ACIT(E), CIR -1, KOLKATA, KOLKATA vs. WEST BENGAL TRANSPORT WORKERS SOCIAL SECURITY SCHEME, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “A”, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) ACIT(E), vs West Bengal Transport Workers Circle-1, 5th Floor, Social Security Scheme, 10b, Middleton Row, 6, Church Lane, 4th Floor, Kolkata-700071. Kolkata-700001. PAN-AAALW0133G (Appellant) (Respondent) Appellant by Sh. Sankar Halder, Addl. CIT, Sr.DR Respondent by Sh.S.M.Surana, Advocate Date of Hearing 29.11.2018 Date of Pronouncement 26.02.2019 ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER This appeal filed by the Revenue against the order dated 26.04.2016 passed by CIT(A)-25, Kolkata for AY 2011-12 of the Income Tax Act, 1961 (in short “Act”).

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) under section 3 of the Act to collect cess from motor vehicles carrying passengers or goods for promotion of social security, health and welfare of the motor transport workers. Section (4) of the said Act, the State Government had all the powers to recover and levy including penalty for non-payment of such cess. A Board has been constituted under section 2(1)(a) to maintain separate and proper accounts and administer the collection vide section 12, 13, 14 of the Act. The said constitution of Board was also published in extra ordinary Gazette. The CEO of the scheme is a Joint Labour Commissioner of Labour Department, Government of West Bengal. The cess collected shall remain in the custody and management of the Board. Ld. AR further submits the property and income of the State shall be exempted from Union taxation under article 289 of the constitution. Further, levy and collection of aforesaid cess is outside the definition of income under section 2(24) of the Income Tax Act. The State Government does not fall under the definition of person u/s 2(31) of the Act so as to levy income tax on the said cess. The PAN was obtained for the purpose of managing the bank account opened to manage the fund collected under the head “cess” and supported the order of CIT(A).

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) or goods by road for hire or reward at an appropriate measure or rate as may be notified by the State Government. The person paying the cess shall be granted token in such form is to be exhibited in the prescribed manner on the vehicles. The cess leviable shall be paid by every owner of motor vehicles as above prescribed at different intervals, times for different classes of motor vehicles. The proceeds of the cess shall be deposited in the account of the Board as defined section 2(1)(a) by the cess authorities as pointed out by the Ld.AR in terms of section 3 of the Cess Act. It is noted that every owner of a motor vehicle on which cess is levied shall furnish a return to the prescribed authority and it is in addition to any tax or duty leviable on the motor vehicles under any other law for the time being in force by the State of West Bengal. Further, the Act provides officers empowering to carry out search and seizure, levy interest at the rate of 2% for failure to pay cess, impose penalty and recovery of cess.

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) as a beneficiary, pension, assistance on death and permanent disability medical benefit for major ailments, maternity benefit, assistant for purchase of spectacles, funeral expenses, education for children and assistance for marriage. The relevant portion is reproduced hereunder for ready-reference:-

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) (5) A registered transport worker failing to renew his registration may be readmitted as a beneficiary by the Registering Authority on such conditions as may be decided by the Executive Council. (6) Notwithstanding such readmission, the defaulter shall not be allowed any benefit accruing during the period of non-renewal. (7) Any clarification in this behalf from the executive council shall be final. 9. Cancellation of registration: glistering I) The Registering Authority may, if he has sufficient reasons to believe that the registration or the benefit under this scheme has been obtained by a transport worker by fraudulent means or through false statements or by suppression of facts, or the worker has contravened any provision of the Act or any rule or scheme framed under the Act, may cancel such registration after holding such enquiry he may deem fit and proper. 2) No such registration can be cancelled without giving the transport worker a reasonable opportunity of being heard. 3) Every person whose registration has been cancelled shall forfeit all his claims under the scheme. 10. Collection of Registration/Renewal Fees: (1) Fees in connection with registration or renewal of registration of a transport worker as a beneficiary shall be collected in cash after giving a receipt of such collection to the applicant in form IV, (2) All fees collected in the office of the Registering Authority shall be deposited to the Fund before such collection exceeds Rupees one thousand. Provided that no such collection shall be retained by the Registering Authority for more than ten days. (3) All Registering Authorities shall submit return of collection of fees along with details of registration and renewals during a month to the CEO within seventh day of the next month in form V. A copy of such return shall also be sent to the Additional CEO of the area, (4) Registering Authority shall also maintain records of all registrations and renewals in a Register of Beneficiaries in Form No VI. 11. Intimation of change:- Every registered worker who leaves or changes his service or status of employment under an employer or migrates from one place to another, shall within a period of thirty days intimate to the Registering Authority, by a letter sent by hand or by registered post. 12. Pension:- (1) Pension shall be allowed to a beneficiary who has been a beneficiary under the scheme for a continuous period of not less than five years at such rate as may be decided by the Board. Such amount of pension shall be Page | 5

