TaxTMI 
TaxTMI 
2025 (8) TMI 1871
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....s and circumstances of the present case and without applying the correct preposition of law. 3 Whether Ld. CIT(A) is justified in holding that the AO has erred in not allowing the benefit provided in the order passed by the respective CIT(A) and Hon'ble ITAT while computing the total income of the Appellant Trust in spite of the facts that the Hon'ble ITAT in para 6 of order dated 08.06.2016 has directed to set aside the orders passed by the authorities below. 4 Whether Id. CIT (A) is justified in holding that the AO has erred in not following the decision of ld. Commissioner of Income Tax (Appeals), Kota in the case of Appellant Trust itself in earlier Assessment Years 2003-04 and 2004-05 and thereby not allowing the following expenditure while computing income of the appellant trust under head 'profits and gains from business or profession'-A. The non plan expenditure incurred for development work amounting to Rs. 3390.12 Lakhs. B. The expenditure incurred for development of Kachhi Basti amounting to Rs. 49.67 Lakhs. C. The expenditure for development work included under head "Deposit Work" amounting to Rs. 92.23 Lakhs. D. The expenditure for rep....
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....Y 2006-07), the revenue has raised the following grounds of appeal: - 1. Order of the Ld. CIT(A) is bad in law and needs to be quashed 2. Whether order passed by the Ld. CIT (A) is justified, ignoring the facts and circumstances of the present case and without applying the correct preposition of law 3. Whether Ld. CIT(A) is justified in holding that the AO has erred in not allowing the benefit provided in the order passed by the respective CIT(A) and Hon'ble ITAT while computing the total income of the Appellant Trust in spite of the facts that the Hon'ble ITAT in para 6 of order dated 08.06.2016 has directed to set aside the orders passed by the authorities below 4. on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in treating the rental income of Rs. 33.13 lakhs assessed under the head "income form house property" as "income from business. 5. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in allowing the expenses of Rs. 576.13 lakhs by treating the same as revenue expenditure viz: Non-plan expenditure incurred for development work amounting to Rs. 469.82 Lakhs Expenditure....
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....ture incurred for development work amounting to Rs. 907.92 lakhs. The expenditure incurred for development of Kachhi Basti amounting to Rs. 352.14 lakhs. The expenditure of Rs. 406.95 lakhs under head 'payment to RUIDP'. The expenditure for repair and maintenance of vehicles under head 'Machinery & plant' amounting to Rs. 0.34 Lakhs. The expenditure of Rs 6.11 lakhs incurred for social welfare under head 'Mahila and BAL Vikash Pariyojana. 6 On the facts and in the circumstances of the case, the Id. CIT(A) has erred in allowing the deduction of Rs. 793.79 lakhs by holding that ground rent, conversion charges, transfer fee etc. collected by the assessee also constituted the shares of State Government and Municipal Bodies and were never part of assessee's income viz: 15 percent of Rs. 1428.92 Lakhs being the amount under the head "Receipts from sale of residential plots". 15 percent of Rs. 755.92 Lakhs being the amount under the head "Receipts from sale of Commercial plots". 15 percent of Rs. 1089.95 Lakhs being the amount under the head "Receipts from sale of constructed Houses/Shops 2/3 rd of Rs. 109.07 Lakhs under head "Receipts from sale of land in....
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.... the ld. CIT (A) has erred in treating the rental income of Rs. 31.99 lakhs assessed under the head "income form house property" as "income from business. 7. Whether Ld. CIT(A) is justified in allowing deduction from the amount of Rs. 908.46 lakhs under the head receipts from land regularization and conversion and Nagariya Kar (Lease Rental) considering the same as share of receipts payable to the other parties and holding that the same do not partake the character of income of the assessee. 8. Appellant craves the right to add, alter or amend any grounds of appeal before the Hon'ble ITAT in the interest of justice In ITA No. 797/JPR/2024 (A.Y 2016-17), the revenue has raised the following grounds of appeal: - 1 Order of the ld. CIT (A) is bad in law and needs to be quashed 2 Whether order passed by the Ld. CIT (A) is justified, ignoring the facts and circumstances of the present case and without applying the correct preposition of law. 3 Whether the ld. CIT (A) is justified in holding that no adjustment is warranted in respect of amount of Rs. 34, 85,37,621/- made to the total income of the assessee on account of withheld amount ....
