TaxTMI 
TaxTMI 
2019 (4) TMI 755
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....icer is contrary to the facts and circumstances of the case and is against the principles of equity and natural justice. 2. The Learned Commissioner of Income-tax (Appeals) has erred in upholding the assessment under section 144 of the Income-tax Act. 3. The Learned Commissioner of Income-tax (Appeals) has erred in upholding the assessment when infact the notice issued under section 148 is invalid. 4. The Learned Commissioner of Income-tax (Appeals) has erred in upholding the assessment when infact there was no reason to believe that the income chargeable to tax has escaped assessment and no reason was served by the Assessing Officer to the Appellant herein during the course of the assessment proceedings. 5. The Learned Commissioner of Income-tax (Appeals) has erred in holding that the appellant herein is liable to tax when infact the appellant is a "state" under Article 289 of the Constitution of India and therefore, not liable to tax at all. 6. The Learned Commissioner of Income-tax (Appeals) and the Assessing Officer has erred in holding that the appellant herein is a "person" for the purposes of Income-tax Act and that it is liable t....
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....der the Act of State Legislature, therefore the assessee is Statutory Board and is not filing return of income. The assessee also contended that the assessee board was set up by the state Government by enacting law for the benefit of the people at large and its income is not chargeable to tax as per the provisions of section 10(46) of the Act, hence the assessee board is not filing return of income. 3. The assessing officer issued notice under section 142(1) dated 01.01.2014 and required certain information in writing and in the prescribed manner, which includes return of income for relevant assessment year, profit and loss account for the year ended on 31st March 2010, complete details of income/ receipt of money during financial year 2009-10 as appearing in the Form No.26AS shown in NSDL web site. The assessee furnished the copies of the account and further explained that the assessee board is 'State' and by virtue of Article 289 of the Constitution of India and its income is exempt from the Union taxes including Income tax, therefore the re-assessment proceedings be dropped. The submissions of the assessee was not accepted by the assessing officer and asked to furnish the det....
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....ncome from business" and Rs. 8,44,38,004/- earned by assessee on account of interest was treated as 'income from other sources'. The assessee has paid professional fee of Rs. 10,70,71,617/- out of which the assessee board deducted TDS only on the amount of Rs. 7,09,62,719/- only, and on remaining amount of Rs. 3,62,08,901/- the assessee failed to deduct tax at source. Thus, the said sum of Rs. 3,62,08,901/- was disallowed by assessing officer under section 40(a)(ia) of the Act. The assessing officer passed the assessment order under section 144 of the Act on 28.03.2014. 6. On appeal before ld. CIT (A) the action of the assessing officer was confirmed. The ld. CIT (A) confirmed the action of the assessing officer on similar view as of assessing officer. Thus, further aggrieved by the order of the ld. CIT (A) the assessee has filed present appeal before this Tribunal. 7. We have heard the Sh. Girish Dave Advocate; assisted by Sh. Tanzil R. Padvekar Advocate hereinafter referred Authorized Representative (AR) for assessee and Sh. Sunil Kumar Jha ld. CIT- DR & Sh. Manish Kumar Singh Sr DR hereinafter called Departmental Representative (DR) for the Revenue and perused the material....
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....mbers to be nominated by the Government from amongst the associations of industries, who are entrepreneurs of Small Scale Industries, Information Technology, Biotechnology, Gems and Jewellery, Pharmacy and Hotel Management, at least two of whom s hall be from out of the Mumbai and Pune Regions. 8. It was submitted that as per section 7 A of the State Act, The Government shall, by notification in the Official Gazette establish the Governing Council which shall be an pertaining to Diploma level technical. And as per the above mentioned clause, the Governing Council shall consist of the following; (i) The Minister of Higher and Technical Education Maharashtra State as President; (ii) The Minister of State for Higher and Technical Education as Vice- President; (iii) Members of the Governing Council. 9. The powers and duties are defined under section 22 of the Act, which are as (a) To advice the Government on matters of policy relating to Diploma Level Technical Education in general, and in particular namely; (i) Coordination between national policies and State policies in Diploma Level Technical Education; (ii) Co-ordination between Secondary, ....
