Baddi Barotiwala Nalagarh Development Authority, Solan V. DCIT, Parwanoo

ITA 881/CHANDI/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8389 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: BIPIN NEGI C S VERMA
• Keywords: Gift; Business income; Question of law
• Section: 143(3); 12AA; 32; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.880 & 881/CHD/2014 (ASSESSMENT YEARS: 2010-11 & 2011-12 ) BADDI BAROTIWALA NALAGARH VS. THE D.C.I.T., DEVELOPMENT AUTHORITY, BADDI, CIRCLE PARWANOO, DISTRICT SOLAN, H.P. DISTRICT SOLAN, H.P. PAN: AAALB0528J (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI BIPIN NEGI, C.S.VERMA & NEERAJ SHARMA RESPONDENT BY : SHRI SUSHIL KUMAR & RAVI SARANGAL, CIT, DR DATE OF HEARING : 18.10.2016 DATE OF PRONOUNCEMENT : 12.01.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER PASSED BY COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA DATED 25.8.2014 FOR ASSESSMENT YEARS 2010-11 AND 2011-12. SINCE THE FACTS AND ISSUE INVOLVED IN BOTH THE APPE ALS ARE IDENTICAL, THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OFF BY THIS COMMON ORDER. 2 2. FOR THE SAKE OF CONVENIENCE, WE ARE DISCUSSING THE FACTS IN THE APPEAL OF THE ASSESSEE IN ITA NO.8 80/2014 RELATING TO ASSESSMENT YEAR 2010-11 AND THE DECISIO N GIVEN IN THIS APPEAL WILL APPLY TO OTHER APPEAL OF THE ASSESSEE IN ITA NO.881/CHD/2014 RELATING TO ASSESSM ENT YEAR 2011-12 MUTATIS MUTANDIS. 3. THE ASSESSEE HAS RAISED THE FOLLOWING CONCISE GROUNDS OF APPEAL BEFORE US : A. THAT THE IMPUGNED ORDERS DATED 19-03-2013 AND 25 - 08-2014 PASSED BY LD. ASSESSING OFFICER AND LD. APPELLATE AUTHORITY BELOW RESPECTIVELY, ARE AGAINST THE LAW AND FACTS OF THE CASE AT HAND. THE SAME IS THEREF ORE LIABLE TO BE SET ASIDE ON THIS SCORE ALONE. B. THAT THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE AMOUNT OF COLLECTION MADE BY THE APPELLANT AS BUSINESS INCOME. C. THAT THE LD. ASSESSING OFFICER HAS FAILED TO APPRE CIATE THE FACT THAT THE APPELLANT IS A SPECIAL AREA CONSTITUTED TO ENSURE PLANNED DEVELOPMENT OF THE BADDI BAROTIWALA NALAGARH AREA BY THE GOVERNMENT OF HIMACHAL PRADESH, VIDE NOTIFICATION DATED 21-07-2006. SUBSEQUENTLY EXERCISING POWERS CONFERRED IN SECTION 67 OF THE HIMACHAL PRADESH TOWN AND COUNTRY PLANNING ACT, 1977 VIDE NOTIFICATION DA TED 21-07-2006, BADDI-BAROTIWALA NALAGARH DEVELOPMENT AUTHORITY WAS CONSTITUTED AS A SPECIAL AREA 3 DEVELOPMENT AUTHORITY FOR NALAGARH, BADDI-BAROTIWALA AREA. D. THAT THE LD. ASSESSING OFFICER HAS ERRED IN LAW BY TREATING THE APPELLANT AS ASSOCIATION OF PERSON AND TREATING THE REVENUE RECEIPTS OF THE APPELLANT AS BUSINESS INCOME. TAXING THE SAME IS ILLEGAL AND CONTRARY TO THE FACTS. THUS THE ASSESSMENT ORDER DA TED 19-03-2013 IS VOID AB-INITIO. E. THAT THE LD. ASSESSING OFFICER IS NOT JUSTIFIED I N INITIATING PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE INCOME TAX ACT. F. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD O R DISPOSED OFF. 4. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE I.E. BADDI-BAROTIWALA-NALAGARH DEVELOPMENT AUTHORITY (BBNDA) WAS CONSTITUTED VIDE H.P. GOVERNM ENT NOTIFICATION NO. GAD/C(F)-5-1/2006 DATED 30.11.2006 UNDER SECTION 67 OF THE H.P. TOWN & COUNTRY PLANNIN G ACT, 1977. THE PURPOSE OF CREATION OF THIS AUTHORI TY WAS DEVELOPMENT OF THE AREAS OF BADDI, BAROTIWALA AND NALAGARH. FOR THE IMPUGNED YEARS, THE ASSESSEE FIL ED RETURN OF INCOME UNDER SECTION 139 OF THE INCOME TA X ACT DECLARING INCOME OF RS.11,57,42,995, WHICH WAS CLAI MED EXEMPT UNDER SECTION 10(20) OF THE INCOME TAX ACT. ASSESSMENT UNDER SECTION 143(3) WAS FRAMED IN THE S TATUS 4 OF AOP, AT AN INCOME OF RS.12,54,78,392/-, BEING TH E SURPLUS OF INCOME OVER EXPENDITURE, AFTER DENYING T HE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 10(20) OF THE ACT, SINCE THE ASSESSING OFFICER HELD THAT THE ASSE SSEE DID NOT QUALIFY AS A LOCAL AUTHORITY AS DEFINED UNDER THE SECTION. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LEARNED CIT (APPEALS) WHERE THE ASSESSEE MADE DETAI LED SUBMISSIONS BOTH VERBAL AND WRITTEN REPRODUCED AT P ARA 4 OF HIS ORDER. THE GIST OF THE SUBMISSION MADE WAS THAT THE ASSESSEE BEING THE GOVERNMENT BODY, FOR THE PUR POSE OF CARRYING OUT FUNCTIONS DELEGATED BY THE GOVERNME NT TO IT AND BEING FUNDED BY THE GOVERNMENT ALSO, THE ASS ESSEE CANNOT BE SAID TO BE CARRYING OUT ANY BUSINESS ACTI VITY RESULTING IN PROFITS. THEREFORE, THE SURPLUS SHOWN BY THE ASSESSEE IN ITS INCOME AND EXPENDITURE ACCOUNT COUL D NOT BE SAID TO BE INCOME DERIVED BY THE ASSESSEE. THE ASSESSEE PLEADED THAT THE GRANTS RECEIVED BY IT REPRESENTED PUBLIC MONEY TO BE UTILIZED FOR PUBLIC PURPOSE AND THEREFORE, COULD NOT BE SAID TO BE INCOME OF TH E ASSESSEE. THE ASSESSEE ALSO ARGUED THAT SINCE IT WAS NOT FORMED FOR THE PURPOSE OF EARNING PROFITS, IT COULD NOT BY ANY STRETCH OF IMAGINATION BE SAID TO BE AN AOP. T HE ASSESSEE RELIED ON A NUMBER OF CASE LAWS IN SUPPORT OF BOTH ITS ARGUMENTS. THE LEARNED CIT (APPEALS) AFTE R CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE HE LD THAT THE ASSESSEE WAS NOT A LOCAL AUTHORITY AS DEFI NED IN 5 SECTION 10(20) OF THE ACT AND WAS THUS NOT ENTITLED TO CLAIM EXEMPTION UNDER THE SAME. FURTHER, THE LD. C IT (APPEALS) HELD THAT BY VIRTUE OF THE EXPLANATION IN SERTED IN SECTION 2(31) THE ASSESSEE COULD NO LONGER CLAIM THAT SINCE IT WAS NOT CREATED FOR THE PURPOSE OF EARNING PROFITS IT COULD NOT BE TERMED AS AN AOP. THUS ALL THE G ROUNDS RAISED BY THE ASSESSEE WERE DISMISSED AND THE ORDER OF THE ASSESSING OFFICER WAS UPHELD. 6. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. DURING THE COURSE OF HEA RING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE STA TED THAT ASSESSEE REPRESENTED THE STATE AND BY VIRTUE OF ART ICLE 289 OF THE CONSTITUTION WHICH EXEMPTED PROPERTY AND INCOME OF A STATE FROM UNION TAXATION, WAS NOT AMEN ABLE TO INCOME TAX. THE LEARNED COUNSEL FOR THE ASSESSE E STATED THAT THIS GROUND WAS BEING TAKEN UP FOR THE FIRST TIME AND REQUESTED THAT THE SAME BE ADMITTED SINCE IT WAS A LEGAL GROUND AND COULD BE ADJUDICATED ON THE BASI S OF FACTS ON RECORD. THE ASSESSEE RELIED UPON THE DECI SION OF THE HON'BLE APEX COURT IN THE CASE OF NTPC VS. CIT , 229 ITR 383 (SC) IN THIS REGARD. THE LD. COUNSEL FOR T HE ASSESSEE THERAEAFTER MADE LENGTHY ARGUMENTS IN SUPP ORT OF HIS CONTENTION THAT THE ASSESSEE WAS INFACT THE STATE AND WAS NOT CARRYING ON ANY ACTIVITIES IN THE NATUR E OF TRADE OR BUSINESS. THE LD. COUNSEL FOR THE ASSESSE E DREW OUR ATTENTION TO VARIOUS DOCUMENTS PLACED IN THE PA PER BOOK IN SUPPORT OF HIS CONTENTIONS. 6 7. THE LD. DR, ON THE OTHER HAND, CHALLENGED THE ADDITIONAL GROUND RAISED AND FURTHER CONTROVERTED T HE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE THAT BY VIRTUE OF ARTICLE 289 OF THE CONSTITUTION THE IN COME OF THE ASSESSEE OUGHT TO BE TREATED AS EXEMPT FROM TAX ATION. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE REPRESENTATIVES, GONE THROUGH THE DOCUMENTS PLACED BEFORE US AS ALSO THE ORDERS OF THE AUTHORITIES BEL OW. 10. WE FIND THAT THE SOLE ISSUE BEFORE US IS THAT WHETHER THE ASSESSEE IS STATE NOT CARRYING OUT ANY ACTIVITY IN THE NATURE OF TRADE OR BUSINESS AND WHOSE INCOME , THEREFORE, CANNOT BE TAXED. PUTTING IT DIFFERENTL Y, THE ISSUE BEFORE US IS WHETHER THE ASSESSEE IS A PERSON AS DEFINED UNDER SECTION 2(31) OF THE ACT AND THUS AN ASSESSEE FOR THE PURPOSE OF THE ACT. SINCE THE I SSUE RAISED WAS AN ADDITIONAL GROUND, WE SHALL BEGIN BY FIRST ADJUDICATING THE ASPECT OF THE ADMISSION OF THE SAM E. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS WAS A LEGAL GROUND ARISING FROM THE ASSESSMENT PROCEEDINGS AND THE TRIBUNAL WAS NOT PREVENTED FROM CONSIDERING SUCH QUESTION OF LAW. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE JUDGMENT OF THE HON'BLE AP EX COURT IN THE CASE OF NATIONAL THERMAL POWER COMPAN Y LTD. VS. CIT, 229 ITR 383 IN THIS REGARD. THE LEAR NED D.R. ON THE OTHER HAND, OBJECTED VEHEMENTLY TO RAISING O F THIS ISSUE AT THIS POINT OF TIME STATING THAT THE ASSESS EE BEING A STATE NEVER RAISED IN ANY PROCEEDINGS EITHER BEFO RE THE 7 ASSESSING OFFICER OR THE CIT (APPEALS) AND, THEREFO RE, EVEN BY VIRTUE OF THE JUDGMENT OF THE HON'BLE APEX COURT IN NTPC (SUPRA), THE SAME SHOULD NOT BE ADMITTED. 11. AS REGARDS THE ADMISSIBILITY OF THE ADDITIONAL GROUND RAISED BEFORE US WE FIND THAT THE ISSUE RAIS ED BEFORE US IS A LEGAL ISSUE WHICH CAN BE ADJUDICATED ON THE BASIS OF MATERIAL ON RECORD. WE THEREFORE ADMIT THE SAME FOR ADJUDICATION. 12. NOW COMING TO THE MERITS OF THE CASE THE LEARN ED COUNSEL FOR THE ASSESSEE MADE LENGTHY ARGUMENTS TO THE EFFECT THAT THE ASSESSEE WAS IN FACT STATE, HAVING BEEN CREATED, GOVERNED AND FINANCED BY THE STATE FOR CAR RYING OUT THE FUNCTIONS OF THE STATE. THE INCOME OR FOR THAT MATTER THE SURPLUS GENERATED IN THE COURSE OF CARRY ING OUT ITS DESIGNATED ACTIVITIES WAS, THEREFORE, INCOME OF THE STATE WHICH BY VIRTUE OF ARTICLE 289 OF THE CONSTIT UTION WAS PRECLUDED FROM BEING SUBJECT TO UNION TAXATION. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING DOCUMENTS TO SUPPORT ITS CONTENTION THAT THE ASSESSEE WAS THE STATE ONLY : I) THE HIMACHAL PRADESH TOWN & COUNTRY PLANNING ACT PLACED AT PAGE 8 OF THE PAPER BOOK TO HIGHLIGHT THE OBJECT/PURPOSE OF THE ACT. II) CHAPTER-VIII OF THE HIMACHAL PRADESH TOWN & COUNTRY PLANNING ACT AT PAGES 25 TO 27 OF THE PAPER BOOK. 8 13. THE ABOVE TWO DOCUMENTS REFERRED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE WAS TO POINT OUT T HAT THE ASSESSEE WAS FORMED UNDER THE PROVISIONS OF THE HIM ACHAL PRADESH TOWN & COUNTRY PLANNING ACT, 1977, THE PURP OSE OF WHICH WAS PLANNING AND DEVELOPMENT AND USE OF LA ND FOR DEVELOPMENT AND ADMINISTRATION. THE LEARNED C OUNSEL FOR THE ASSESSEE POINTED OUT THAT THE IMPUGNED ACT WAS ENACTED BY THE HIMACHAL PRADESH LEGISLATIVE ASSEMBL Y IN 1977. CHAPTER-VIII OF THIS ACT WAS POINTED OUT TO SHOW THAT UNDER THE PROVISIONS OF THIS ACT THE STATE GOVERNMENT COULD DESIGNATE CERTAIN AREAS AS SPECIAL AREAS WHICH WOULD HAVE A SPECIAL AREA DEVELOPMENT AUTHORI TY FOR ITS DEVELOPMENT. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS FORMED BY VIRTUE OF THIS SPECIAL AREA DEVELOPMENT PROVISION, BADDI, BAROTIW ALA AND NALAGARH HAVING BEEN RECOGNIZED AS SPECIAL AREA FOR DEVELOPMENT PURPOSE, THE ASSESSEE WAS CONSTITUTED T O CARRY OUT DEVELOPMENT OF THIS AREA. THE LEARNED CO UNSEL FOR THE ASSESSEE THEREAFTER DREW OUR ATTENTION TO T HE DECISION OF THE APEX COURT IN THE CASE OF UNION OF INDIA & OTHERS VS. SHRI R.C. JAIN & OTHERS (1981) 2 SCC 308 , MORE SPECIFICALLY, TO PARA 6 OF THE ORDER WHERE THE APEX COURT HAD HELD THAT THE PLANNED DEVELOPMENT OF TOWN S WAS A GOVERNMENT FUNCTION WHICH HAS BEEN DELEGATED BY LEGISLATURE TO SUPPORT TOWN PLANNING AUTHORITIES OR DEVELOPMENT AUTHORITIES. THUS, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE FUNCTION PERFORMED BY THE ASSESSEE WAS A GOVERNMENT FUNCTION. TO BUTTRESS HI S 9 ARGUMENTS THAT THE ASSESSEE WAS IN FACT STATE THE L EARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE NOTIFICATION BY THE HIMACHAL PRADESH GOVERNMENT TOW N & COUNTRY PLANNING DEPARTMENT BY VIRTUE OF WHICH THE ASSESSEE WAS CREATED, PLACED AT PAPER BOOK PAGE NOS .36 TO 41. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REF ERRED TO A LETTER WRITTEN BY THE PRINCIPAL SECRETARY (TCP) T O THE GOVERNMENT OF HIMACHAL PRADESH, SHIMLA BY THE DIREC TOR, TOWN & COUNTRY PLANNING DEPARTMENT, HIMACHAL PRADES H IN WHICH THE ASSESSEE I.E. BBNDA HAS BEEN STATED TO HAVE BEEN CONSTITUTED UNDER THE PROVISIONS OF STATE LAW TO PERFORM FUNCTIONS OF THE STATE AND IS AN EXTENSION OF THE GOVERNMENT. 14. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO CLAUSE 68 OF THE HIMACHAL PRADESH TOWN & COUNTRY PLANNING ACT, 1977 WHICH STATED THAT EVERY SPECIAL AREA DEVELOPMENT AUTHORITY SHALL BE A BODY CORPORATE WITH PERPETUAL SUCCESSION AND A COMMON SE AL. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT DE SPITE HAVING BEEN CONSTITUTED AS A BODY CORPORATE IN SUBS TANCE IT WAS STILL THE ALTER EGO OF THE GOVERNMENT ITSELF DESIGNED/CONSTITUTED TO CARRY OUT THE FUNCTION S OF THE STATE, TO BE RUN BY OFFICIAL OF THE STATE AND ALSO FUNDED BY THE STATE. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION AT THIS POINT TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BIHARI LAL DOBRAY VS. ROSHAL LAL DOBRAY (1984) 1 SUPREME COURT CASES 551, 10 MORE SPECIFICALLY TO THE FINDINGS OF THE HON'BLE AP EX COURT AT PARA 21 OF THE ORDER WHEREIN IT WAS HELD THAT EV EN THOUGH THE INCORPORATION OF A BODY CORPORATE MAY SU GGEST THAT THE STATUTE INTENDED IT TO BE A STATUTORY CORP ORATION INDEPENDENT OF THE GOVERNMENT, IT IS NOT CONCLUSIVE ON THE QUESTION WHETHER IT IS REALLY SO INDEPENDENT. SOME TIMES THE FORM MAY BE THAT OF A BODY CORPORATE INDEPENDEN T OF THE GOVERNMENT BUT THE SUBSTANCE IT MAY BE JUST THE ALTER EGO OF THE GOVERNMENT ITSELF. TRUE TEST OF THE DETERMINATION OF THE SAID QUESTION DEPENDS UPON THE DEGREE OF CONTROL THE GOVERNMENT HAS OVER IT, THE E XTENT OF CONTROL EXERCISED BY THE SEVERAL OTHER BODIES OR COMMITTEES OVER IT AND THEIR COMPOSITION, THE DEGRE E OF ITS DEPENDENCE ON GOVERNMENT FOR ITS FINANCIAL NEEDS AN D THE FUNCTIONAL ASPECT, ETC. THUS, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT MERELY BECAUSE IT WAS CONSTITU TED AS A BODY CORPORATE WOULD NOT ADVERT AGAINST THE FACT THAT IT WAS STILL THE STATE ITSELF HAVING BEEN CREATED, GOV ERNED, ADMINISTERED AND FINANCED BY THE GOVERNMENT. THE LD . COUNSEL FOR THE ASSESSEE CONTENDED THAT IN A SENSE, THE ASSESSEE WAS THE ALTER EGO OF THE GOVERNMENT ITSELF . 15. HAVING CONCLUDED HIS ARGUMENTS ON ESTABLISHING THAT THE ASSESSEE WAS THE STATE ITSELF , THE LEARNED COUNSEL FOR THE ASSESSEE THEREAFTER ARGUED THAT IT WAS NOT INVOLVED IN CARRYING OUT ANY ACTIVITY IN TH E NATURE OF TRADE OR BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE HAVING BEEN CREATED FOR TH E 11 PURPOSE OF DEVELOPMENT OF SPECIAL AREAS WITH NO PRO FIT MOTIVE AT ALL, THE ASSESSEE COULD NOT BE SAID TO BE INDULGING IN ANY ACTIVITY IN THE NATURE OF TRADE OR BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE REF ERRED TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF NEW DELHI MUNICIPAL CORPORATION VS. STATE OF PUNJAB (19 77) 7 SUPREME COURT CASES 339 WHEREIN THE HON'BLE APEX CO URT HAD DRAWN A DISTINCTION BETWEEN GOVERNMENTAL ACTIVI TY AND TRADE AND BUSINESS CARRIED ON BY THE GOVERNMENT FOR THE PURPOSE OF CLAUSE (2), ARTICLE 289 AND HELD THA T UNLESS AN ACTIVITY IN THE NATURE OF TRADE AND BUSINESS IS CARRIED ON WITH A PROFIT MOTIVE, IT WOULD NOT BE A TRADE OR BUSINESS CONTEMPLATED BY CLAUSE (2) OF ARTICLE 289 OF THE CONSTITUTION. THEREAFTER, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FINDINGS OF THE ASSESSING OFFICER AT PARAS 4.3 AND 4.4 FOR ITS ORDE R AND STATED THAT EVEN THE ASSESSING OFFICER HAD HELD THA T THE ASSESSEE HAD BEEN FORMED BY A DECLARATION OF THE GOVERNMENT, ITS OFFICE BEARERS WERE MOSTLY APPOINTE D BY THE GOVERNMENT AND WERE EITHER GOVERNMENT OFFICERS OR OTHER PERSONS IN THE EMPANELMENT OF THE GOVERNMENT OR DERIVING BENEFIT FROM THE GOVERNMENT. AT PARA 4.4, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE ASSESSING OFFICER HAD HELD THAT THE ASSESSEE WAS NO T AN INDEPENDENT ENTITY IN THE SENSE THAT IT PRIMARILY DEPENDENT ON THE RECEIPTS OF THE TOWN & COUNTRY PLA NNING DEPARTMENT AND ASSISTANCE FROM STATE GOVERNMENT FUN D. THUS, THE LEARNED COUNSEL FOR THE ASSESSEE STATED T HAT 12 EVEN THE ASSESSING OFFICER HAD HELD THE ASSESSEE TO BE AN EXTENSION OF THE STATE. THE LEARNED COUNSEL FOR TH E ASSESSEE SUMMED UP HIS ARGUMENTS BY STATING THAT TH E ASSESSEE WAS A STATE CREATED BY THE TOWN & COUNTRY PLANNING DEPARTMENT, CARRYING OUT PURELY GOVERNMENT FUNCTIONS BEING RUN BY THE GOVERNMENT AND ALSO FUND ED BY THE GOVERNMENT. IT WAS THUS NOT DISTINCT AND SE PARATE FROM THE GOVERNMENT BUT A PART OF IT AND FURTHER, T HAT IT WAS NOT INDULGING IN ANY ACTIVITY IN THE NATURE OF TRADE AND BUSINESS I.E. WITH ANY PROFIT MOTIVE AND THUS B Y VIRTUE OF ARTICLE 289, IT WAS EXEMPTED FROM PAYING ANY TAX. 16. PER CONTRA, THE LEARNED D.R. STATED THAT THE CLAIM OF THE ASSESSEE THAT IT IS COVERED BY ARTICLE 289 OF THE CONSTITUTION IS INCORRECT. THE LEARNED D.R. PL ACED RELIANCE ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF ADITYAPUR INDUSTRIAL AREA DEVELOPMENT AUTH ORITY VS. UOI, 283 ITR 97(SC), WHEREIN IT WAS HELD THAT CONSIDERING ALL THE ASPECTS OF THE MATTER THE ASSES SEE WAS NOT ENTITLED TO CLAIM EXEMPTION FROM UNION TAXATION UNDER ARTICLE 289 OF THE CONSTITUTION OF INDIA. 17. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE ISSUE BEFORE US IS RELATING TO ARTICLE 289 OF T HE CONSTITUTION. IT IS PERTINENT TO REPRODUCE ARTICLE 289 OF THE CONSTITUTION FOR A BETTER UNDERSTANDING OF THE ISSUE IN HAND : 13 289. EXEMPTION OF PROPERTY AND INCOME OF A STATE FR OM UNION TAXATION (1) THE PROPERTY AND INCOME OF A STATE SHALL BE EXEMPT FROM UNION TAXATION (2) NOTHING IN CLAUSE ( 1 ) SHALL PREVENT THE UNION FR OM IMPOSING, OR AUTHORISING THE IMPOSITION OF, ANY TAX TO SUCH EXTE NT, IF ANY, AS PARLIAMENT MAY BY LAW PROVIDE IN RESPECT OF A TRADE OR BUSINES S OF ANY KIND CARRIED ON BY, OR ON BEHALF OF, THE GOVERNMENT OF A STATE, OR ANY OPERATIONS CONNECTED THEREWITH, OR ANY PROPERTY USED OR OCCUPI ED FOR THE PURPOSES OF SUCH TRADE OR BUSINESS, OR ANY INCOME ACCRUING OR A RISING IN CONNECTION THEREWITH (3) NOTHING IN CLAUSE ( 2 ) SHALL APPLY TO ANY TRADE O R BUSINESS, OR TO ANY CLASS OF TRADE OR BUSINESS, WHICH PARLIAMENT MAY BY LAW DECLARE TO BE INCIDENTAL TO THE ORDINARY FUNCTIONS OF GOVERNMENT 18. CLEARLY ARTICLE 289 OF THE CONSTITUTION EXEMPT S PROPERTY AND INCOME OF A STATE FROM TAXATION PROVID ED IT IS NOT IN RESPECT OF A TRADE OR BUSINESS CARRIED OUT B Y THE STATE ON WHICH TAX IS IMPOSED BY THE UNION. 