DCIT, CIR-35, KOLKATA, Kolkata V. M/s Kolkata Port Trust, Kolkata

ITA 997/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0762 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SAHELI DUTT OSD TAXATION
• Assessee Lawyers: G MALLIKARJUNA
• Section: 143(3); 37

Judgement Text

1 ITA NOS.997 & 998/KOL/2016 KOLKATA PORT TRUST. AYS- 2005-06, 2011-12 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NOS. 997 & 998/KOL/2016 ASSESSMENT YEARS: 2005-06 & 2011-12 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-35, KOLKATA. VS. M/S. KOLKATA PORT TRUST (PAN: AAAJK0361L) APPELLANT RESPONDENT DATE OF HEARING 14.12.2017 DATE OF PRONOUNCEMENT 21.12.2017 FOR THE ASSESSEE SHRI G. MALLIKARJUNA, CIT, DR FOR THE REVENUE MRS. SAHELI DUTT, OSD (TAXATION) ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-10, KOLKATA DATED 02.02.2016 FOR AYS. 2005-06 AND 2011- 12. 2. THE ONLY ISSUE TO BE DECIDED IN BOTH THE APPEAL S OF THE REVENUE IS THAT WHETHER THE ASSESSEE PORT TRUST CAN BE ASSESSED IN THE STATUS O F LOCAL AUTHORITY OR IN THE STATUS OF COMPANY IN THE FACTS AND CIRCUMSTANCES OF THE CAS E. 3. AT THE OUTSET ITSELF, THE LD. AR BROUGHT TO OUR NOTICE THAT FOR AYS 2003-04 TO 2005- 06 IN ITA NO. 2628 TO 2630/KOL/2013 PREFERRED BY TH E ASSESSEE PORT TRUST AND IN ITA NOS. 2868 TO 2870/KOL/2013 FOR AYS 2003-04 TO 2005-06 PR EFERRED BY THE DEPARTMENT THE SAME ISSUE AROSE AND THE TRIBUNAL WAS PLEASED TO HOLD TH AT THE ASSESSEE PORT TRUST HAS TO BE ASSESSED AS A LOCAL AUTHORITY AND NOT IN THE STAT US OF THE COMPANY. ON THE OTHER HAND, LD. DR SUBMITTED THE FOLLOWING : I) THE MINISTRY OF SHIPPING GUIDANCE NOTE PROVIDES THAT 'THE FORMAT OF FINANCIAL STATEMENT PRESCRIBED BY THE INDIAN COMPANIES ACT, 1 956 HAS BEEN USED AS THE BASIS FOR DEVELOPING THE ACCOUNTING FORMAT OF PORT TRUSTS TOG ETHER WITH THE REQUIREMENT OF ACCOUNTING 2 ITA NOS.997 & 998/KOL/2016 KOLKATA PORT TRUST. AYS- 2005-06, 2011-12 STANDARDS' VIDE MINISTRY OF SHIPPING (PORTS WING) L ETTER NO. PR-20021/2/98-PG DATED 6.11.2002. II) THE PORT TRUST THUS FOLLOWS ACCRUAL SYSTEM OF A CCOUNTING AND THE IDENTIFICATION OF REVENUE AND EXPENDITURE IS BASED ON THE PRINCIPLES OF THE COMPANIES ACT. III) LD. CIT (A) HAS ERRED IN ADMITTING THE SUBMISS ION OF ASSESSEE THAT 'UNDER 2 (17) (II) OF THE SAID ACT, ONLY THOSE BODY CORPORATE ARE CONSIDE RED'' AS A COMPANY, WHICH ARE INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA, WHICH CONDITION IS OBVIOUSLY NOT SATISFIED BY THE APPELLANT THEREIN'. IV) WE WOULD LIKE TO THE HIGHLIGHT THE FACT THAT AP PELLANT HAS ONLY PRODUCED HALF BAKED FACT AS PER THE ORIGINAL ARGUMENT FORWARDED BY THE A.O. IT WAS EXPLAINED THAT 'SECTION 2(26)(I) OF THE INCOME TAX ACT,1961 STATES THAT COMPANY ALSO MEANS ANY INDIAN COMPANY ,AND WHEN READ WITH THE SECTION 2 (26) (IA) WHICH STATES THAT 'INDIAN COMPANY' MEANS A COMPANY FORMS AND REGISTERED UNDER THE COMPANIES ACT,1956 A ND INCLUDES A CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT' WHI CH OBVIOUSLY IS THE CASE WITH KOLKATA PORT TRUST. V) KOLKATA PORT TRUST IS RESHAPED AND CONTINUED UND ER MAJOR PORT TRUSTS ACT, 1963 WHICH HAD COME INTO FORCE ON SUCH DATE 1 [AS THE CENTRAL