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....f academic autonomy to institute, reviewing or revoking of autonomy granted; (o) To carry out all such acts as may be necessary to achieve the objective of this Act so as to improve, existed, expand the Diploma Level Technical Education in the State and to maintain and improve standard of Diploma Level Technical Education; (p) To make regulation for granting affiliation, accreditation, autonomous status, equivalence, eligibility institutes and reviewing or revoking affiliation or accreditation or equivalence, or autonomous status or eligibility; (q) To conduct the examinations of the Board; .......... ........... (zb) To admit candidates for the examination according to the regulations; (zh) To call for any information from any Diploma Level Institutions recognized by it to ensure maintenance of academic standard, to call for special reports, and information from the Regional Joint Director of Technical Education concerned on Diploma Level institutors recognized by it but not marinating the required academic standard and to recommend to the Directorate of Technical Education, withdrawal of recognition granted under the administr....
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.... Maharashtra State Board of Technical Education, Act 1997(MSBTE), it can be observed that on facts and in the circumstances that (a) Board is the arm of the Maharashtra State Government, formed solely for the purpose of administration of the Technical Exanimations to be conducted by Maharashtra State Government in the interest of general public in the state of Maharashtra. (b) The Board is an authority constituted by an enactment for administering and managing the Technical Examinations to be conducted by Maharashtra State Government through monitoring funds and activities of its regional offices of the state of Maharashtra. (c) Board has to discharge the function on behalf of the Maharashtra State Government in the public interest. (d) Activity of the Board is not of business or of trading. The surplus of the Board is utilized for creating infrastructure in the state and for the smooth functioning of its regional offices and payments to regional offices for discharging duties and functions by the Board. (e) Accounts of the Board (as required in the Act governing 1he Board), are subject to Audit and are required to be placed before the State Legislature for approval. (f) The appell....
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....purposes of such trade or business, or any income accruing or arising in connection therewith. The nature of activity of the appellant is neither trading nor of business of any goods or services. Appellant is a body entrusted with the responsibility of administration of technical education department of the state of Maharashtra. The assessee only collects the fees and penalties on behalf of the Government have decided by the Governing Council of the assessee, which is chaired by Minister of Education Govt. of Maharashtra. Therefore, at no point of time administration activity can be treated as Trade or Business. There is no trade or business carried on by the appellant. Mere temporary surplus arose as the said alleged surplus is not yet spent on various objects of the appellant does not mean the surplus becomes from trade or business. Therefore, unless it is shown that the appellant is carrying on trade or business and parliament by law has provided to tax such activity, no tax can be levied. 15. It was argued that meaning of State as per Constitution of India Article 12 of Constitution the word "State" has different meanings depending upon the context in which it is used. The e....
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.... the Supreme Court, has held that the Patna University is "a state". Mathew, J. in a separate but concurring judgment preferred a broader test that if the functions of the Corporation are of public importance and closely related to governmental functions It should be treated an agency or instrumentality of government and hence a 'State' within the ambit of Article 12 of the Constitution. 19. The definition of the expression "the State" in Article 12 is used in the concept of the State in relation to the Fundamental Rights guaranteed by Part III of the Constitution and the Directive Principles of State as above. Policy contained in Part IV of the Constitution which principles are declared by Article 37 to be fundamental to the governance of the country and enjoins upon the State to apply making laws. The State is an abstract entity and it can, therefore only set through its agencies or instrumentalities, whether such agency or instrumentality is human or juristic. 20. The ld. AR further submits that so far as exemption under section 10 of the Act is concerned, it was submitted that with the omission of clause (20) of section 10, income of such local authorities were su....
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....e order of authorities below. The ld. DR further submits that nothing is argued by ld.AR on re-opening of the assessment under section 147 or on the issuance of notice under section 148. Therefore, ground no.1 to 4 should be treated as not pressed. The assessee's Board was set up by the State Government as a "Body Corporate", the assessee may be sued or be sued by its corporate name only, it cannot use the name of State Government. Further, the assessee's Board has a right to acquire, hold and dispose of property of its own, which clearly indicates that the funds are vested in the assessee's Board and is independent of State Government. The assessee's Board has a right to dispose of movable and immovable property without any restriction. The Board is not established for the purpose of welfare people of Maharashtra but only for limited purpose of supervising the Institution imparting Diploma and technical education. The assessee is generating huge surplus and keeping it in FD's and earning interest income. The assessee's Board is given exemption from A.Y. 2015-16 onward. For the year under consideration, the assessee has neither applied nor received any exemption as provided under s....