19. THE SHORT QUESTION, THEREFORE, THAT HAS TO BE ANSWERED IN THE PRESENT CASE IS WHETHER THE INCOME FROM PROPERTY OF THE ASSESSEE AUTHORITY COULD BE SAID TO BE INCOME FROM PROPERTY OF THE STATE AND IF SO WHETHER THE SAME IS DERIVED FROM TRADE OR BUSINESS CARRIED OUT BY IT. 20. ON THE ISSUE, WHETHER THE INCOME OF THE ASSESSEE AUTHORITY CAN BE SAID TO BE INCOME OF THE STATE, WE FIND THAT IDENTICAL QUESTION HAD COME UP BEFORE THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF VIDARB HA HOUSING BOARD V. ITO [1973] 92 ITR 430 (BOM) WHEREI N AFTER EXAMINING THE RELEVANT PROVISIONS OF THE ENAC TMENT 14 BY VIRTUE OF WHICH THE ASSESSEE BOARD WAS CREATED, THE HON'BLE HIGH COURT HELD THAT IT WAS A DISTINCT ENTI TY SEPARATE FROM THE STATE. THE HIGH COURT POINTED OU T THAT THE FACT THAT THE APPELLANT WAS INCORPORATED AS A B ODY CORPORATE WITH PERPETUAL SUCCESSION AND COMMON SEAL , THAT SOME OF ITS MEMBERS COULD BE NOMINATED BY THE SPEAKER OF THE LEGISLATIVE ASSEMBLY AND BY THE STAT E GOVERNMENT, THAT IT COULD HAVE ITS OWN FUNDS WHICH CAN GET AUGMENTED BY DONATIONS, GIFTS OR LOAN BY CENTRA L GOVERNMENT, THAT IT WOULD PAY INTEREST ON LOAN TAKE N FROM GOVERNMENT, THAT ON DISSOLUTION OF THE BOARD, THE LIABILITIES WOULD VEST WITH THE STATE GOVERNMENT TO THE EXTENT OF PROPERTY AND FUNDS VESTED IN THE GOVERNME NT, ALL POINTED TO THE FACT THAT IT WAS SEPARATE AND DISTIN CT FROM THE STATE AND THUS COULD NOT ENJOY IMMUNITY FROM TA X UNDER ARTICLE 289 OF THE CONSTITUTION. THE RELEVANT FINDINGS OF THE HIGH COURT ARE AS UNDER: IN OUR VIEW, THOUGH IT IS TRUE THAT THE STATE HAS U NDOUBTEDLY AN OBLIGATION TO PROMOTE THE WELFARE OF ITS CITIZENS AND PROVIDING HOUSING ACCOMMODATION WOULD BE ONE OF THE WELFARE ACTIVITIES OF THE STATE, THE QUESTION IS WHETHER BY C ONSTITUTING THE PETITIONER BOARD UNDER THE MADHYA PRADESH HOUSIN G BOARD ACT, 1950, A SEPARATE LEGAL ENTITY HAS BEEN ESTABL ISHED UNDERTAKING THE VARIOUS ACTIVITIES ON ITS OWN OR WHETH ER THE ENTITY ESTABLISHED IS EITHER A DEPARTMENT OF THE STAT E GOVERNMENT OR AN AGENT OF THE STATE GOVERNMENT ACTI NG ON BEHALF OF THE STATE GOVERNMENT, FOR, IT IS OBVIOUS TH AT IF THE ACTIVITY UNDERTAKEN IS BEING PERFORMED BY THE PETITIO NER BOARD DIRECTLY AS THE DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT ACTING ON BEHALF OF THE STATE GOVERNMENT, IT WO ULD BE CLEAR THAT THE PROPERTY AND INCOME OF THE BOARD WOULD BE THE PROPERTY AND INCOME OF THE STATE GOVERNMENT, BUT IF THAT BE NOT THE CASE AND IF THE BOARD UNDER THE RELEVANT PRO VISIONS OF THE ACT IS A SEPARATE LEGAL ENTITY DISCHARGING FUNCTION S ENJOINED UPON IT ON ITS OWN AND NOT AS AN AGENT OR DEPARTMENT OF THE STATE GOVERNMENT, THEN CLEARLY THE IMMUNITY CLAIMED BY THE PETITIONER-BOARD UNDER ART. 289(1) OF 15 THE CONSTITUTION WOULD NOT BE AVAILABLE TO IT. IN OUR VIEW, WITH THE POSSIBLE EXCEPTION OF THE PROVISION CONTAINED IN S. 32A, NONE OF THE OTHER FEATURES POINTED OUT BY MR. THAKAR SHOWS AT ALL THAT THE BOARD IS A DEPARTMENT OF THE STATE GOVER NMENT OR IS ITS AGENT AND EVEN THE PROVISION OF S. 32A DOES N OT INDICATE THAT. UNDER THAT SECTION ALL MONEYS RECOVERABLE BY THE BOARD UNDER THE ACT OR UNDER ANY AGREEMENT ARE DECLARED T O BE RECOVERABLE AS ARREARS OF LAND REVENUE AND MR. THAKAR URGED THAT THIS PROVISION SHOWED THAT THE RECOVERIES OF T HE BOARD WILL HAVE TO BE REGARDED AS RECOVERIES OF THE STATE GOVE RNMENT, OTHERWISE THESE WOULD NOT HAVE BEEN MADE RECOVERABLE AS ARREARS OF LAND REVENUE. IN OUR VIEW, IT IS NOT POSSIB LE TO ACCEPT THIS SUBMISSION OF MR. THAKAR, FOR, ALL THAT S. 32 A PROVIDES FOR IS MERELY TO INDICATE A MODE OF RECOVER Y AND SIMPLY BECAUSE A PARTICULAR MODE OF RECOVERY WHICH I S GENERALLY AVAILABLE TO THE STATE GOVERNMENT FOR MAKIN G ITS RECOVERIES HAS BEEN MADE AVAILABLE TO THE BOARD FOR MAKING ITS RECOVERIES, IT CANNOT MEAN THAT THE SAID RECOVERI ES BECOME RECOVERIES OF THE STATE GOVERNMENT OR THAT THE RECOVERIE S MADE BY ADOPTING THAT PARTICULAR MODE BECOME RECOVERIES MADE BY THE BOARD FOR AND ON BEHALF OF THE STATE GOVERNMENT . SIMILARLY, THE PROVISION UNDER WHICH THE BOARD HAS BEE N DEEMED TO BE A LOCAL AUTHORITY FOR THE PURPOSES OF THE LAND ACQUISITION ACT COULD NOT BE SUGGESTIVE OF AN INFEREN CE WHICH WOULD FAVOUR OR SUPPORT THE PETITIONER'S CONTENTION. I N FACT, THE PROVISION CONTAINED IN S. 3(3) IS A DEEMING PROVISIO N WHICH IMPLIES THAT BUT FOR THE SAID PROVISION THE BOARD WO ULD NOT BE A LOCAL AUTHORITY, AND WHAT IS MORE, IT HAS BEEN DECLARED A LOCAL AUTHORITY FOR THE PURPOSES OF CERTAIN ENACTMENT, NAMELY, THE LAND ACQUISITION ACT, WHICH ONLY FACILITATES ACQUI SITION OF PROPERTIES FOR THE BOARD. THE FEATURES THAT THE BOAR D AS A CORPORATE BODY HAS NO POWER TO RAISE SHARE CAPITAL OR THAT ITS ACTIVITIES ARE NOT OF TRADING OR COMMERCIAL NATURE OR THAT THE ELEMENT OF PROFIT-MAKING IS ABSENT MAY HAVE SOME RELE VANCE ON THE POINT WHETHER ITS INCOME WILL ATTRACT EXEMPTI ON UNDER S. 4(3)(I) OF THE 1922 ACT, BUT FROM THESE FEATURES NO I NFERENCE COULD BE DRAWN THAT THE BOARD IS A MERE DEPARTMENT O F THE STATE GOVERNMENT OR ITS AGENT. IT IS TRUE THAT UNDER THE ACT THE BOARD WHILE DISCHARGING ITS FUNCTIONS DOES SO UNDER THE GENERAL SUPERVISION AND CONTROL OF THE STATE GOVERNME NT BUT THAT BY ITSELF CANNOT LEAD TO THE NECESSARY INFERENCE THAT THE BOARD IS A DEPARTMENT OR AGENT OF THE STATE GOVERNM ENT. AS AGAINST THIS, THERE ARE SEVERAL PROVISIONS IN THE ACT WHICH SUPPORT MR. MANOHAR'S CONTENTION FOR THE 1ST RESPONDENT. 