AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 443
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....y with equal force for other asst years also. As identical issues are involved for other asst years except variance in figures, all the appeals are taken up together for the sake of convenience and disposed of by this common order. 4. The return of income for the Asst Year 2003-04 was filed on 28.11.2003 disclosing loss of Rs. 146,78,95,230/- and assessment was completed u/s 143(3) of the Act on 10.2.2006 on the assessed income of Rs. 231,51,57,440/-. The case was reopened by the Learned AO on having the reason to believe that the assessee had been assessed considering the status of the assessee as local authority at a low rate instead of treating the status as company, due to failure on the part of the assessee to disclose full and true particulars for the Asst Year 2003-04 within the meaning of explanation 2(c )(ii) of Section 147 of the Act. After obtaining the approval of the Learned CIT, the case was reopened by issuance of notice u/s 148 dated 22.3.2010 served on the assessee on 29.3.2010. The assessee filed return in response to notice u/s 148 on 28.4.2010 in the status of local authority. The assessee sought for the reasons recorded by the Learned AO for re-opening the ass....
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....without jurisdiction, illegal, invalid and void ab-initio. 4. That the learned Commissioner of Income Tax (Appeals), as an appellate authority, was bound in law to also wholly quash the initiation of the impugned reassessment proceedings, in the undisputed facts and circumstances of the instant case. 5. That the learned Commissioner of Income Tax (Appeals) should have also held that the impugned Order dated 18th November, 2010 passed by the Assessing Officer, disposing of the preliminary objections raised by the Appellant Port Trust as to the invalidity of the initiation of the impugned reassessment proceedings, was wholly arbitrary, illegal and invalid in law." 5. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA and reiterated the submissions made before the ld CITA. 6. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee comprising of copy of orders passed u/s 143(3) of the Act in original scrutiny assessment proceedings (pages 1 to 23 of PB) ; copy of impugned notices u/s 148 of the Act (pages 24 to 29 of the PB) ....
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....012-13 dated 28.3.2015 accepting the status of assessee as a local authority (pages 101 to 108 of PB) . 6.1. We find that the assessee had filed its return of income for the first time in Asst Year 2003-04. Prior to this year, it claimed exemption u/s 10(20) of the Income Tax Act. By the Finance Act, 2002 w.e.f 1.4.2003 ( i.e from Asst Year 2003-04 onwards) an explanation was added to section 10(20) of the Act as below:- Explanation - For the purposes of this clause, the expression "local authority" means - (i) Panchayat as referred to in clause (d) of Article 243 of the Constitution; (ii ) Municipality as referred to in clause (e) of Article 243 P of the Constitution; or (iii ) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924) 6.2. We find that the expression 'local authority' as per section 3(31) of General Clauses Act shall mean a Municipal Committee, District Board, Body of Port Commissioner or other Authority legally entitled to , or entrusted by the Government with con....
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....nd. All Major Port Trusts therefore, fall within the meaning of the expression "local authority" under the General Clauses Act. By the Finance Act 2002 w.e.f. assessment year 2003-04, exemption under section 10(20) of the Act has been restricted to few local authorities viz. Panchayat as referred to in clause (d) of Article 243 of the Constitution, Municipal as referred to in Clause (e) of Article 243P of the Constitution, Municipal Committee & District Board and Cantonment Board as defined in Section 3 of the Cantonment's act, 1924. Thus w.e.f. assessment year 2003-04, only these local authorities continue to claim exemption under section 10(20). However, it may be noted that the definition of "local authority" as per General Clauses Act has not undergone any change. Therefore, KOPT remains as a local authority as per General Clauses Act, but its exemption under section 10(20) of the Act has been withdrawn w.e.f. assessment year 2003-04. In view of that, return has been correctly filed by KOPT in the status of a local authority. KOPT is governed by the Major Port Trusts Act. 6.5. The ld. AR apart from arguing that the assessee's status should be assessed only as a local autho....
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....er this Act shall be a body corporate having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold or dispose of property and may by the name by which it is constituted, sue or be sued'. Further, the Ministry of Shipping guidance note provides that 'the format of financial statements prescribed by the Indian Companies Act, 1956 has been used as the basis for developing the accounting format of port trusts together with the requirement of accounting standards' vide Ministry of Shipping [Ports Wing] letter No. PR-20021/2/98-PG dated 06/11/2002. The port trusts thus follow accrual system of accounting and the identification of revenue and expenditure is based on the principles contained in the Companies Act, 1956. Further, steps have already been taken for corporatisation of JNPT, New Mangalore and Tuticorin port trusts viz. registering with the jurisdictional Registrars of Companies. In view of above, I have the reason to believe that income of the assessee for the relevant assessment year in question has been assessed considering the status of the assessee as Local Authority at a low rate instead of treating the ....