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....ical persona and liable for filing return of income and surplus of various receipt over expenditure is to be recognized as the income of the assessee Board. The ld. CIT(A) further concluded that the specified income of public institutions, trust, authorities or commission are not liable for including in computing the total income of previous year provided they are covered under the provision of section 10(23C). Such trust or institutions or authorities are required to make an application in the prescribed form before prescribed authority for the purpose of seeking exemption of specified income. The assessee has not applied for such exemption. The assessee applied such exemption only on 18.02.2015. 25. The ld. CIT(A) further concluded that assessee Board is not established for the larger and broad purpose of welfare of people of State of Maharashtra but only for the limited purpose of supervising the Institutions imparting Diploma in Technical Education. The assessee is having supervisory role on various institutions and collecting substantial sum of money from students and Institutions in the form of fees, charges, penalties and accumulated huge surplus year after the year kept ....
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....hnology, Biotechnology, Gems and Jewellery, Pharmacy and Hotel Management, at least two of whom s hall be from out of the Mumbai and Pune Regions. 28. Section 7A prescribed establishment of Governing Council which shall be an Apex Body to control and monitor matter pertaining to Diploma level technical education at the State Level. The Governing Council shall consist of the following; (i) The Minister of Higher and Technical Education Maharashtra State as President; ((ii) The Minister of State for Higher and Technical Education as Vice- President; ((iii) State Secretary Technical Education - Member (iv) three Industrialist nominated by the Government - Members (v) Director of Technical Education, Maharashtra State - Member, (i) Secretary, Maharashtra State Board of Technical Education - Member (vii) Director, Maharashtra State Board of Technical Education. The name of Persons other than the Ex-Officio Members, who have been nominated, from time to time as a Member of Council are published in official Gazette of State Government. The powers and duties of Board of Directors are defined under section 22 of the Act as explained by ld. AR of the assessee which we have already referre....
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.... including condition of their services, control administration, safe custody and management of finance of the Board or any other matter which may be prescribed. As per section 46, the Regulation made by Board requires sanction of the State Government. Initially, Regulation was prepared by Government shall continue in force, until new Regulation are made by Board. Further, if any questions arise regarding the interpretation or doubt arising of the by-laws the same is liable to be decided by the State Government and such decision are final. Section 51 provides the immunity against any Suit, Prosecution or legal proceeding against the Government, Governing Council, Board or Members or servant of the Government for anything which is done or purported or intended to be done in pursuance of this Act in good faith. From the perusal of various statutory provisions, we may conclude that there is complete control of State Government over the affair of assessee Board. The power and duties of the Board activities as prescribed under section 22, which we have mentioned in para 9 supra and are not repeated here for the sake of brevity shows that none of the activity under taken or entrusted to t....
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....te participation. We further find that MSRTC is incorporated under special legislation i.e., Road Transport Corporation Act, 1950. We have examined the provisions of the said enactment. As per section 5 of the said Act, the State Government is only having power to appoint the Chairman and other Members in the Managing body. There is a full control of the State Government on the policy decisions as well as management. In our opinion, if we apply the test of the control and management as well as the equity participation, MSRTC is a State within Article 12 of the Constitution. Applying the above test, the Hon'ble Supreme Court has held, as discussed hereinabove, that the autonomous bodies like State Road Transport Corporation or Warehousing Corporation where there is a full control by the Government, either Central or State, these are the instrumentalities of the Government only. 12. The term Government is very much wide under the constitutional set up. Government may be Central or State, or it may be Local Government which is envisaged by our Constitution, like Zilla Parishad, Municipal Corporations, Municipal Councils, Panchayat Samithis, etc. The Public Works Departmen....
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....oration are of public importance and closely related to governmental functions. It would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government. 5. If a department of a Government is transferred to a corporation, it would be a strong factor supporting this inference of the corporation being an instrumentality or agency of the Government." After applying the cumulative effect of all the relevant factors mentioned above, if the body is found to be an instrumentality of the agency of the Government, it would be an authority included in term "State" under Article 12 of the Constitution of India. However, the tests indicated by the Hon'ble Apex Court in the case of Som Prakash Rekhi are merely indicative and not absolute and thus, have to be applied discretely. If any body or organisation falls within the criteria as laid down by the Hon'ble Apex Court it can be considered that it falls within the term "State". 12. If these tests are applied on the MSRTC, we observe that the Corporation satisfies majority of the conditions. The entire share capital of MSRTC is owned by State and Central Government. The Sta....