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) enhanced by Rupees ten for each completed year as a beneficiary in excess of five years. (2) Such pension shall be allowed after completion of sixty years of age to a beneficiary and shall continue till his death. Provided that in some exceptional cases due to total permanent disablement of a beneficiary the Executive Council may allow pension before completion of 60 years of age at such rate and on such terms and conditions as may be decided by the Executive Council. 13. Assistance on death and permanent disablement: (1) A nominee/dependent of a beneficiary shall be entitled to a relief of a) Rs One Lac only, in cases of death of the beneficiary arising out of an accident. b) Rs Thirty Thousand Only in cases of normal death of the beneficiary. (2) Relief in cases of permanent disability arising from any accident will be allowed to a beneficiary in the following manner a) Loss of one hand from elbow Rs 25,000.00 b) Loss of one leg below the knee Rs 25,000.00 c) Loss of one eye Rs 25,000.00 d) Loss of total hearing capacity - one ear Rs 25,000.00 e) Loss of thumb Rs. 9000/-; loss of any other finger : Rs.4000/- Explanation - For the purposes of this provision in cases of multiple natures of disablement, relief will be calculated on the basis of total disablement subject to a maximum of Fifty thousand rupees. (3) No assistance under this provision shall be allowed if such death or permanent disablement was: (a) Caused by intentional self injury, suicide or attempted suicide, insanity or immorality or if the member was under influence of intoxicating liquor, drug or narcotic or, (b) Caused by injuries resulting from riots, civil commotions, or racing of any kind. 14. Medical benefit for major ailments: (1) A beneficiary or any member of his family suffering from serious ailments like TB, Cancer, Leprosy, Cardiac problems, malfunctioning of kidney(s), AIDS, or thalacemia requiring hospitalization and treatment may be allowed relief up to a maximum of Rupees ten thousand per annum per beneficiary. (2) In cases of major surgery additional relief up to Rupees thirty thousand only may be allowed. Explanation - No beneficiary shall be entitled to assistance exceeding Rs Forty Thousand in a block of four years.

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) (3) Actual amount of relief under this provision shall be such as may be decided by the Authorised Officer in consideration of the nature of ailment and on the basis of a certificate from the hospital where such treatment was conducted. 15. Maternity Benefit: A relief of Rs. 3000/- shall be allowed to a beneficiary on successful delivery of a child or miscarriage by such beneficiary or his wife, as the case may be, on the basis of a certificate from a registered medical practitioner provided that such benefit shall not be allowed more than twice. 16. Assistance for purchase of Spectacles: An assistance of Rupees Five Hundred only will be allowed to a beneficiary once every five years on production of proper prescription and proof of purchase of spectacles. 17. Funeral expenses: Assistance of Rs Three Thousand would be allowed for funeral expenses in cases of death of the beneficiary. Explanation - Application for such assistance shall be made along with application for relief for accidental/normal death of the beneficiary. 18. Assistance for education of children: One time assistance for education of children of a beneficiary shall be allowed in the following manner:- (I) Higher Secondary Rs.2,000/- (2) Graduation Rs.3,000/- (3) Post Graduation Rs.5,000/- (4) Engineering/Medical Rs. 10,000/- Explanation - (I) Such benefit shall not be allowed for more than two children. (2) Benefits under this provision shall have cumulative effect. 19. Assistance for marriage: An assistance of Rs. 5000/- may be allowed to a beneficiary for marriage of his dependent daughters up to a maximum of two only.” 6. On perusal of the scheme above adopted by the Government of West Bengal in order to make applicable to the benefits as spell out in the Cess Act. It is clear that welfare legislation intended, enacted and adopted for the benefit of certain class of workers in organised sector that is transport workers going by the area of categories for benefits suggests a strong flavour of social justice and is an attempt by the Government of West Bengal to ensure the transport workers are Page | 7

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) not exploited because of their poverty and their children do not suffer in terms of education, health in order to give dignified life. So in this context, it appears cess is being levied and collected for a definite purpose to do a particular thing.