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....he format of financial statements prescribed by the Companies Act 1956 has been used as the basis for developing the accounting format of Port Trusts. Reply - It may be noted that the format of financial statements adopted by KoPT is not that prescribed by Companies Act 1956. The format has been designed to make the financial statements more transparent and more useful for the stake holders. Even before withdrawal of exemption under section 10(20) of the Income Tax Act, KoPT was following accrual system of accounting and the same format for preparation of financial statements. Therefore, merely because KoPT follows accrual system of accounting, it cannot be deemed to a company for income tax purposes. (iv) In the reason for reopening, you have referred to Section - 5 of the Major Port Trusts Act which provides that every Board constituted under this Act shall be a body corporate having perpetual succession and a common seal with power, subject to the provisions of this Act to acquire, hold or dispose of property and may by the name by which it is constituted, sue or be sued. Reply- In this connection, it may be noted that body corporate does not always mean a Company. The defin....
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.... company formed and registered under any law for the time being in force in that State; (iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Oaman and Diu and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory : Provided that the registered or, as the case may be principal office of the company, corporation, institution, association or body in all cases is in India: Hence, KoPT is not also covered by this definition. (vii) Moreover, it may be noted that the assessee Kolkata Port Trust has registered for Service Tax and VAT purposes as a 'local authority' and not as 'Company' and the same has been accepted by the respective authorities. 6.7. We find that the ld AO had passed an independent order dated 18.11.2010 disposing off the preliminary objections raised by the assessee on reopening of assessment, wherein, he had justified the reopening of assessment by making the following observations:- "The only criteria at this juncture is that, the prime Minister's Council on Trade and Industry in its recommendation on ports, under the Infrastructure Development has recommen....
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....re if the A.O. is satisfied that any excess deduction or relief has been allowed, then it is permissible for him, to reopen the concluded assessments. In this case the facts on record gathered in course of regular assessment excess relief has been granted by computing the tax at lower rate. I therefore reject the Objections of the assessee to the reassessment proceedings initiated u/s 147 explanation 2(c)(ii) of the Income Tax Act. I, accordingly, propose to proceed with the reassessment proceedings u/s 147 of the Income Tax Act." 6.8. We find that Ministry of Shipping & Transport (Tranport Wing), Government of India, vide its communication dated 28.12.1977 addressed to the assessee that it being a local authority is not chargeable to income tax and that this view was also endorsed by the Central Board of Direct Taxes vide their Office Memorandum No. 184/67/76-IT (AI) dated 3.9.1977 wherein they have agreed that port trust is a local authority under the Income Tax Act. We find from another correspondence of Government of India, Ministry of Finance, Department of Revenue, Office of the Public Relations Officer, Income Tax Department, West Bengal vide proceedings No. PRO-I/TC/Pt.II....
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.... CAD/Taxes Cell/Income Tax/ 2010 dated 31.12.2010 Visakhapatnam Port Trust - Vide Ref.Letter No. FA?B&B/Reopening of Asst Dated 24.12.2010 6.10. We find that the Income Tax Act does not define the expression 'local authority' other than what is mentioned in the Explanation to section 10(20) of the Act. This definition as clearly stated in the said explanation is only for the purpose of section 10(2) of the Act and does not apply to the definition of the expression 'person' contained in section 2(31) of the Act, sub-clause (vi) whereof, also includes a 'local authority' as a 'person', who is an assessee within the meaning of section 2(7) of the Act. We also find that the definition of the expression 'local authority' has to be drawn from the General Clauses Act has been approved by the following decisions:- Buddha Veerinaidu vs State of Andhra Pradesh reported in (1983) 143 ITR 1021 at 1024 (SC) - It was held that the body of 'port commissioners' are specifically mentioned in section 3(31) of the General Clauses Act , as 'Local Authority'. The port commissioners are appointed specifically by the Government to administer the affairs of the ports and they ned not and do not disch....
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.... (Bom) The Hon'ble Bombay High Court applied the aforesaid principles in upholding that the said assessee was also a local authority, as defined in section 3(31) of the General Clauses Act, 1897, in the absence of any definition of that expression in the Income Tax Act, 1961. 6.11. We find that the decision of the Hon'ble Supreme Court in Adityapur Industrial Area Development Authority vs Union of India & Ors reported in (2006) 283 ITR 97 (SC), referred to the ld AO in the reasons recorded and in the re-assessment orders dated 30.12.2010, has no application whatsoever in deciding the controversy raised by the ld. AO. In that case, the question for consideration before the Hon'ble Supreme Court was as to whether Adityapur Industrial Area Development Authority governed by the Bihar Industrial Area Development Authority Act, 1974 was part of the state government and / or that its income was the income of the state government entitled to exemption from union taxation under Article 289 of the Constitution. Their Lordships of the Hon'ble Supreme Court held that in view of the insertion of the Explanation u/s 10(20) of the Income Tax Act, 1961, Adityapur Industrial Area Development A....