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....rred in not allowing various expenditure incurred by Appellant Trust in entirety. 7. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the set off of losses against the total income and has also erred in not allowing the carry forward of unabsorbed losses. 8. under the facts and the circumstances of the case and in law, the Ld. CIT (A) has erred in levying interest u/s 234A, 234B and 234C of the Act. 9. the appellant Company craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing. In ITA No. 773/JPR/2024 (A.Y 2003-04), the assessee has raised the following grounds of appeal: - 1. Under the facts and the circumstances of the case and in law, the order dated 27.03.2024 passed by the Ld. CIT(A) u/s 250 of the Income Tax Act, 1961 is perverse, non-speaking, arbitrary and bad in law and without proper service as required under law. 2. under the facts and circumstances of the case and in law, Ld. CIT (A) erred in passing Impugned order u/s 250 of the Act without providing opportunity of being heard including personal hearing, thereby violating the pr....
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....ed in not allowing the benefit of application of income as per Section 11 of the Act made by the Appellant Trust Towards the charitable objects of the Appellant Trust. 5. under the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not allowing the depreciation alternatively claimed by the Appellant. 6. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the set off of losses against the total income and has also erred in not allowing the carry forward of unabsorbed losses. 7. under the facts and the circumstances of the case and in law, the Ld. CIT (A) has erred in levying interest u/s 234A, 234B and 234C of the Act. 8. the appellant Company craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing. In ITA No. 803/JPR/2024 (A.Y 2006-07), the assessee has raised the following grounds of appeal: - 1. Under the facts and the circumstances of the case and in law, the order dated 31.03.2024 passed by the Ld. CIT(A) u/s 250 of the Income Tax Act, 1961 is perverse, non-speaking, arbitrary and bad in law and without proper servic....
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.... circumstances of the case and in law, the Ld. CIT has erred in upholding the addition of Rs. 1,86,29,94,499/- made by the Ld.AO to the total income of the Appellant Trust in respect of surplus from income and expenditure account 6. Under the facts and the circumstances of the case and in law, the Ld. CIT has erred in upholding the action of Ld. AO in requiring the account of the Appellant Trust to be audited under section 142(2A) of the Income Tax Act, 196 1 by special auditor 7. Under the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not allowing the benefit of application of income as per Section 11 of the Act made by the Appellant Trust Towards the charitable objects of the Appellant Trust. 8. under the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not allowing various expenditures incurred by Appellant Trust in entirety. 9. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the set off of losses against the total income and has also erred in not allowing the carry forward of unabsorbed losses. 10. under the facts and the cir....
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....n passing Impugned order u/s 250 of the Act without providing adequate opportunity of being heard 3. under the facts and the circumstances of the case and in law, the Ld. CIT (A) has erred in not providing the benefit u/s 11 and 12 of the Act to Appellant. 4. Under the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not allowing the benefit of application of income as per Section 11 of the Act made by the Appellant Trust Towards the charitable objects of the Appellant Trust. 5. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the allowing the depreciation alternatively claimed by the Appellant. 6. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing various expenditure incurred by Appellant Trust in entirety. 7. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the set off of losses against the total income and has also erred in not allowing the carry forward of unabsorbed losses. 8. under the facts and the circumstances of the case and in law, the Ld. CIT (....
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....section 10(2) is no more available to the assessee w.e.f Assessment Year 2003-04. This issue further reached up to the Hon'ble Supreme Court in the case of ITO vs. Urban Improvement Trust (2018) 409 ITR 1 (SC), wherein it was held as under:- "The Urban Improvement Trust constituted under the Rajasthan Urban Improvement Act, 1959 cannot be held to be covered by the definition of municipal committee as contained in Explanation (iii). The expression "municipal committee" occurring in clause (iii) has a definite purpose and object. The purpose and object was to cover those bodies which are discharging municipal functions but are not covered by the definition of municipalities as was required to be constituted by article 243Q of the Constitution of India." 5. There was another section, i.e. section 10(20A) of the Act directly dealing with the facts of the matter was also abolished w.e.f A.Y 2003-04. Thereafter, the assessee chosen for registration u/s. 12A of the Act, which was denied to the assessee hence the assessee, is in appeal before us. We have gone through the order of authorities below and various judicial pronouncements relied upon by the assessee. In addition to t....
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....ncorporation of Trusts (1) The State Government may, by notification in the official Gazette, establish, for the purpose of carrying out improvement of any urban area in the State, whether a master plan in respect thereof has or has not been prepared, a Board of Trustees to be called the Improvement Trust of the place where its principal office is situated, hereinafter called 'the Trust'. (2) Every such Trust shall be a body corporate by the aforesaid name having perpetual succession and a common seal with power to acquire, hold and dispose of property both movable and immovable and to contract and shall by the said name sue and be sued. 9. Constitution of Trust (1) The Trust shall consist of- (a) A Chairman, (b) Two members of the Municipal Board, if any, having authority in the urban area, x x (bb) x x x (c) such number of other persons, as may be determined by the State Government for each Trust, of whom one shall be a person belonging to scheduled tribe or scheduled caste, if no person of such caste or tribe is represented in the Trust by virtue of clause (a) or clause (b). x x x (2) The Ch....
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....t to another or to the Jaipur Development Authority in accordance with the rules made under section 74. 25. Power of appointment etc. Subject to the provisions of section 24 and to any rules for the time being in force, the power of appointing and granting leave to officers and servants of the Trust and censuring, reducing, suspending or dismissing them for misconduct and dispensing with their services for any reason other than misconduct, shall be vested- (a) in the case of officers and servants drawing such monthly salary as may be specified by the State Government for each Trust, in the Chairman, and (b) In other cases, in the Trust: Provided that, in the case of Government servants whose services are lent to the Trust, the power of granting leave only will so vest and the other powers specified in this section will be exercisable by the State Government or by an appropriate authority of the State Government upon a complaint made by the Trust in that behalf or otherwise: Provided further that officers may be appointed to administrative and technical posts in the Trust by the State Government either from amongst staff holding ....
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.... on such site whether before or after the erection of such buildings and the person or authority by whom or at whose expense such amenities are to be provided; (p) the construction of buildings for the accommodation (including shops) of the poor and the working classes or of any other class of the inhabitant of the area comprised in the scheme including such classes as are likely to be displaced by the execution of the scheme; (q) The provision of facilities for communications; (r) The reclamation or reservation of land for gardens, afforestation and the provision of fuel and grass supply and other needs of the population; (s) The planting and preservation of trees and plantations (t) The sale, letting or exchange of any property or land comprised in the scheme; and (u) Any other matter for which in the opinion of the State Government it is expedient to make provision with a view to the improvement of the area comprised in the scheme or the general efficiency thereof. 37. Power to sanction, reject or return scheme (1) The State Government may sanction, or may refuse to sanction or may return for reconsideration any sche....
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....orm all or any of the powers and functions which under any of the said provisions might have been exercised and performed by the Municipal Board, Council or Corporation or by the Chairman or President or by any officer thereof. Provided that the Trust may delegate to the Chairman or to any officer of the Trust all or any of the powers conferred under this section. 48. Transfer of duties etc. of Municipal Board to Trust The State Government may by notification in the official Gazette transfer to the Trust any of the duties, powers, functions and responsibilities of the Municipal Board and thereupon the Trust shall carry out, exercise, perform and discharge such duties, powers, functions and responsibilities. 68. Accounts and Audit (I) The Trust shall maintain proper accounts and other relevant records and prepare an annual statement of accounts including the balance sheet in such form as the State Government may prescribe. (2) The accounts of the Trust shall be subject to audit annually by the Examiner of Local Fund Audit and the provisions of the Rajasthan Local Fund Audit Act. 1954 (Rajasthan Act 38 of 1954) shall apply. ....
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....und, for compelling all or any of the officers in the service of the Trust to contribute to such fund at such rates and subject to such conditions as may be prescribed and for supplementing such contributions out of the funds of the Trust: Provided that a Government servant employed as an officer or servant of the Trust shall not be entitled to leave or leave allowance otherwise than as may be prescribed by the conditions of his service under the State Government; (l) For determining the conditions under which the officers and servants of the Trust or any of them shall, on retirement, receive pensions or gratuities or compassionate allowances and the amount of such pensions, gratuities and compassionate allowances; (m) For regulating every matter which, under this Act, may be or is required to be prescribed; x xx (n) Generally for the guidance of Trusts and public officers in all matters connected with the carrying out of the provisions of this Act; (o) For prescribing the rates of conversion charges; and (p) As to the authority to which, and the manner, in which an application for permission for change of use of land s....
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....ble by the Municipal Board; (b) All liabilities which are enforceable against the Trust shall be enforceable against the Municipal Board (c) for the purpose of completing the execution of any scheme sanctioned under this Act which has not been mile executed by the Tran of realising properties, funds and dues referred to in clause a the function of the Trust under this Act shall be discharged by the Municipal Board as if it were the Trust under this Act and (d) The Municipal Board shall keep separate accounts of all money respectively received and expended by it under this Act, until all loans raised hereunder have been repaid and until all other liabilities to in clause (b) have been duly met. 6. Now we are taking up the grounds raised by the assessee through the appeals mentioned (supra). Although, before the bench assessee never raised an issue that appellant is a "State" within the meaning of article 289(1) of the constitution of India i.e., an agent/an instrumental institution of state within the meaning thereof, so as to be not taxable under the Income Tax Act 1961. On this ground, as was never raised before the authorities below, to understand th....
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....its own is so firmly rooted in our notions derived from common law that it is hardly necessary to deal with it elaborately, and so, prima facie, the income derived by the appellant from its trading activity cannot be claimed by the State which is one of the shareholders of the corporation." The Hon'ble Supreme Court after analyzing the different clauses of Article 289(1) in the context of the claim made by the assessee held as under: The main point which we are examining at this stage: is the income derived by the appellant from its trading activity, income of the State under article 289(1) In our opinion, the answer to this question must being the negative. Far from making any provision which would make the income of the corporation the income of the State, all the relevant provisions emphatically bring out the separate personality of the corporation and proceed on the basis that the trading activity is run by the corporation and the profit and loss that would be made as a result of the trading activity would be the profit and loss of the corporation. There is no provision in the Act which has attempted to lift the veil from the face of the corporation and th....
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....come derived from the said trading activity is the income of the State. That is how ultimately, the cure of the problem is to determine whether the income in question is the income of the State and on this vital test, the appellant fails." In view of the ratio, as decided in the case of APSRTC by Hon'ble Supreme Court, the assessee cannot be treated as agent of state government and its income cannot be treated as income of Maharashtra State Government. 8. The assessee is being instrument of state is exempted from filing return of income even, although the assessee has filed return of income for the assessment years under consideration. Considering, the facts that the assessee Trust is under complete superintendence, and control of the State Government financially as well as administratively falls under the definition of 'State' as per article 12 of the Constitution of India. And it is entitled for immunity from the taxation of its income under the provisions of Income-tax Act. 9. It is observed that the assessee is exempted under Article 289 of the Constitution of India, as the same exempts' state income or property from taxation. On plain reading of abov....
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....ia. 12. The term 'State' thus includes executive as well as the legislative organs or the "Authorities" of the Union & States. Further, it may be noted that according Webster's Dictionary "Authority" means a person or body exercising power to command. In the context of Article 12 the word "authority" means the power to make laws, orders, regulations, bye-laws, notification etc. which have the force of law and power to enforce those laws. Further 'Local authorities' as defined in Section 3 (31) of the General Clauses, Act refers to authorities like Municipalities, District Boards, Panchayat, Improvement Trust and Mining Settlement Boards. 13. In Article 12 the expression 'other authorities' is used after mentioning a few of them such as, the Government, Parliament of India, the Government and Legislature of each of the States and all local authorities. In Article 12 the bodies specifically named are the Government of the Union and the States, the Legislature of the Union and the states and local authorities. There is no common genus running through these named bodies nor can these bodies so have placed in one single category on any rational basis. T....
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....g of Article-12 r.w.s. Article 289 of the Constitution of India. The CBDT has specifically exempted certain income by way of this notification. There is no change in the activities of the assessee since inception which establishes the fact that the assessee was never into the business of commercial activities. The source of income of assessee consists of grant from State Government, various fees/conversion charges collected from public to convert land use changes, receipt from auction of land etc. and receipt from other government bodies or interest on deposits. None of these items can be said to be carrying of any activities in the nature of trade, commerce or business. The assessee is not rendering any services in the nature of trade, commerce or business for a fee or any other consideration. The assessee engaged in regulation of concerned city/district in terms of town planning and improvement of residential and commercial property needs. In support of our observations we relied upon the decision of Hon'ble Supreme Court in M/s. Novopan India Ltd. v. Collector of Central Excise and Customs [1994] Supp. (3) SCC 606, for the preposition that once the provision is found applica....
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....aged by our Constitution, like Zilla Parishad, Municipal Corporations, Municipal Councils, and Panchayat Samithi's, etc. The Public Works Department is part of the Government. In our opinion, this aspect has not been considered by the authorities below and they have closed door to the assessee to make out the case for examination under Rule 6DD. We are, therefore, of the opinion, that in the light of our above discussion, the plea of the assessee needs reconsideration by the Ld. CIT (Appeals). We, therefore, set aside the issue in respect of the disallowance made u/s. 40A (3) to the file of the Ld. CIT (A) to decide the same de novo in the light of our above observations and discussion. Accordingly, the relevant Grounds taken by the assessee in all these appeals are allowed for statistical purposes. Needless to say, the Ld. CIT (A) is directed to give opportunity of being heard to the assessee as per the principles of natural justice.' 16. The expression "other authorities" used in Article 12 is neither defined in the Constitution of India nor in any other statute. Therefore, the Hon'ble Supreme Court of India and the Hon'ble High Courts have interpreted this express....
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....scheme. The money so received from the Government of India was parked by the assessee in various bank deposits during the unutilised period. The interests earned during the year on these deposits were transferred to the Mega-city scheme account directly with an appropriate disclosure in the notes to the accounts. The assessee also performed the other projects of development of infrastructure apart from the activity as a nodal agency for the implementation of the Mega-city scheme undertaken by the Government of India from time to time. The Assessing Officer treated the interest earned and received by the assessee out of the amount which it had received from the Central and State Governments and deposited in various banks, as income of the assessee and brought the aforesaid amounts to tax. The aforesaid view of the Assessing Officer was upheld by the Commissioner of Income-tax (Appeals). The assessee preferred an appeal before the Tribunal. The Tribunal looked into the guidelines which provided the background of the scheme. The Tribunal while setting aside the Orders of the Assessing Officer and Commissioner of Income-tax (Appeals) held that the assessee in fact acted as an agent of ....
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.... is implemented as per the guidelines of the Central Government and, therefore, the assessee is only acting as a nodal agency of Central Government for implementation of these projects. It is not the case of the revenue that the assessee was carrying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project could not be fully implemented, is deposited in a bank to earn interest. That interest earned is also again utilised for the implementation of the Mega-city scheme which is also permitted under the scheme. Therefore, in computing the total income of the assessee for any previous year the interest accrued on bank deposits cannot be treated as an income of the assessee as the interest is earned out of the money given by the Government of India for the purpose of implementation of Mega-city scheme." 19. The Income-tax Authorities under the Act cannot assess all receipts; they can assess only those receipts that amount to 'income' and, therefore, before they assess a receipt, they must find that to be the income of an assessee so as to invite chargeability provisions of Section 4 of the Act. The clas....
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....o existence, provides that such an instrumentality shall be the agent of the State, the instrumentality shall not be a State. The pertinent observation in regard thereto, made by the Supreme Court in the case of Heavy Engg. Mazdoor Union vs. State of Bihar reads as under: "The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statute setting up a corporation so provides, such a corporation can easily be identified as the agent of the State as in Graham v. Public Works Commissioners, [1901] 2 KB 781 where Phillimore, J. said that the Crown does in certain cases establish with the consent of Parliament certain officials or bodies who are to be treated as agents of the Crown even though they have the power of contracting as principals. In the absence of a statutory provision, however, a commercial corporation acting on its own behalf, even though it is controlled wholly or partially by a Government department, will be ordinarily presumed not to be a servant or agent of the State. The fact that a minister appoints the members or directors of a corporation and he is entitled to call for information, to give directions which a....
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....vities cannot be said to be the income of the Andhra Pradesh State under Article 289 of the Constitution of India. The Supreme Court for reaching the aforesaid conclusion referred to the following observations which had been made by Lord Denning in the case of Tamlin v. Hannaford [1950] 1 KB 18: "The corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its property is not Crown property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a public authority and its purposes, no doubt, are public purposes, but it is not a government department nor do its powers fall within the province of government." Thus, on the basis of the aforesaid observations, that a trading activity carried on by the corporation is not a trading activity carried on by the State departmentally, nor is it a trading activity carried on by a State through its agents appointed in that behalf, the Hon'ble Supreme Court held that the income derived by the Corporation from its trading activities cannot be said ....
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....ough the provisions of section 10(46) and 10(46A) of the Act, reproduced as under: (46) any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) other than those covered under clause (46A)], or a class thereof which- (a) has been established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public; (b) is not engaged in any commercial activity ; and (c) Is notified by the Central Government in the Official Gazette for the purposes of this clause. Explanation.-For the purposes of this clause, "specified income" means the income, of the nature and to the extent arising to a body or authority or Board or Trust or Commission (by whatever name called) other than those covered under clause (46A), or a class thereof referred to in this clause, which the Central Government may, by notification in the Official Gazette, specify in this behalf; (46A) any income arising to a body or authority or Board or Trust or Commission....