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) number mandatorily required many other mandatory transactions specified u/s 139A (5)(c) r.w.s Rule 114B(f) of Income Tax Rules, 1962. Further the CIT(A) held that the scheme is not a person u/s 2(31) of the Act. Further as regards certificate of registration u/s 12AA of the Act, the CIT(A) held the benefits under the scheme are neither charitable nor religious and are mainly of social security in the nature. Thereby, the CIT(A) annulled assessment passed by the AO. The relevant portion which is reproduced herein below:- 5. Discussion, and, Appellate Decision: 5.1 I will straight away address the crux of the matter - else wandering via the discussion in the impugned assessment order, reports, etc, would only lead astray to theoretical hypothesis being propounded. I have already given my brief remarks in preceding Para, just after presentation of the facts. I will reiterate the same here. It is amply clear that the Scheme is of the Government of West Bengal in implementing The Parliamentary legislated "The Unorganised Workers' Social Security Act, 2008". Income-tax is not chargeable to collections of the Government/State. This is mandated in The Constitution of India itself in Article 289(1) which states that the property and income of a State shall be exempt from Union taxation. Furthermore, in any case the Scheme is not for motive to earn profit/income/gains. It is not a commercial venture. The Scheme is not a taxable 'person' nor entity. There is no 'income' but receipts being Cess levied and collected by the Transport Department and remitted to the Bank account for implementation of the social security scheme by the Labour Department. The Bank account itself is but of the Government of West Bengal. Thus it is that the Scheme is outside the purview of the Income Tax Act. Thus it will suffice that at Ground of Appeal No. 1 itself, this Appeal is Allowed. Having stated so, since in the impugned assessment order the crux had hovered merely on the technical view that the registration granted u/s 12AA would be applicable from subsequent AY 2012- 13 onwards, I consider to also state that - section 12A/12AA is not applicable at all to the appellant. The Sections 11, 12, 12A, 12AA concern only charitable and religious trust/institutions. The Scheme is not a charitable or religious trust/institution. It is a social security Scheme of the Government. It is out of abundant caution again that the Scheme had applied for registration u/s 12A and has been granted the registration u/s 12AA. Page | 9

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) Thus, the decision required for this appeal goes beyond normal appeal reliefs of just allowing the Appeal. In this case, as the Scheme is outside the purview of the Income Tax Act, the impugned assessment order is hereby Annulled. 5.2 Having Annulled the impugned assessment, now for academic discussion sake as also for clarification, I will now discuss the salient facts, and issues that arose in the impugned assessment. It all started - just because of PAN - requirement of PAN to open the bank account. The 'appellant' in abundant caution/law compliance - had filed 'return of income'. It was a wise thing to do, else probably things have turned out even nastier. Just because PAN had been applied for and allotted it does not necessarily imply that the allottee is a person liable to tax. U/s 139A - which concerns PAN, in addition to persons liable to tax, PAN is also just an identification number mandatorily required for many other monetary transactions specified u/s I 39A(5)(c) read with Rule 114B - which includes opening of a bank account as per clause (f) to the Rule 114B. As pointed out earlier at Para 3 on the facts, PAN allotment and issue is not done by the Income Tax Department. This work had been Outsourced and awarded to UTI ITSL (a group company of Unit Trust of India) - for the issue of PAN is just a mere mechanical process - of identification only; not that of having taxable income, or, being taxable identity. As regards whether the Scheme is a 'person' u/s 2(31) - even to the remotest extent the Scheme cannot be construed so as to be in the nature of company, AOP, BOI, local authority, or artificial juridical person. The Scheme had applied for Registration u/s 12A and had been granted registration u/s 12AA on 20.04.2012. On this aspect too, as earlier stated above, I consider that the Scheme had applied for registration out of abundant caution; but the section is just not applicable - for section 12A/12AA is concerning charitable or religious trust - which the Scheme isn't. To stretch this aspect further, if it were that the appellant/Scheme were to be registered u/s 12AA, then all the numerous other Central and State Government Welfare and Social Security Schemes are also to register. This is just not the case of section 12A/12AA - for these are not charitable nor religious trusts/institutions; they are Schemes for Social Security by the Government. Then per se the impugned assessment order - just for mere academic discussion sake on this technical aspect - the taxation had been made merely on the rigid technical view that the registration u/s 12AA would be applicable from the subsequent AY 2012-13 onwards. On this aspect the appellant vide its appellate submissions dated 18.09.2014 had brought to notice that vide the Finance Act of 2014 was inserted the Provisos below sub-section (2) to Section 12A which provided that - in essence, that where registration had been granted to the u/s 12AA, then the provisions of section Page | 10