GOVERNMENT, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, APPOINT. VI) WE WOULD ALSO LIKE TO HIGHLIGHT THAT KOLKATA PO RT TRUST WORKS AS A COMPANY AND MAJOR CRITERIA AS GIVEN IN COMPANIES ACT, 1956 IS SATISFI ED IN ITS FORM, STRUCTURE AND FUNCTIONING. VII) IN THIS REGARD GOVT. OF INDIA HAS ALREADY MADE EFFORTS, STEPS HAS ALREADY BEEN TAKEN FOR CORPORATIZATION OF JNPT, NEW MANGALORE AND TUTICORI N PORT TRUSTS VIZ. REGISTERING WITH JURISDICTIONAL REGISTRAR OF COMPANIES. VIII) ACCORDINGLY, IN OCTOBER 1996 POLICY GUIDELINE S WERE ISSUED WHICH PROVIDED FOR PRIVATE SECTOR PARTICIPATION/INVESTMENT IN THE MANY AREAS. AS A FURTHER STEP TOWARDS SECURING PRIVATE PARTICIPATION, POLICY GUIDELINES WERE ISSUED IN 199 7 TO ENABLE THE MAJOR PORTS TO SET UP JOINT VENTURES WITH FOREIGN PORTS, MINOR PORTS OR PRIVATE COMPANIES. THE MAJOR PORT TRUST ACT WAS AMENDED TO GIVE EFFECT TO THE GUIDELINES ISSUED IN 1996 AND 1997. IX) ON THE ABOVE LINE KOLKATA PORT TRUST HAS ALSO S ET UP DIFFERENT JOINT VENTURES E.G. HALDIA BULK TERMINALS, A JOINT VENTURE OF ABG INFRA LOGIST ICS AND LOA, THIS IS IN TUNE WITH KOPT WORKING AS A COMPANY. BERTH NO. 12 (AT HDC OF KOLKA TA PORT) WAS ALLOTTED ON 30.1.2002 TO A PRIVATE OPERATOR VIZ. MLS TATA MARTRADE INTERNATI ONAL LOGISTIC LTD. (TMILL), (A JOINT 3 ITA NOS.997 & 998/KOL/2016 KOLKATA PORT TRUST. AYS- 2005-06, 2011-12 VENTURE OF M/S. TATA STEEL AND A HOLDING CO. OF COM PANY) FOR A PERIOD OF 30 YEARS FOR ITS OPERATION, MANAGEMENT AND MAINTENANCE. X) RECOGNIZING THAT PORT OPERATIONS CANNOT BE MADE EFFICIENT OR COST EFFECTIVE, UNLESS PORTS WERE ENCOURAGED TO OPERATE ON COMMERCIAL LINES, THE GOVERNMENT PORT RESTRUCTURING IN INDIA, AS PART OF THE 1996 POLICY GUIDELINES, SUBST ANTIALLY INCREASED THE FINANCIAL AND OTHER POWERS OF THE PORT TRUSTS. XI) THE GOVERNMENT OF INDIA ALSO TOOK A DECISION TH AT ALL NEW PORTS WILL BE SET UP AS COMPANIES UNDER THE INDIAN COMPANIES ACT AND THE EX ISTING PORT TRUSTS WILL ALSO BE GRADUALLY CORPORATIZED AND SET UP AS COMPANIES. ACT ION HAS ALSO BEEN INITIATED TO CORPORATIZE THE JAWAHARLAL NEHRU PORT TRUST (JNPT) AND THE HALD IA PORT, WHICH ARE AMONG THE NEWER OF THE MAJOR PORTS. XII) APPELLANT IN HIS SUBMISSION HAS ALSO MENTIONED THIS FACT THAT THE ASSESSEE PORT TRUST HAS NOT BEEN CORPORATIZED TILL DATE. XIII) IN CONTINUATION WITH THE ABOVE ARGUMENTS, WE WOULD LIKE TO BRING TO THE NOTICE TO THE APPELLATE AUTHORITY THAT ENDLESSLY NON ACCEPTANCE O F AN AGREED AND REALISTIC POSITION AS PROVED BY THE GOVT OF INDIA DOES NOT MAKE THE ASSES SEE FREE FROM THE BURDEN OF REALIZING THE CONSEQUENTIAL REMEDIES AND ACTION TAKEN IN THIS REG ARD. IT MAY CONTINUE TO WITHHELD ITS CURRENT POSITION AND DENY THE TAX CONSEQUENCES AND PROLONG WITH TAX AVOIDANCE, WHICH CERTAINLY NEGATES THE BASIC SPIRIT OF LAW AND RELAT ED RULES. XIV) APPELLANT HAS SIMPLY IGNORED THE MAIN ARGUMENT HIGHLIGHTED BY HON'BLE SUPREME COURT IN THE R.C.JAIN CASE (SUPRA) THAT --- 'WE FINALLY COME TO THE IMPORTANT QUESTION WHETHER THE LEGISLATURE HAS VESTED ANY POWER OF TAXATION IN THE AUTHORITY. ONE OF THE SUBMISSIONS OF THE LE ARNED COUNSEL FOR THE RESPONDENT WAS THAT THE FUND OF THE