11. IN THE FIRST PLACE, AS WE HAVE STATED IN THE EARL IER PART OF THE JUDGMENT, THE VERY CONSTITUTION OF THE BOARD UNDE R S. 3 OF THE ACT CLEARLY SHOWS THAT THE BOARD ON ITS INCORPORA TION SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND COMMON SEAL. THIS PROVISION CLEARLY SHOWS THAT PRIMA FACIE THE BOARD IS A STATUTORY ENTITY DISTINCT FROM THE STATE GOVERN MENT. EVEN THE CONSTITUTION OF THE BOARD WHICH HAS BEEN PROVIDED FOR BY S. 4 CLEARLY SHOWS THAT SOME MEMBERS OF THE BOARD COULD BE NOMINATED BY THE SPEAKER OF THE LEGISLATIVE ASSEMBLY AND BY THE STATE GOVERNMENT. THE PROVISION CONTAINED IN S. 1 2 OF THE 16 ACT WOULD BE A CLEAR POINTER TO THE BOARD BEING A SEP ARATE ENTITY DISTINCT FROM THE STATE GOVERNMENT. UNDER THAT SECTION THE BOARD SHALL HAVE ITS OWN FUND AND SUCH FUND IS TO GET AUGMENTED BY ACCEPTANCE OF GRANTS SUBVENTIONS, DONAT IONS OR GIFTS AS WELL AS LOANS FROM THE CENTRAL OR THE STATE GOVERNMENTS AND OBVIOUSLY THE BOARD WOULD BE PAYING INTEREST ON SUCH LOANS. NOW, IF THE BOARD WERE THE DE PARTMENT OF THE GOVERNMENT OR AN AGENT UNDERTAKING VARIOUS A CTIVITIES FOR AND ON BEHALF OF THE GOVERNMENT, NO PROVISION W OULD HAVE BEEN MADE ENABLING THE BOARD TO BORROW LOANS FROM TH E STATE GOVERNMENT OR TO PAY INTEREST THEREON TO THE STATE GOVERNMENT, FOR, IT IS INCONCEIVABLE THAT A PARTY WOULD PAY INTEREST TO ITSELF. THIS PROVISION, IN OUR VIEW, IS A CLEAR POINTER TO THE FACT THAT THE BOARD IS A DISTINCT ENTITY APAR T FROM THE STATE GOVERNMENT AND NOT A DEPARTMENT OR AN AGENT O F THE STATE GOVERNMENT. ON THE OTHER HAND, THIS PROVISION C LEARLY SUGGESTS THAT THE BOARD IS A SEPARATE ENTITY, POSSESS ES ITS OWN PROPERTY, ASSETS OR FUNDS AND UNDERTAKES THE VAR IOUS ACTIVITIES ON ITS OWN ACCOUNT. THE OTHER PROVISION WHI CH, IN OUR VIEW, IS OF A CLINCHING CHARACTER IS THE ONE TO BE F OUND IN S. 40(2) OF THE ACT. THAT PROVISION INDICATES AS TO WHAT SHOULD HAPPEN TO THE PROPERTY AND ASSETS OF THE BOARD UPON ITS DISSOLUTION BEING MADE BY THE STATE GOVERNMENT. UNDE R SUB- CL. (A) OF SUB-S. (2) OF S. 40 IT IS PROVIDED THAT WITH EF FECT FROM THE DATE SPECIFIED IN THE NOTIFICATION UNDER SUB-S. (1) , ALL PROPERTIES, FUNDS AND DUES WHICH ARE VESTED IN OR RE ALIZABLE BY THE BOARD SHALL VEST IN AND BE REALIZABLE BY THE S TATE GOVERNMENT. IF THE BOARD WAS ACTING AS A DEPARTMENT OF THE STATE GOVERNMENT OR WAS MERELY AN AGENT UNDERTAKING THE ACTIVITIES FOR AND ON BEHALF OF THE STATE GOVERNMENT , IT WAS UTTERLY UNNECESSARY TO MAKE THE PROVISION OF THE TY PE INDICATED ABOVE. THE VERY FACT THAT PROVISION HAS BEE N MADE IN S. 40(2)(A) THAT UPON THE DISSOLUTION OF THE BOARD ALL PROPERTIES, FUNDS AND DUES RECOVERABLE BY THE BOARD SHALL VEST IN THE GOVERNMENT CLEARLY SHOWS THAT THE BOARD IS A DISTINCT ENTITY AND IS NOT AN AGENT OR A DEPARTMENT OF THE STATE GOVERNMENT. SIMILARLY, S. 40(2)(B) IS A FURTHER INDICATIO N IN THE SAME DIRECTION. IT PROVIDES THAT ALL LIABILITIES ENFORCE ABLE AGAINST THE BOARD SHALL BE ENFORCEABLE AGAINST THE ST ATE GOVERNMENT BUT ONLY TO THE EXTENT OF THE PROPERTIES , FUNDS AND DUES VESTED IN AND REALISED BY THE STATE GOVERNMENT . IN OTHER WORDS, UPON THE DISSOLUTION OF THE BOARD IF THE BOARD IS FOUND TO HAVE CREATED LIABILITY IN EXCESS OF ITS ASSETS OR PROPERTIES AND FUNDS WHICH SHALL VEST IN THE STATE GOVERNMENT, TH EN THE STATE GOVERNMENT IS NOT RESPONSIBLE FOR SUCH EXCESS LIABILITIES INCURRED BY THE BOARD. IF THE BOARD WERE MERELY ACTI NG AS A DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT O F THE STATE GOVERNMENT, THEN THE STATE GOVERNMENT WOULD HAV E BEEN LIABLE FOR ALL THE LIABILITIES CREATED BY THE BOAR D. THESE PROVISIONS, IN OUR VIEW, RUN COUNTER TO THE CONTENTI ON URGED BY MR. THAKAR BEFORE US THAT THE PETITIONER-BOARD, WHEN IT UNDERTOOK THE ACTIVITIES ENJOINED UPON IT BY THE ACT, DID SO EITHER AS A DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT OF THE STATE GOVERNMENT ACTING ON BEHALF OF THE STA TE GOVERNMENT. ON THE OTHER HAND, THESE PROVISIONS CLEARL Y SHOW THAT THE PETITIONER-BOARD IS A SEPARATE STATUTORY BOD Y DISTINCT 17 FROM THE STATE GOVERNMENT AND IT HAS BEEN UNDERTAKI NG THE ACTIVITIES ENJOINED ON IT NOT AS AN AGENT OF THE STA TE GOVERNMENT BUT ON ITS OWN. IF THAT BE THE POSITION W HICH REALLY EMERGES FROM EXAMINATION OF THE SEVERAL PROVISIONS O F THE ACT, IT SEEMS TO US VERY CLEAR THAT THE INCOME AND PROPERT Y OF THE BOARD COULD NOT BE REGARDED AS INCOME AND PROPERTY O F THE STATE GOVERNMENT, WITH THE RESULT THAT THE IMMUNITY C LAIMED BY THE PETITIONER-BOARD UNDER ART. 289(1) OF THE CONSTIT UTION IS CLEARLY NOT AVAILABLE TO THE PETITIONER-BOARD. IN OUR VIEW, THEREFORE, ON AN EXAMINATION OF THE PROVISIONS OF THE ACT, THE CONTENTION RAISED BY MR. THAKAR MUST FAIL. 12. IN THIS CONTEXT IT WOULD NOT BE OUT OF PLACE TO RE FER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION VS. ITO (1964) 52 IT R 524 (SC). IN THAT CASE A SIMILAR QUESTION BASED ON THE PRO VISIONS OF ART. 289(1) OF THE CONSTITUTION WAS RAISED AND IMMUNITY FROM UNION TAXATION THEREUNDER WAS CLAIMED BY THE ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION, AND ON AN EXAMINATION OF THE RELEVANT PROVISIONS OF THE ROAD T RANSPORT CORPORATION ACT, 1950, UNDER WHICH THE ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION WAS CONSTITUTED, THE COURT CAME TO THE CONCLUSION THAT THE TRADING OR BUSINESS ACTIV ITY THAT WAS BEING CARRIED ON BY THE ANDHRA PRADESH STATE ROAD T RANSPORT CORPORATION WAS NOT CARRIED ON BY THAT CORPORATION EITHER AS A DEPARTMENT OF THE STATE GOVERNMENT OR AS AN AGENT O N BEHALF OF THE STATE GOVERNMENT, BUT THE CORPORATION INDULGED IN THE CONCERNED TRADE OR BUSINESS ACTIVITY ON ITS OWN AND IT WAS HELD THAT THE IMMUNITY CLAIMED BY THAT CORPORATION UNDE R ART. 289(1) OF THE CONSTITUTION WAS NOT AVAILABLE TO IT. IN THAT CASE THERE WERE PROVISIONS OF THAT ACT WHICH SHOWED THAT THE BULK OF THE CAPITAL NECESSARY FOR THE ESTABLISHMENT OF THE CORPORATION HAD BEEN CONTRIBUTED BY THE STATE GOVER NMENT, A