TaxTMI 
TaxTMI 
2017 (10) TMI 1338
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....d thereto as nullity?" 3. However, in view of the decision of this Court in the case of D.B. Income Tax Appeal No.643/2008 dated 25.07.2017 which is binding to both the parties wherein assessee has upheld to be local authority under the Act, reads as under: "In all these appeals common questions of law and facts are involved, hence, they are decided by this common judgment. 1. By way of these appeals, the assessee as well as the department have assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal preferred by the department reversing the view taken by the CIT(A) and in some appeals the appeal of the department was dismissed. 2. This Court while admitting the matter has framed the following 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....
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.... ITA No. 326/2009 "(1) Whether on the facts and in the circumstances of the case, Hon'ble ITAT was justified in ignoring the para 6 of the Accounting Standard-2 of ICAI for valuation of inventories to be inconsonance with section 145 of the Income Tax Act, 1961? (2) Whether on the law and facts of the case Hon'ble ITAT was justified in deleting the disallowance of the depreciation ignoring the Explanation 6 of Section 43(6) of I.T. Act, 1961 inserted by the Finance Act, 2008 with retrospective effect from 1.4.2003?" D.B. ITA No.357/2011 "(1) Whether on the facts and circumstances of the case and in law, the Ld. ITAT was right in holding that, the appellant is not a 'local authority' as contemplated u/s 10(20) of the Income 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 Arti....
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....d that this authority will fall under explanation 3 and the benefit of local self government is to be granted. This is supported by Article 243 read with Schedule 1, Schedule 12 Item (1) of the Constitution which clearly establish that the urban planning including term plan is to be covered under the Chapter 243 and recently in view of amendment in Chapter 9. 7. He has also relied upon the decision of the Supreme Court in the case of Union of India & Ors. vs. Shri R.C. Jain & Ors. reported in AIR 1981 SC 951 wherein it has been held as under:- "3. Let us, therefore, concentrate and confine our attention and enquiry to the definition of 'Local Authority' in Section 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of Section 3(31) 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 enti....
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....and Article 289 which reads as under:- "289. Exemption of property and income of a State from 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 from imposing, or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business 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 occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith (3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental 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 A....
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....to the aforesaid action of the AO and made the following submissions:- From the above it can be noted that the dispute is in respect of the following:- (i) Whether the AO has correctly calculated the closing stock even as per his method. (ii) Whether administrative, establishment and maintenance cost is to be included in the valuation of stock in trade. (iii) Whether closing stock is to be further increased by the addition of Rs. 11,74,15,986/- during the year. (iv) Whether the increase in the value of opening and closing stock by 147% is justified. The assessee has taken the value of opening stock of lands at Rs. 1,12,11,12,783/-. The AO have increased the value of the opening stock by 147.57% and further made addition of 30% for administration & establishment 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 incr....
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...., labour or other production costs. (b) Storage cost, unless those costs are necessary in the productions process prior to a further production stage. (c) Administrative overheads that do not contribute to bringing the inventories to their present location and condition. (d) Selling & distribution costs. From the above it is clear that the administrative, establishment and maintenance cost does not form part of the closing stock. The same has to be charged to profit & loss account in the year in which it is incurred. Therefore the addition of Rs. 6,57,52,952/- (3,52,24,796+3,05,28,156) made by the AO in the valuation of closing stock in trade as well as Rs. 1,48,43,97,609/- (79,52,13,005+68,91,84,604) in opening stock is incorrect and be deleted. In the regard 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 Office....
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....red to several decisions of this Court wherein this Court dealing with cases arising under Article 285 of the Constitution of India, which exempts properties of the Union from State taxation, took a similar view. We may usefully refer to the cases reported in: : AIR1999SC2573 Food Corporation of India v. Municipal Committee, Jalalabad and Anr., : (1995)5SCC251 Municipal Commissioner of Dum Dum Municipality and Ors. v. Indian Tourism Development Corporation and Ors., MANU/SC/1179/1994 Central Warehousing Corporation v. Municipal Corporation and : [1982]2SCR1 Western Coalfields Ltd. v. Special Area Development Authority, Korba and Anr. and Bharat Aluminium Company Ltd. v. Special Area Development Authority, Korba and Ors. MANU/MP/0056/1978 Having considered all aspects of the matter we hold that 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 a....
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....commercial organization. Therefore, the objects pursued by the Authority cannot be said to be charitable in view of the fact that the authority being a commercial organization with no restriction as to the application of the assets on dissolution or winding up of for charitable purposes. In order to find out whether organization is a charitable one, tests have been laid down by the B Hon'ble Supreme Court in the case of CIT vs. Surat Art Silk Cloth Manufacturers Association (1997) 121 ITR and CIT vs. Andhra Pradesh State Road Transport Corp. (1986) 159 ITR 1. In the case of Surat Art Silk Cloth Manufacturers Association, it was held as under:- "Since the income and property of the assessee were liable to be applied solely and exclusively for the promotion of the objects set out in the Memorandum and 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....