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) 11 and 12 [i.e., exemption of income] shall apply for any assessment year preceding the assessment year where registration had been granted. Thus, the appellant was right to have also made claim for relief by this Proviso. Otherwise too, it was also turning out to be paradoxical that tor AY 2011-12 the appellant was taxed due to pending grant of registration, and, that from AY 2012-13 it was exempted trust or institution. This is incongruous.” 9. On perusal of the impugned order as reproduced above clearly shows the receipts generated under Cess Act is not liable to assessment under Income Tax Act as the assessee is not a person as defined u/s 2(31) of the Act and certificate granted u/s 12AA of the Act is of no relevance.

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) resides or to compensate him for the increased cost of living ; (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ; (iva) the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the "beneficiary") and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary ; (v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ; (va) any sum chargeable to income-tax under clause (iiia) of section 28 ; (vb) any sum chargeable to income-tax under clause (iiib) of section 28 ; (vc) any sum chargeable to income-tax under clause (iiic) of section 28 ; (vd) the value of any benefit or perquisite taxable under clause (iv) of section 28 ; (ve) any sum chargeable to income-tax under clause (v) of section 28 ; (vi) any capital gains chargeable under section 45 ; (vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co- operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ; (viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members; (viii) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original sub-clause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;] (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. Explanation.—For the purposes of this sub-clause,— Page | 12

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) (i) "lottery" includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called; (ii) "card game and other game of any sort" includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game ; (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ; (xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.—For the purposes of this clause*, the expression "Keyman insurance policy" shall have the meaning assigned to it in the Explanation to clause (10D) of section 10 ; (xii) any sum referred to in clause (va) of section 28; Following sub-clause (xiia) shall be inserted after sub-clause (xii) of clause (24) of section 2 by the Finance Act, 2018, w.e.f. 1-4-2019 : (xiia) the fair market value of inventory referred to in clause (via) of section 28; (xiii) any sum referred to in clause (v) of sub-section (2) of section 56; (xiv) any sum referred to in clause (vi) of sub-section (2) of section 56; (xv) any sum of money or value of property referred to in clause (vii) or clause (viia) of sub-section (2) of section 56; (xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56; (xvii) any sum of money referred to in clause (ix) of sub- section (2) of section 56; 8[(xviia) any sum of money or value of property referred to in clause (x) of sub-section (2) of section 56;] Following sub-clause (xviib) shall be inserted after sub-clause (xviia) of clause (24) of section 2 by the Finance Act, 2018, w.e.f. 1-4-2019 : (xviib) any compensation or other payment referred to in clause (xi) of sub-section (2) of section 56; (xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Page | 13

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) Central Government or a State Government or any authority or body or agency in cash or kind to the assessee 9[other than,— (a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or (b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be];

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) custody of public moneys other than those credited to such Funds received by or on behalf of the Government of the State, their payment into the public account of the State and the withdrawal of moneys from such account and all other matters connected with or ancillary to matters aforesaid shall be regulated by law made by the Legislature of the State, and, until provision in that behalf is so made, shall be regulated by rules made by the Governor 1 *** of the State.”

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12) 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.”

ITA No.1406/KOL/2016 (ASSESSMENT YEAR-2011-12)

Order pronounced in the open court on 26.02.2019.

Sd/- Sd/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER Date:- 26.02.2019 *Amit Kumar* Copy forwarded to: 1. Appellant- ACIT(E), Circle-1, 5th Floor, 10b, Middleton Row, Kolkata-700071. 2. Respondent- West Bengal Transport Workers Social Security Scheme, 6, Church Lane, 4th Floor, Kolkata- 700001. 3. CIT-Kolkata 4. CIT(Appeals)-Kolkata 5. DR: ITAT -Kolkata Benches By order

AR/H.O.O ITAT, KOLKATA