SMALL PORTION BY THE CENTRAL GOVERNMENT AND A FEW SHAR ES WERE HELD BY SOME INDIVIDUALS ; THE PROVISIONS OF THE A CT ALSO INDICATED THAT THE ACTIVITY OF THE CORPORATION WAS CO NTROLLED BY THE STATE AND IN PARTICULAR THERE WAS A PROVISION T O BE FOUND IN S. 30 OF THE ACT FOR MAKING OVER SURPLUS RECEIPTS TO THE STATE GOVERNMENT AFTER DISBURSEMENTS INDICATED IN SS. 28 AN D 29 HAD BEEN MADE AND, NOTWITHSTANDING THESE FEATURES, WHI CH EMERGED FROM THE PROVISIONS OF THE ROAD TRANSPORT CORPORATIONS ACT, 1950, THE SUPREME COURT TOOK THE VI EW THAT THE OTHER FEATURES EMERGING FROM THE EXAMINATION OF OTHER PROVISIONS OF THE ACT SHOWED THAT THE ANDHRA PRADES H STATE ROAD TRANSPORT CORPORATION WAS A DISTINCT STATUTORY CORPORATION AND THE PROPERTY AND INCOME THEREOF WER E NOT THE PROPERTY AND THE INCOME OF THE STATE GOVERNMENT AND AS SUCH THE IMMUNITY FROM UNION TAXATION UNDER ART. 289(1) OF T HE CONSTITUTION COULD NOT BE CLAIMED BY THAT CORPORATION. IT IS TRUE THAT SOME DISTINGUISHING FEATURES WOULD BE NOTICED I F THE PROVISIONS OF THE MADHYA PRADESH HOUSING BOARD ACT, 1 950, ARE EXAMINED IN THE CONTEXT OF THE PROVISIONS WHICH OBTAINED IN THE ROAD TRANSPORT CORPORATIONS ACT, 1950, BUT, IN OUR VIEW, THE DISTINGUISHING FEATURES WHICH WERE POINTE D OUT BY MR. THAKAR COULD NOT BE REGARDED AS HAVING ANY BEARIN G ON 18 THE QUESTION WHICH IS REQUIRED TO BE CONSIDERED IN T HIS CASE BY US ; FOR EXAMPLE, IT WAS POINTED OUT BY MR. THAKAR THAT WHEREAS UNDER THE ROAD TRANSPORT CORPORATIONS ACT, 1 950, THERE WAS PROVISION FOR RAISING A SHARE CAPITAL WHIC H COULD BE SUBSCRIBED BY PRIVATE INDIVIDUALS, THERE WAS NO SUCH PROVISION FOR RAISING ANY SHARE CAPITAL FOR THE PETITI ONER- HOUSING BOARD, UNDER THE MADHYA PRADESH HOUSING BOAR D ACT, 1950 ; IT WAS ALSO POINTED OUT THAT THERE WAS A G LARING DIFFERENCE BETWEEN THE NATURE OF ACTIVITY UNDERTAKEN BY THE ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION AND THE NATURE OF ACTIVITY UNDERTAKEN BY THE PETITIONER-BOARD, AS, FOR INSTANCE, THE ACTIVITY UNDERTAKEN BY THE FORMER ENTITY WAS IN THE NATURE OF TRADING ACTIVITY, WHILE THE ACTIVITY UND ERTAKEN BY THE PETITIONER-BOARD COULD NOT BE REGARDED AS ANY TRAD ING ACTIVITY IN ANY SENSE OF THE TERM ; FURTHER, IT WAS PO INTED OUT THAT SINCE PROFIT MOTIVE WAS ABSENT IN THE INSTANT C ASE BEFORE US, THERE WAS NO QUESTION OF MAKING ANY PROVISION FO R MAKING OVER SURPLUS RECEIPTS TO THE STATE GOVERNMENT WHICH WAS A FEATURE WHICH APPEARED CLEAR UNDER S. 30 OF THE ROAD TRANSPORT CORPORATIONS ACT, 1950. IN THE FIRST PLACE, IN SPITE OF THE AFORESAID PECULIAR FEATURES WHICH OBTAINED UNDER THE ROAD TRANSPORT CORPORATIONS ACT, 1950, THE SUPREME CO URT TOOK THE VIEW THAT THE A. P. STATE ROAD TRANSPORT COR PORATION WAS A DISTINCT ENTITY. SECONDLY, AS STATED EARLIER, THE DISTINGUISHING FEATURES MENTIONED BY MR. THAKAR MAY BE RELEVANT ON THE POINT OF ATTRACTING THE EXEMPTION UN DER S. 4(3)(I) AND NOT ON THE ISSUE WHICH HAS BEEN RAISED. T HE PRINCIPAL QUESTION INVOLVED BOTH IN THAT DECISION AS WELL AS IN THE CASE BEFORE US HAS BEEN WHETHER THE INCOME AND THE PROPERTY OF THE BOARD COULD BE REGARDED AS THE INCOM E AND PROPERTY OF THE STATE GOVERNMENT AND ON THAT QUESTI ON THE PROVISIONS OF THE MADHYA PRADESH HOUSING BOARD ACT, 1 950, ESPECIALLY PROVISIONS OF SS. 3, 4, 12 AND 14, CLINCHING LY INDICATE THAT THE PETITIONER-BOARD CANNOT BE REGARDED AS A DEPARTMENT OR AN AGENT OF THE STATE GOVERNMENT AND WILL HAVE TO BE REGARDED AS A SEPARATE LEGAL ENTITY DISTINCT FRO M THE STATE GOVERNMENT, AND, THEREFORE, THE INCOME AND PROP ERTY OF THE BOARD COULD NOT BE REGARDED AS THE INCOME AND TH E PROPERTY OF THE STATE GOVERNMENT. IN OTHER WORDS, THE RELEVANT PROVISIONS CONCERNING A PARTICULAR ENTITY ESTABLISHE D UNDER A PARTICULAR ENACTMENT WOULD HAVE TO BE CONSIDERED FOR DECIDING THE QUESTION AND, IN OUR VIEW, AS STATED EARLIER, THE PROVISIONS OF THE MADHYA PRADESH HOUSING BOARD ACT, 1950, CLEARLY INDICATE THAT THE BOARD, ITS PROPERTY AND INCOME CANN OT BE REGARDED AS PROPERTY AND INCOME OF THE STATE GOVERN MENT. IN THIS VIEW OF THE MATTER, WE FEEL THAT THE PRINCIPLE EN UNCIATED IN THE SUPREME COURT'S DECISION IN THE CASE OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION (SUPRA), WOULD BE APPLIC ABLE TO THE INSTANT CASE BEFORE US AND ON AN ANALYSIS OF THE PROVISIONS OF THE CONCERNED ACT BEFORE US, WE HAVE COME TO THE CONCLUSION THAT THE PROPERTY AND INCOME OF THE BOARD IS NOT THE PROPERTY AND INCOME OF THE STATE GOVERNMENT. MR. THAK AR'S CONTENTION, THEREFORE, MUST FAIL (UNDERLINE SUPPLIED BEFORE US US) 19 21. BORROWING FROM THE ABOVE PROPOSITION AND APPLYING THE SAME TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT CAS E ARE IDENTICAL TO THAT IN THE ABOVE CASE IN VIDARBHA HOU SING BOARD (SUPRA). A PERUSAL OF THE FOLLOWING CLAUSES OF THE HIMACHAL PRADESH TOWN & COUNTRY PLANNING ACT, 1977, UNDER WHICH THE ASSESSEE AUTHORITY WAS FORMED, WOUL D SHOW THAT THE ASSESSEES CASE IS IDENTICAL TO THAT IN VIDARBHA HOUSING BOARD (SUPRA) : **68. (1) EVERY SPECIAL AREA DEVELOPMENT AUTHORITY SHALL BE A BODY CORPORATE WITH PERPETUAL SUCCESSION AND A COMMON SE AL UNLESS ABOLISHED AND SHALL HAVE POWER TO ACQUIRE, HOLD AND DISPOSE O F PROPERTY, BOTH MOVEABLE AND IMMOVEABLE TO CONTRACT AND SUE AND BE SUED BY THE NAME SPECIFIED IN THE NOTIFICATION UNDER SUB-SECTION (1) OF SECTION 66. (1) THE STATE GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE ABOLISH THE SPECIAL AREA DEVELOPMENT AUTHOR ITY CONSTITUTED UNDER SECTION-67OF THE ACT FROM SUCH DATE AS MAY BE SPECI FIED THEREIN AND THE AUTHORITY SHALL STAND ABOLISHED ACCORDINGLY. (2) THE STATE GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE ABOLISH THE SPECIAL AREA DEVELOPMENT AUTHOR ITY CONSTITUTED UNDER SECTION-67OF THE ACT FROM SUCH DATE AS MAY BE SPECI FIED THEREIN AND THE AUTHORITY SHALL STAND ABOLISHED