AUTHORITY, REQUIRED TO BE MAINTAINED BY SEC. 23 OF THE DELHI DEVELOPMENT ACT, WAS NOT A LOCAL FUND AS NO PART OF IT FLOWED DIRECTLY FROM ANY TAXI NG POWER VESTED IN THE DELHI DEVELOPMENT AUTHORITY. THE SUBMISSION OF THE LEARNED COUNSEL WA S THAT THE FEES COLLECTED UNDER SEC. 12 OF THE ACT AND THE CHARGES LEVIED UNDER SEC. 37 OF THE ACT DID NOT PART-TAKE THE CHARACTER OF TAX BUT WERE MERE FEES WHICH WERE THE QUID PRO QUO FOR THE SERVICES W HICH WERE REQUIRED TO BE PERFORMED BY THE DELHI DEVELOPMENT AUTHORITY UNDER THE ACT. WE WERE REFERR ED TO HINGIR-RAMPUR COAL CO. LTD. &ORS. V. THE STATE OF ORISSA &ORS. WE ARE UNABLE TO AGREE WI TH THE SUBMISSION MADE ON BEHALF OF THE RESPONDENTS. IN THE FIRST PLACE WHEN IT IS SAID THA T ONE OF THE ATTRIBUTES OF A LOCAL AUTHORITY IS THE POWER TO RAISE FUNDS BY THE METHOD OF TAXATION, TAX ATION IS TO BE UNDERSTOOD NOT IN ANY FINE AND NARROW SENSE AS TO INCLUDE ONLY THOSE COMPULSORY EX ACTIONS OF MONEY IMPOSED FOR PUBLIC PURPOSE AND REQUIRING NO CONSIDERATION TO SUSTAIN IT, BUT I N A BROAD GENERIC SENSE AS TO ALSO INCLUDE FEES LEVIED ESSENTIALLY FOR SERVICES RENDERED. IT IS NOW WELL RECOGNISED THAT THERE IS NO GENERIC DIFFERENC E BETWEEN A TAX AND A FEE; BOTH ARE COMPULSORY EXACTI ONS OF MONEY BY PUBLIC AUTHORITY. IN DECIDING THE QUESTION WHETHER AN AUTHORITY IS A LOCAL AUTHOR ITY, OUR CONCERN IS ONLY TO FIND OUT WHETHER THE PUBLIC AUTHORITY IS AUTHORISED BY STATUTE TO MAKE A COMPULSORY EXACTION OF MONEY' 4 ITA NOS.997 & 998/KOL/2016 KOLKATA PORT TRUST. AYS- 2005-06, 2011-12 ON THE ABOVE PROPOSITION KOLKATA PORT TRUST FOR OBV IOUS REASON CANNOT BE REGARDED AS A LOCAL AUTHORITY, AS IT HAS NOT RIGHT TO IMPOSE TAX OF ANY KIND AND USE THAT FOR PUBLIC PURPOSE BUT ONLY TO EXACT FEES AND CHARGES THAT TOO FOR COMMERCIAL BENEFIT. 4. HOWEVER, WE ARE NOT PERSUADED TO ACCEPT THE AFOR ESAID CONTENTION OF THE LD. DR BECAUSE BY REASONED ORDER OF THE CO-ORDINATE BENCH CITED (SUPRA) WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW. WE ALSO NOTE THAT THE AO HAS ACC EPTED THE STATUS OF THE ASSESSEE PORT TRUST AS A LOCAL AUTHORITY IN THE RECENTLY CONCLUDED SC RUTINY ASSESSMENT FOR AY 2012-13 U/S. 143(3) OF THE ACT DATED 28.03.2015. WE FIND THAT A LL THE PORT TRUSTS SUCH AS CHENNAI PORT TRUST, MARMAGAO PORT TRUST, NEW MANGALORE PORT TRUS T, COCHIN PORT TRUST AND VISHAKAPATNAM PORT TRUST ARE BEING ASSESSED TO INCO ME TAX AS LOCAL AUTHORITY. TAKING NOTE OF THE AFORESAID FACTS AND THE COORDINATE BENC H DECISION IN ASSESSEES OWN CASE ON THE ISSUE IN HAND, RESPECTFULLY FOLLOWING THE SAME CITE D (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF LD. CIT(A). THEREFORE, WE DO NOT FIND ANY MERIT IN THE APPEAL PREFERRED BY THE REVENUE SO IT STANDS DISMISSED. 5. IN THE RESULT, APPEAL REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21ST DECE MBER. 2017. SD/- SD/- (J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21ST DECEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-35, KOLKATA 2 RESPONDENT . M/S. KOLKATA PORT TRUST, 15, STRAND ROAD, KOLKATA-1. 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, GUWAHATI BENCH, GUWAHATI / TRUE COPY, BY ORDER, SR. PVT. SECRETARY