AI Drafter 
TaxTMI 
TaxTMI 
2018 (4) TMI 192
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....ing questions of law:- "D.B. ITA No. 643/2008 (i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in holding that the expenditure of Rs. 11,74,15,986/- incurred by the assessee is of revenue in nature ignoring that the expenditure was incurred in bringing the inventories to the present location and condition as stipulated in the Accounting Standard-2 of ICAI and therefore are part of closing stock? (ii) Whether under the facts and circumstances of the case and in law the Tribunal was justified in deleting the disallowance made out of depreciation claimed even when it was not claimed on written down value of the asset? (iii) Whether under the facts and circumstances of the case and in law the Tribunal was justified in confirming the order of CIT(A) on the issue wherein the additions of Rs. 18,31,68,938/- made in the value of closing stock was reduced arbitrarily to Rs. 10,87,50,513/-thereby granting a whopping relied Rs. 7,44,18,425/- without appreciating that the value of opening stock has to be taken as closing stock of preceding year?" D.B. ITA No. 73/2011 "Whether on the facts and c....
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....come Tax Act, 1961 and therefore it was not exempt from income tax? (2) Whether on the facts and in circumstances of the case and in law, the Order passed by Ld. ITAT was not perverse, unjust, arbitrary and contrary to material on record? (3) Whether on the facts and circumstances of the case, the appellant is not a State as per Article 12 of the constitution of India and therefore exempt from income tax under Article 289(1) of the Constitution of India? (4) Whether on the facts and circumstances of the case, the Ld. ITAT was correct in law in holding that the appellant is liable to tax under the Income Tax Act, 1961?" D.B. ITA No. 392/2011 (1) Whether under the facts and circumstances of the case, and in law the ld. Tribunal was justified in not upholding the order of the CIT (A) whereby the rental income of Rs. 13,26,069 was treated as "Income from house property" u/s 22 as against "business income"? (2) Whether under the facts and in the circumstances of the case, and law the ld. Tribunal was justified in not holding that the deficit of Rs. 1,26,07,674/- on development work in progress being not allowable u/s 14A of the Act?"....
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....) suggests that an authority in order to be a local Authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and management of a municipal or local fund. What then are the distinctive attributes and characteristics, all or many of which a Municipal Committee, District Board or Body of Port Commissioners shares with any other local authority? First, the authorities must have separate legal existence as Corporate bodies. They must not be mere Governmental agencies but must be legally independent entities. Next, they must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. Next, they must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and ....
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.... to the ordinary functions of government" 11. He contended that benefit of exemption or any benefit under the Income Tax Act cannot be granted to the local authority. He has also taken us to the Article 243 read with Schedule 12 and also the order of the CIT(A) has observed as under:- "During the assessment proceedings the AO noted from the Income & Expenditure Account that the appellant had treated the land available with it as stock in trade for the year under reference. He further found that opening stock of the land was shown at 112.11 crore and closing stock at 107.06 crore. He asked the appellant to provide the details of working out such valuation. In response thereof the ld. AR informed that the appellant had valued the land according to reserves price of each scheme determined in the Trust Meeting. It was also explained that during the relevant period no change in reserve price was made. In this regard the ld. AR submitted the copy of decision of the meeting of the trust held on 29-5-1999. However, the AR could not file the basis of such reserve price as determined by the Trust. The AO found that as per provision of Rule 6(2) of Rajasthan Improvement T....
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....nt charges and 20% to cover maintenance cost. Thus value of opening stock is recalculated at Rs. 4,32,98,69,111/-. Thus the value of opening stock is increased by Rs. 3,20,87,56,328/- (4,32,98,69,111-1,12,11,12,783). On the above basis the AO have reworked out the value of closing stock at Rs. 4,46,26,09,367/- Thus the value of closing stock is increased by Rs. 3,39,19,25,266/- (4,46,26,09,367-1,07,06,84,101) The above calculation made contains an error even as per method adopted by AO i.e. increase in the value of the opening stock at Rs. 3,20,87,56,328/- is included in closing stock without considering that, part of the land was sold during the year. The correct calculation of the value of closing stock by applying method adopted by AO would be at 4,31,82,76,563/- Thus amount to be increased for value of opening stock remaining in closing stock is Rs. 3,06,44,23,524/- & not of Rs. 3,20,87,56,328/-. The value of closing stock accordingly, works out to Rs. 4,31,82,76,563/- as against Rs. 4,46,26,09,367/- worked out by the AO resulted in the year valuation of closing stock by Rs. 14,43,32,804/- (4462609367-4318276563). (....
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....d the ld. AR placed reliance on the following decisions:- A.L.A. Firmv. CIT 189 ITR 285 (SC) Sanjeev Woolen Mills v. CIT [2005] 149 Taxman 431/279 ITR 434(SC) Investment Ltd. v. CIT 77 ITR 533(SC)" 12. He contended that the CIT(A) has seriously committed an error in passing the order and the department has taken a contrary stand to what has been taken before Assessing Officer. He has also strongly relied upon the decision of the Supreme Court in the case of Adityapur Industrial Area Development Authority vs. Union of India & Ors. reported in 2006 (5) SCC 100 wherein it has been held as under:- "Similarly, the decision in New Delhi Municipal Council v. State of Punjab and Ors. (supra) does not advance the case of the appellant. It was held that the property/ municipal taxes levied by the New Delhi Municipal Council under the relevant Act constituted Union taxation within the meaning of Clause (1) of Article 289 of the Constitution of India. The levy of property taxes under the aforesaid enactments on lands or buildings belonging to the State Government was invalid and incompetent by virtue of the mandate contained in Clause (1) of Article 289. However, ....
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....at the High Court is right in concluding that the appellant/Authority could not claim exemption from Union taxation under Article 289(1) of the Constitution of India. The impugned notice issued by the Income Tax Authorities was, therefore, valid and legal and could not be successfully challenged in the writ petition. Accordingly, this appeal is dismissed but without any order as to costs." 13. Therefore, he contended that the exemption cannot be claimed only in the income of the State Government. 14. Taking into consideration he has also taken us to the different part of the judgment and contention raised by the parties and ultimately that the issue is squarely covered against the assessee. He has also relied upon the decision of the Tribunal in M/s Jammu Development Authority, Jammu vs. Commissioner of Income Tax ITA No. 30 (Asr)/2011 decided on 14th June, 2012. wherein it has been held as under:- "It would thus be seen that the income of a local Authority chargeable under the head "income from house property", "Capital gains" or "Income from other sources" or from a trade or business carried on by it was earlier excluded in computing the total income of the Authori....
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.... no part of such income or property could be distributed amongst the Members in any form or utilized for their benefit either during its operational existence or on its winding up or dissolution as such the object was a charitable one." 15. It is true that the functions which are carried out by the assessee are statutory functions and carry on for the benefit of the State Government for urban development therefore, in our considered opinion, the functions carried out by the authority is a supreme function and fall within the activity of the State Government. 16. In that view of the matter, the judgments which are strongly relied upon by counsel for the department are of no help in the facts of the case as the case relied upon by the department was in respect of industrial corporation which was under the statute for the purpose of making profit. The fees and other charges which are covered are statutorily for the development of the urban area. In that view of the matter, the judgment which sought to be relied upon by the counsel for the respondents, in our considered opinion, would be of importance and the functions which are carried out by the assessee is statutory function. ....