ACCORDINGLY. (3) ON AND WITH EFFECT FROM THE DATE OF ABOLITION O F THE AUTHORITY ALL PROPERTIES, ASSETS, LIABILITIES, FUND S, DUES AND STAFF WHICH ARE REALIZABLE AND VESTED BY THE AUTHORITY SHALL VEST I N OR BE REALISABLE BY SUCH AUTHORITY OR CORPORATION OR AGENCY, AS THE CASE MAY BE AS THE STATE GOVERNMENT MAY DEEM FIT.' 72. (1) EVERY SPECIAL AREA DEVELOPMENT AUTHORITY SHALL ITS OWN FUND AND ALL RECEIPTS OF THAT AUTHORITY SHALL BE CREDITE D THERETO AND ALL PAYMENT OF THAT AUTHORITY SHALL BE MADE THEREFROM. (2) THE SPECIAL AREA DEVELOPMENT AUTHORITY SHALL LEVY T HE DEVELOPMENT AUTHORITY. CHARGE IN THE MANNER AS PRESCRIBED UNDER SECTIONS 6 1 AND 62 OF THIS ACT. (3) THE SPECIAL AREA DEVELOPMENT AUTHORITY MAY FOR ALL OR ANY OF THE PURPOSES OF THIS ACT (A) ACCEPT GRANTS FROM THE STATE GOVERNMENT OR A LOCAL AUTHORITY; (B) RAISE LOANS, SUBJECT TO SUCH TERMS AND CONDITIONS A S MAY BE PRESCRIBED. 78. (I) WHENEVER IN THE OPINION OF THE STATE GOVERNMENT THE CONTINUED EXISTENCE OF ANY AUTHORITY CONSTITUTED UNDER THIS A CT IS UN-NECESSARY OR UNDESIRABLE THE STATE GOVERNMENT MAY BY NOTIFICATIO N DECLARE THAT SUCH AUTHORITY SHALL BE DISSOLVED FROM SUCH DATE AS MAY BE SPECIFIED THEREIN AND THE AUTHORITY SHALL STAND DISSOLVED ACCORDINGLY. (2) AS FROM THE SAID DATE (A) ALL THE PROPERTIES, FUNDS AND DUES WHICH ARE VE STED IN OR REALIZABLE BY THE 20 AUTHORITY SHALL VEST IN OR BE REALISABLE BY THE STA TE GOVERNMENT; (B) ALL LIABILITIES WHICH ARE ENFORCEABLE AGAINST T HE AUTHORITY SHALL BE ENFORCEABLE AGAINST THE STATE GOVERNMENT; (C) FOR THE PURPOSE OF REALISING PROPERTIES, FUNDS AND DUES REFERRED TO CLAUSE (A), THE, FUNCTION OF THE AUTHORITY SHALL BE DISCHA RGED BY THE STATE GOVERNMENT ; (D) ALL POWERS AND FUNCTIONS TO BE EXERCISED OR DISCHARGED BY THE AUTHORITY UNDER THIS ACT SHALL BE EXERCISED AND DIS CHARGED BY THE DIRECTOR AND FOR THE PURPOSE ANY REFERENCE IN THIS ACT TO THE SAID AUTHORITY SHALL BE CONSTRUED AS A REFERENCE TO THE DIRECTOR 22. CLAUSE 68 OF THE ACT CLEARLY SHOWS THAT THE ASSESSEE AUTHORITY ON ITS INCORPORATION SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND COMMON SE AL AND SHALL HAVE POWER TO ACQUIRE, HOLD AND DISPOSE O F PROPERTY, BOTH MOVEABLE AND IMMOVEABLE, TO CONTRACT AND SUE AND BE SUED IN ITS OWN NAME. THIS PROVISION CL EARLY SHOWS THAT AN ASSESSEE IS A STATUTORY ENTITY DISTIN CT FROM THE STATE GOVERNMENT. CLAUSE 72 OF THE ACT STATES THAT THE ASSESSEE AUTHORITY SHALL HAVE ITS OWN FUND AND SUCH FUND IS TO BE AUGMENTED BY THE ACCEPTANCE OF GRANTS AS WELL AS LOANS FROM THE STATE GOVERNMENT. THE RAISI NG OF LOANS IS SUBJECT TO SUCH TERMS AND CONDITIONS AS MA Y BE PRESCRIBED. THIS PROVISION IS AGAIN CLEAR POINTER OF THE FACT THAT THE ASSESSEE AUTHORITY IS A SEPARATE ENTI TY POSSESSING ITS OWN PROPERTY, ASSETS AND FUNDS AND UNDERTAKING VARIOUS ACTIVITIES ON ITS OWN ACCOUNTS. 23. CLAUSE 78 OF THE ACT INDICATES AS TO WHAT SHOU LD HAPPEN TO THE PROPERTY AND ASSETS OF THE ASSESSEE AUTHORITY UPON ITS DISSOLUTION BEING MADE BY THE ST ATE GOVERNMENT. UNDER THE SAID CLAUSE, IT IS PROVIDED THAT ALL PROPERTIES, FUNDS AND OTHER DUES WHICH ARE VESTED I N OR REALIZABLE BY THE AUTHORITY SHALL VEST IN OR BE REA LIZABLE BY 21 THE STATE GOVERNMENT. IT FURTHER PROVIDES THAT ALL LIABILITIES ENFORCEABLE AGAINST THE AUTHORITY SHALL BE ENFORCEABLE AGAINST THE STATE GOVERNMENT. THE HON' BLE HIGH COURT OF BOMBAY IN THE CASE OF VIDARBHA HOUSIN G BOARD (SUPRA) READ AN IDENTICAL CLAUSE IN THAT CASE AND FOUND IT TO BE OF A CLINCHING CHARACTER TO SHOW THA T THE ASSESSEE WAS DISTINCT FROM THE STATE. THE HIGH COU RT STATED IN THAT CASE THAT IF THE BOARD WAS ACTING AS A DEPARTMENT OF THE STATE GOVERNMENT OR WAS MERELY AN AGENT UNDERTAKING THE ACTIVITIES FOR AND ON BEHALF OF THE STATE GOVERNMENT, IT WAS UTTERLY UNNECESSARY TO MAK E THE PROVISION OF THE TYPE INDICATED ABOVE. THE HIGH C OURT STATED THAT THE PROVISION MADE TO THE EFFECT THAT U PON THE DISSOLUTION OF THE BOARD ALL PROPERTIES, FUNDS AND DUES RECOVERABLE BY THE BOARD SHALL VEST IN THE GOVERNME NT CLEARLY SHOWS THAT THE BOARD IS A DISTINCT ENTITY A ND IS NOT AN AGENT OR A DEPARTMENT OF THE STATE GOVERNMENT. 24. IN VIEW OF THE SAME, WE FIND THAT THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THAT IN VIDHARBA HOUS ING SOCIETY (SUPRA) AND THE DECISION RENDERED THEREIN S QUARELY APPLIES IN THE PRESENT CASE MORESO WHEN NO OTHER DE CISION ON IDENTICAL FACTS FAVOURING THE ASSESSEE WAS BROUG HT TO OUR NOTICE. WE, THEREFORE, HAVE NO HESITATION IN H OLDING THAT THE ASSESSEE AUTHORITY COULD NOT BE TERMED TO BE AN EXTENSION OF THE STATE. EVEN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT IT IS THE SUBSTANCE W HICH IS RELEVANT FOR DETERMINING THE CASE OF THE ASSESSEE A ND NOT 22 FORM, IS DEFEATED BY THE RELEVANT CLAUSES REPRODUCE D ABOVE, WHICH CLEARLY POINT OUT THAT EVEN IN SUBSTAN CE THE ASSESSEE WAS NOT AN EXTENSION OF THE STATE. HAVING SAID SO, THE QUESTION OF GRANTING IMMUNITY UNDER ARTICLE 289 OF THE CONSTITUTION DOES NOT ARISE AT ALL. 25. EVEN THE HON'BLE APEX COURT IN ADITYAPUR INDUSTRIAL AREA DEVELOPMENT AUTHORITY VS. UOI, 283 ITR 97(SC) READ THE RELEVANT CLAUSES OF THE AUTHORITY I N THAT CASE, WHICH WE FIND ARE IDENTICAL TO THAT IN THE AS SESSEES CASE AND HELD IT TO BE A DISTINCT ENTITY SEPARATE F ROM THE STATE. THE RELEVANT FINDINGS AT PARA 10 OF THE ORD ER ARE AS FOLLOWS : '10.IT IS TRUE, AS SUBMITTED BY SRI VENUGOPAL, THAT CL. (2) OF ART. 289 EMPOWERS THE PARLIAMENT TO MAKE A LAW IMPOSING A TA X ON INCOME EARNED ONLY FROM TRADE OR BUSINESS OF ANY KIND CARRIED BY OR ON BEHALF OF THE STATE. IT DOES NOT AUTHORIZE THE PARLIAMENT TO IMPOSE A TA X ON THE INCOME OF A STATE IF SUCH INCOME IS NOT EARNED IN THE MANNER CONTEMPL ATED BY CL. (2) OF ART. 289. THIS, TO OUR MIND, DOES NOT ANSWER THE QUESTIO N WHICH ARISES FOR OUR CONSIDERATION IN THIS APPEAL. CLAUSE (2) OF ART. 28 