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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Ashok J. Patil (AR) Department by: Shri Rajat Mittal(DR) Date of Hearing: 03.04.2018 Date of Pronouncement: 02.07.2018 O R D E R
PER AMARJIT SINGH, JM:
The present appeal has been filed by the assessee against the order dated 10.12.2015passed by the Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2010-11.
The assessee has raised the following grounds: - I The Honorable Commissioner of Income Tax Appeals - 33 has erred in rejecting the contentions of the appellant and on the facts and circumstances of the case and in law:
ITA. No.1380/M/2016 A.Y.2010-11 1 Has erred in upholding the additions made by the learned Income Tax officer, being interest on deposits and bank deposits amounting to Rs.5,12,88,824/- as income chargeable to tax, summarily rejecting the contentions of the appellant that it is a fund established under State Government Act for the regulation, administration and promotion of welfare in the State of Maharashtra and its income is exempt under IT Act 1%1 and the receipt is actually by way of reduction of expenses which are then augmented towards public welfare objects of the fund. The rejection of claim and upholding of additions is without going into the merits but on the technical ground that appellant has not submitted evidence regarding registrations / notification/approval by the Commissioner of Income Tax in accordance with Rules u/s 10 (23AAA) / 10 (23) (C) (iv), 11/12A of IT Act 1961, 2. Has further erred in rejecting [he relief claimed by the appellant to: i. Treat the receipts from interest and miscellaneous income from rent etc as arising from and in the course of welfare activities and utilized for the same as such contributing to reduction of expenses incurred on welfare activities and on net basis resulting in net expenditure on welfare/mutual welfare / benefit activities and hence exempt on the concept of mutuality, or ii. Hold that in the absence of processing / rejection or grant of application/ approval i.e in absence of action on part of department, the exemptions claimed u/s 10 (23 AAA)/IO (23C) (iv)(v) and /or sections 11/12/12A/13 be deemed to be granted and kindly direct the Assessing Officer to grant the same and treat the income as exempt by granting appropriate relief. The learned Income Tax Officer 18 (2) (4) on the facts and in the circumstances of the ease and in law: 1. Has erred in considering interest on deposit and interest on bank deposit amounting to Rs. 5,12,88,824/- as income chargeable to tax without considering the fact that the appellant is a fund established under State Government Act / regulation for the welfare of labour in the State of Maharashtra and its income is exempt under J. T, Act 1961 and that the above income is actually a receipt by way of reduction of expenses which are then augmented and used incurred towards objective of fund and that A.Y.2010-11 the investments are mandated by statute. In view of this the entire addition made to the returned income may be deleted.
2. Has erred in considering other misc. income which includes income from rent and taxes of Rs.9 ,66,803.'- as income chargeable to tax without considering the fact that the appellant is a fund established under State Government Act/ Regulation for the welfare of labour in the Slate of Maharashtra and its income is exempt under I. T Act 1961 and that the above income is actually a receipt by way of reduction of expenses which are then augmented and used towards objective of fund, in view of this the entire addition made to the returned income may be deleted.
Has erred in [axing the receipts of the appellant on account of interest and miscellaneous receipts by way of rent as income ignoring the claim of the appellant that the appellant is eligible for exemption under the Income Tax Act 1961, and more particularly U/S 10 (23C) (iv) / (v) and / or u/s 10 (23AAA), or u/s 11, 12, 12 A, 13 of the Income Tax Act 3961, In view of this the entire additions may be deleted, 4. The learned Income Tax Officer Tax Authorities may he directed to consider the appellants pending applications for approval, grant exemptions and delete the additions to the income.
5. Hold that in the absence of processing/ rejecting or grant of application/ approval i,e, in absence of action on part of department, the exemptions claimed u/s 10(23AAA)/1G (23C) (iv)(v) and/ or sections 11/12/12A-'13 be deemed to granted and kindly direct the Assessing Officer to grant the same and treat the income as exempt by granting appropriate relief. The appellant craves leave to add, alter, amend, modify, insert or interpolate club or rectify to all or any of the said grounds of appeal
at or before the hearing of the appeal.”
3. The brief facts of the case are that the assessment of the assessee was completed on 28.03.2013 by the ITO 18(2)(4), Mumbai for the A.Y. 2010-11 u/s 143(3) of the I.T. Ac, 1961 assessing the income to the tune of Rs.5,22,55,630/-. The assessee was AOP engaged in the labour welfare activities in the state of Maharashtra A.Y.2010-11 and funded by tripartite contributions from State Government, employers and employees. Apart from this, the Board was earning the income by way of interest on bank and other deposits/bonds and miscellaneous income by way of rent/charges/fees etc. incidental to its welfare activities. The contention of the assessee is that the assessee was not under obligation to pay the tax as to assessee was state/agent of the state/instrumental of the state. The claim of the assessee was declined and in appeal before the CIT(A) order of the Assessing Officer was confirmed. Aggrieved by the said order, the appellant/assessee filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. At the very outset, the Ld. Representative of the assessee has argued that the basic issue on account of non-payment of income tax payable by appellant being the state has been restored before the AO by Hon’ble ITAT in the assessee’s own case in for the A.Y. 2008- 09 dated 10.11.2017, therefore, in the said circumstances, the present issue is also liable to be restored before the AO accordingly in accordance with law. Copy of order in ITA. No.4305/M/2012 for the A.Y. 2008-09 dated 10.11.2017 is on the file in which the following issues has been considered by the Hon’ble ITAT. “1. On the facts and circumstances of the present case and in law, no income tax is payable by the appellant as it is a state and/ or agent of the state and/ or instrumental of the state.
ITA. No.1380/M/2016 A.Y.2010-11
Before going further we deemed it necessary to advert the finding of the Hon’ble ITAT on this issue given below.: - “6. We have carefully considered the rival submissions. Notably, the additional Ground that is sought to be raised by the assessee is based on Article 289 of the Constitution of India. Article 289(1) of the Constitution of India provides that the property and income of the State shall be exempt from Union taxation. Clause (2) & (3) of Article 289 of the Constitution of India prescribes some of the exceptions from the provisions of Article 289(1) of the Constitution. In any case, the point 5 sought to be made out by the assessee is that it must be considered as State or Government or an agent of the State so as to fall within the prescription of Article 289(1) of the Constitution. It is axiomatic that in order to adjudicate the said controversy one has to examine the statute under which assessee is constituted and the purport and manner of its activities. At the time of hearing, the learned representative referred to the decision of the Mumbai Bench of the Tribunal in the case of City and Industrial Development Corporation of Maharashtra Ltd. vs. ACIT, the ld. DR was that the new plea involves fresh investigation of facts and, therefore, it is impermissible to be raised at this stage. The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner of Income Tax, 229 ITR 383 (SC) held that it is open for the appellate authorities to admit a fresh plea, which has not hitherto raised before the lower authorities provided, of course, the necessary facts to decide the plea are on record. Pertinently, the plea of the assessee is primarily to be examined in the context of the Charter, in terms of which it has been set-up by the State legislature. We are not convinced that the plea of the ld. DR that the adjudication of the fresh plea would require afresh investigation of facts. Rather, in our view, all that is required is a fresh appraisal of facts in the context of the legal point, and not a fresh investigation to obtain the facts. Therefore, in our view, the ratio of the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra) supports the plea of the assessee for admission of the said additional Ground of appeal since it involves a point of law and no new facts are required to be investigated, but are only required to be appraised. Pertinently, at this stage, we may also notice that the bona fide of the additional A.Y.2010-11