(23C)(VIA) OF THE ACT SHALL BE MADE BY THE A.O , WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 10 , UNLESS, THE A.O HAS INTIMATED TO THE CENTRAL GOVERNMENT OR THE PRESCRIBED AUTHORITY, THE CONTRAVENTION OF THE RELEVANT PROVISIONS OF SECTION 10(23C) BY SUCH FUNDS OR THE INSTITUTION WHERE, IN HIS VIEW, SUCH CONTRAVENTION HAS TAKEN PLACE; AND THE APPROVAL GRANTED TO SUCH FUND OR THE INSTITUTION HAS BEEN WITHDRAWN OR THE NOTIFICATION ISSUED IN RESPECT OF SUCH FUND OR THE INSTITUTION HAS BEEN RESCINDED. 10 . THE LD. CIT(A) ANNULLED THE ASSESSMENT ORDER, HOLDING AS FOLLOWS: - 5.2 . I HAVE GONE THROUGH THE LEGAL CON TENTION RAISED BY THE LD. COUNSEL AND I FIND THAT THERE IS A LEGAL REQUIREMENT CONTEMPLATED IN PROVISO TO SECTION 143(3) WHICH MAKES IT INCUMBENT UPON THE A .O TO INTIMATE THE COMPETENT AUTHORITY ABOUT PERCEIVED CONTRAVENTION OF PROVISION OF SECTION 10(23)( C)(IV) AND TO HAVE THE APPROVAL/NOTIFICATION WITHDRAWN/RESCINDED, BEFORE HE P ROCEEDS TO MAKE AN ASSESSMENT ORDER WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 10. I ALSO FIND THAT THE A .O HAS NOT COMMENTED ON THIS ISSUE IN HIS REMAND REPORT DATED 10.0 9.2015, WHICH MAKES IT CLEAR THAT NO SUCH INTIMATION HAS BEEN MADE TO THE CENTRAL GOVERNMENT AND THE APPROVAL GRANTED U/S 10(23)(C)(IV) IN THE CASE OF THE APPELLANT SOCIETY STANDS WITH FULL FORCE. 5.3 IN VIEW OF THE ABOVE, THE ASSESSMENT MADE U/S 143(3) BY THE LD. A .O CANNOT BE SUSTAINED BECAUSE OF THE BREACH OF STATUARY REQUIREMENT STIPULATED IN PROVISO TO SECTION 143(3). ITA NO.725/LKW/2015 PAGE 5 OF 6 6. THE ASSESSMENT ORDER IS, THUS, LIABLE TO BE ANNULLED. I ORDER ACCORDINGLY. 11 . THE LD. D.R. HAS CONTENDED THAT T HE LD. CTT(A) HAS ERRED IN LAW IN ALLOWING THE APPEAL OF ASSESSEE AGAINST THE ORDER OF THE A.O U/S 143(3) OF THE INCOME TAX ACT, 1961 WITHOUT TAKING COGNIZANCE OF THE ORDER MADE BY THE SAME A.O U/S 154 OF THE INCOME TAX ACT , 1961 ON THE APPLICATION OF ASSESSEE WHERE THE ASSESSEE 'S SUBMISSION/RECORDS INCLUDING YEAR - WISE BREAKUP OF ACCUMULATED INCOME CLARIFIES THAT THE ACCUMULATED INCOME PERTAINING TO F.Y. 2002 - 03 IS RS.15,58,53,973/ - AND THE BALANCE ACCUMULATED INCOME OF RS.36,41,91 , 502/ - PERTAINS TO F.Y. 2003 - 04 . 12 . THE LD. A.R. OF THE ASSESSEE, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 13 . HEARD. AS PER THE SECOND PROVISO TO SECTION 143(3) OF THE ACT, THE POWER OF THE A.O ., TO FRAME AN ASSESSMENT ORDER IN A CASE LIKE THE PRESENT ONE, STANDS CIRCUMSCRIBED BY T HE NECESSARY STATUTORY MANDATORY REQUIREMENT OF (I) THE A.O, WHERE HE I S NOT INCLINED TO GIVE EFFECT TO THE PROVISIONS OF SECTION 10 OF THE ACT, TO INTIMATE THE CENTRAL GOVERNMENT OR THE PRESCRIBED AUTHORITY ABOUT THE CONTRAVENTION OF THE PROVISIONS OF SEC TION 10(23C) OF THE ACT AND TO, ACCORDINGLY, RECOMMEND AN Y, APPROVAL GRANTED TO THE FUND OR INSTITUTION TO BE WITHDRAWN , OR THE NOTIFICATION ISSUED IN RESPECT OF SUCH FUND OR INSTITUTION TO BE RESCINDED , AND (II) OF SUCH APPROVAL BEING WITHDRAWN . 14 . AS CORREC TLY OBSERVED BY THE LD. CIT(A), IN THE REMAND REPORT DATED 10/9/2015, THE A.O DID NOT MAKE ANY COMMENT ON THIS ISSUE, THEREBY MAKING IT OBVIOUS THAT NO INTIMATION, AS REQUIRED UNDER THE PROVISIONS OF SECTION 143(3) OF THE ACT STOOD MADE TO THE CENTRAL ITA NO.725/LKW/2015 PAGE 6 OF 6 GOVE RNMENT AND THAT THE APPROVAL GRANTED TO THE ASSESSEE UNDER SECTION 10(23C)(IVA) OF THE ACT CONTINUES UNABATED AND UN - WITHDRAWN . 15 . IN VIEW OF THE ABOVE MATTER, THE ORDER DATED 17/5/2013 , PASSED BY THE A.O UNDER SECTION 154 OF THE ACT, IS OF NO CONSEQUENCE SO FAR AS RE GA RDS THE PRESENT CONTROVERSY. THE GRIEVANCE OF THE DEPARTMENT IN THIS REGARD IS, THEREFORE, SHORN OF MERIT AND ENTIRELY UNCALLED FOR. THIS RECTIFICATION ORDER (APB: 45 - 49) PERTAINS TO THE ISSUE OF CHARGEABILITY OF TAX ON UNUTILIZED ACCUMULATED INCOME. THIS HAS NOTHING TO DO WITH THE ISSUE AT HAND, I.E., THE APPLICABILITY OF THE PROVISIONS OF SECTION 143(3) OF THE ACT, AS CONSIDERED HEREINABOVE. 16 . THEREFORE, FINDING NO ERROR THEREIN, THE ORDER UNDER APPEAL IS HEREBY CONFIRMED. 17 . IN THE RESULT, THE A PPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 / 0 3 /201 9 . SD/ - SD/ - [ T. S. KAPOOR ] [ A. D. JAIN ] ACCOUNTANT MEMBER VICE PRESIDENT DATED: 29 /03/ 201 9 JJ: 2003 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR BY ORDER ASSISTANT R EGISTRAR