9 PRESUPPOSES THAT THE INCOME SOUGHT TO BE TAXED BY THE UNION IS THE INCOM E OF THE STATE, BUT THE QUESTION TO BE ANSWERED AT THE THRESHOLD IS WHETHER IN TERMS OF CL. (1) OF ART. 289, THE INCOME OF THE APPELLANT/ AUTHORITY IS THE INCOME OF THE STATE. HAVING REGARD TO THE PROVISIONS OF THE BIHAR INDUSTRIAL AR EAS DEVELOPMENT AUTHORITY ACT, 1974, PARTICULARLY S. 17 THEREOF, WE HAVE NO MANNER OF DOUBT THAT THE INCOME OF THE APPELLANT/AUTHORITY CONSTITU TED UNDER THE SAID ACT IS ITS OWN INCOME AND THAT THE APPELLANT/AUTHORITY MAN AGES ITS OWN FUNDS. IT HAS ITS OWN ASSETS AND LIABILITIES. IT CAN SUE OR B E SUED IN ITS OWN NAME. EVEN THOUGH, IT DOES NOT CARRY ON ANY TRADE OR BUSI NESS WITHIN THE CONTEMPLATION OF CL. (2) OF ART. 289, IT STILL IS A N AUTHORITY CONSTITUTED UNDER AN ACT OF THE LEGISLATURE OF THE STATE HAVING A DISTINCT LEGAL PERSONALITY, BEING A BODY CORPORATE, AS DISTINCT FR OM THE STATE. SEC. 17 OF THE ACT FURTHER CLARIFIES THAT ONLY UPON ITS DISSOLUTIO N ITS ASSETS, FUNDS AND LIABILITIES DEVOLVE UPON THE STATE GOVERNMENT. NECE SSARILY THEREFORE, BEFORE ITS DISSOLUTION, ITS ASSETS, FUNDS AND LIABILITIES ARE ITS OWN. IT IS, THEREFORE, FUTILE TO CONTEND THAT THE INCOME OF THE APPELLANT/ AUTHORITY IS THE INCOME OF STATE GOVERNMENT, EVEN THOUGH THE AUTHORITY IS C ONSTITUTED UNDER AN ACT ENACTED BY THE STATE LEGISLATURE BY ISSUANCE OF A NOTIFICATION BY THE GOVERNMENT THEREUNDER .' (UNDERLINE SUPPLIED BY US) 26. THE APEX COURT FURTHER HELD THAT THE EXEMPTION OTHERWISE SPECIFICALLY PROVIDED TO THE ASSESSEE AUT HORITY 23 UNDER SECTION 10(20A)/10(20) HAVING BEEN EXPRESSLY TAKEN AWAY THERE WAS NO MERIT IN THE CONTENTION OF THE AS SESSEE. THE HON'BLE APEX COUORT HELD AS FOLLOWS : ACCORDING TO BASUS COMMENTARY ON THE CONSTITUTION OF INDIA (SIXTH EDN., P. 50, VOL. L) ARTS. 285 AND 289 ARE ANALOG OUS TO EACH OTHER INASMUCH AS WHILE ART. 285 EXEMPTS UNION PROPERTY F ROM STATE TAXATION, ART. 289 EXEMPTS THE STATE PROPERTY FROM TAXATION. WHILE CL. (1) OF ART. 289 EXEMPTS FROM UNION TAXATION ANY INC OME OF A STATE, DERIVED FROM GOVERNMENTAL OR NON-GOVERNMENTAL ACTIV ITIES, CL. (2) PROVIDES AN EXCEPTION, NAMELY, THAT INCOME DERIVED BY A STATE FROM TRADE OR BUSINESS WILL BE TAXABLE, PROVIDED A LAW I S MADE BY PARLIAMENT IN THAT BEHALF. CLAUSE (3) OF ART. 289 IS AN EXCEPT ION OF THE EXCEPTION PRESCRIBED BY CL. (2) OF ART. 289 AND IT PROVIDES T HAT INCOME DERIVED FROM PARTICULAR TRADE OR BUSINESS MAY BE MADE IMMUN E FROM UNION TAXATION IF PARLIAMENT DECLARES SUCH TRADE OR BUSINESS AS IN CIDENTAL TO THE ORDINARY FUNCTIONS OF GOVERNMENT (EMPHASIS, ITALICISED IN PRINT, SUPPLIED). THE REASON IS OBVIOUS. UNDER THE CONSTIT UTION, THE STATE HAS NO POWER TO TAX ANY INCOME OTHER THAN AGRICULTURAL INCOME. UNDER THE CONSTITUTION, POWER TO TAX 'INCOME' IS VESTED ONLY IN THE UNION. THEREFORE, WHILE ANY PROPERTY OF THE UNION IS IMMUN E FROM STATE TAXATION UNDER ART. 285(1), INCOME DERIVED BY THE S TATE FROM BUSINESS, AS DISTINGUISHED FROM GOVERNMENTAL PURPOS ES, SHALL NOT HAVE EXEMPTION FROM UNION TAXATION UNLESS THE PARLIAMENT DECLARES SUCH TRADE OR BUSINESS AS INCIDENTAL TO THE ORDINARY FUN CTIONS OF GOVERNMENT OF THE STATE [SEE ART. 289(3)]. (EMPHASIS, ITALICISED IN PRINT, SUPPLIED). 12. APPLYING THE ABOVE TEST TO THE FACTS OF THE PRESENT CASE IT IS CLEAR THAT THE BENEFIT, CONFERRED BY S. 10(20A) OF THE IT ACT, 1961 ON THE ASSESSEE HEREIN, HAS BEEN EXPRESSLY TAKEN AWAY. MORE OVER, THE EXPLANATION ADDED TO S. 10(20) ENUMERATES THE 'LOCA L AUTHORITIES' WHICH DO NOT COVER THE ASSESSEE HEREIN. THEREFORE, WE DO NOT FIND ANY MERIT IN THE SUBMISSION ADVANCED ON BEHALF OF THE A SSESSEE. 27. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE ASSESSEE IS DISTINCT AND SEPARATE FROM THE STATE AN D THUS NOT ENTITLED TO CLAIM EXEMPTION FROM TAXATION UNDER ARTICLE 289 OF THE CONSTITUTION. 28. WE MAY ADD THAT THE ASSESSEE HAD ALL ALONG CLAIMED ITSELF TO BE A LOCAL AUTHORITY AND ENTITL ED TO EXEMPTION FROM TAXATION UNDER SECTION 10(20) OF THE ACT WHICH WAS DENIED TO IT IN VIEW OF THE AMENDMENT MAD E IN THE DEFINITION OF LOCAL AUTHORITY W.E.F. 1.4.2003 BY THE FINANCE ACT, 2002 AND ALSO SINCE IT WAS HELD THAT I T DID 24 NOT QUALIFY AS SUCH TO BE A LOCAL AUTHORITY. EVE N BEFORE US, THE ORIGINAL GROUNDS OF APPEAL RAISED ARE AGAIN ST TREATING THE RECEIPTS OF THE ASSESSEE AS BUSINESS I NCOME. WE FURTHER FIND THAT THE ASSESSEE HAD FILED AN APPL ICATION FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT FOR CLAIMING EXEMPTION FROM TAXATION UNDER SECTIONS 11 AND 12 OF THE ACT, THUS CLAIMING ITSELF TO BE A TRUST O R SOCIETY CARRYING ON CHARITABLE ACTIVITIES. WE FIND THAT TH E ASSESSEE HAD BEEN GRANTED REGISTRATION UNDER SECTIO N 12AA FOR ASSESSMENT YEAR 2008-09. THUS EVIDENTLY, ALL ALONG THE ASSESSEE HAS CLAIMED ITSELF TO BE LIABLE TO TAX UNDER THE INCOME TAX ACT, 1961 BUT EXEMPT FROM THE SAME FOR SOME REASON OR THE OTHER. IN THE IMPUGNED YE AR, WE FIND THAT ALL ITS CLAIMS OF EXEMPTION HAVING BEEN EXHAUSTED, THE ASSESSEE TOOK BEFORE US THIS PLEA TH AT IT WAS A STATE/EXTENSION OF STATE AND THUS IMMUNE FROM UNION TAXATION BY VIRTUE OF ARTICLE 289 OF THE CONS TITUTION. THIS IS A TOTAL CONTRADICTORY STAND TAKEN BY THE AS SESSEE IN COMPARISON TO ITS STATED POSITION AS NARRATED AB OVE AND APPEARS TO BE AN AFTER THOUGHT TAKEN UP JUST FOR TH E SAKE OF PROLONGING LITIGATION. 29. IN VIEW OF THE ABOVE, WE HOLD THAT SINCE THE O NLY ISSUE AGITATED BEFORE US RELATING TO THE ASSESSEE B EING A STATE AND THUS IMMUNE FROM TAX UNDER ARTICLE 289(1) OF THE CONSTITUTION, HAVING BEEN DECIDED AGAINST THE ASSESSEE AND THE LD. COUNSEL FOR THE ASSESSEE NOT P RESSING OTHER GROUNDS OF APPEAL RAISED BEFORE US, THE APPEA L OF THE 25 ASSESSEE STANDS DISMISSED. 30. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12 TH JANUARY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH