THE COMMISSIONER OF INCOME TAX, THIRUVAN vs. KERALA STATE INDUSTRIAL ENTERPRISES LTD.

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ITA/105/2008HC KeralaKLHC01027010200811 January 2018Bench: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court of Kerala, respectfully following a previous Division Bench judgment dated August 9, 2011, in ITA Nos. 304 and 311 of 2002, dismissed the appeals filed by the Revenue. The Court reiterated the finding from the earlier judgment that in 1999, the Government discontinued certain arrangements with the respondent. The Tribunal had found that the respondent was merely a channelizing agency for the transfer of funds and was not a beneficiary of the interest earned on such funds. Consequently, the respondent could not be assessed under the Income Tax Act. The question raised by the Revenue was answered against the Revenue and in favour of the assessee.

What were the facts?

The appeals before the High Court of Kerala concerned the applicability of the Income Tax Act, 1961, to Kerala State Industrial Enterprises Ltd. (KSIDE). The Assessing Officer had passed an order on March 3, 2003, which was followed by an order from the Commissioner of Income-Tax (Appeals) on December 3, 2003. The Income Tax Appellate Tribunal (ITAT), Cochin Bench, had passed an order on July 6, 2005, which was under challenge. The core of the dispute revolved around whether KSIDE could be assessed under the Income Tax Act. The Revenue had filed these appeals against the ITAT's order.

What were the issues?

1. Whether the respondent, Kerala State Industrial Enterprises Ltd. (KSIDE), is amenable to assessment under the Income Tax Act, 1961, as a channelizing agency for government funds, or if it is not a beneficiary of the interest earned on such funds, thus precluding its assessment under the Act. Contentions: Assessee (KSIDE): The assessee argued that it acted solely as a channelizing agency for the transfer of funds on behalf of the Government. It was not the beneficiary of the interest earned on these funds, and therefore, it could not be assessed under the Income Tax Act. The Tribunal had found in its favour on this point. Revenue: The Revenue contended that KSIDE was subject to assessment under the Income Tax Act. The Revenue had filed appeals against the order of the Tribunal which had held in favour of the assessee.

Which sections of the Income-tax Act were involved?

Income Tax Act, 1961

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 11TH DAY OF JANUARY 2018 / 21 ST POUSHA, 1939 ITA.No. 105 of 2008 AGAINST THE ORDER/JUDGMENT IN TA 42/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-07-2005 APPELLANT(S)/APPELLANT THE COMMISSIONER OF INCOME-TAX THIRUVANANTHAPURAM

BY ADVS.SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENT: KERALA STATE INDUSTRIAL ENTERPRISES LTD. THIRUVANANTHAPURAM. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-01-2018, ALONG WITH ITA NOS.138/2008 AND 251/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA 105/2008 APPENDIX APPELLANT'S ANNEXURES ANNEXURE-A : COPY OF ORDER OF THE ASSESSING OFFICER DATED 3.3.2003. ANNEXURE-B : COPY OF ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DATED 3.12.2003. ANNEXURE-C : COPY OF ORDER OF THE APPELLATE TRIBUNAL DATED 6.7.2005. //TRUE COPY// PS TO JUDGE. jg-17/1

K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- I.T.Appeal Nos.105 & 138 of 2008 and 251 of 2009 ------------------------------------------- Dated this the 11th day of January, 2018 J U D G M E N T Vinod Chandran, J. The issue raised in the above appeals, insofar as the inapplicability of the Income Tax Act, 1961, to the respondent Institution has been categorically found by a Division Bench by judgment dated 9.8.2011 in ITA Nos.304 and 311 of 2002. We extract paragraph No.3 of that judgment hereunder:- “3. It is also seen from the Tribunal's order that in 1999 the Government discontinued the arrangements with the respondent by just declaring that the benefits or loss on account of all money transactions made by the respondent on behalf of the Government will go to Government in the same form and style of the asset. In view of the findings of the Tribunal that respondent is only a channelising agency for transfer of funds and it is not a beneficiary of the interest earned on such funds transferred by the Government through it, the respondent cannot be assessed under the Act. We, therefore, dismiss both the appeals filed by the Revenue.”

ITA 105, 138/08 & 251/09 2 Respectfully following the aforesaid declaration, we reject these appeals answering the question raised by the Revenue against the Revenue and in favour of the respondent assessee.

K.VINOD CHANDRAN JUDGE

ASHOK MENON JUDGE jg

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