MAHARASHTRA LABOUR WELFARE BOARD,MUMBAI vs. ITO 18(2)(4), MUMBAI

The appellant before us is an Association of Persons which has been constituted under Sec. 4 of the Maharashtra Labour Welfare Fund Act, 1953 and is engaged in labour welfare and its funding is statutorily prescribed by way of tripartite contributions from the State Government, employers and employees, and it exists for the benefit of welfare of workers and labour in the State of Maharashtra. For the Assessment Year 2008-09, it filed a return of income declaring NIL income, inter-alia, claiming its income to be exempt. On being show- caused during the assessment proceedings, assessee referred to Sec. 10(23AAA) of the Act to justify its claim of exemption, but as the requisite conditions were not complied with, the Assessing Officer rejected the claim. Instead, the Assessing Officer noted three elements of income credited in the Income & Expenditure Account of the assessee, namely, interest on deposit – Rs.2,09,046/-; interest on bank deposit – Rs.1,60,25,751/-; and other miscellaneous receipts including rates and taxes – Rs.9,28,263/- totalling to Rs.1,71,63,060/-, which according to the Assessing Officer were receipts in the nature of income and accordingly assessed the taxable income at Rs.1,71,63,060/-. The CIT(A) has also confirmed the assessment primarily for the reasons advanced by the Assessing Officer inasmuch as the requisite approval required for claim of exemption u/s 10(23AAA) of the Act was not received. In this manner, assessee is in appeal before us.

At the time of hearing, the learned representative for the assessee briefly touched upon the history of the assessee inasmuch as it was originally set-up for the welfare of labour by the Government of Bombay (as it then existed) and it was exempt from tax in terms of Sec.

At the time of hearing, the learned representative for the assessee referred to an additional Ground of appeal preferred by the assessee, which reads as under :-

In our considered opinion, the plea of the assessee goes to the root of the jurisdiction of the Assessing Officer to levy tax on the income of the assessee. No doubt, such a plea has not been taken by the assessee before the lower authorities, so however, it cannot be denied that what the assessee has raised is a pure point of law and is quite relevant to determine its tax liability. The only aspect raised by Maharashtra Labour Welfare Board 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 Ground of appeal raised by the assessee have not been challenged and, therefore, in our view, considering the entirety of facts and circumstances of the case, the additional Ground of appeal deserves to be admitted for adjudication. Since the said plea was not before the lower authorities, and as it would certainly require the detailing of facts in a slight detail, in all fairness, we deem it fit and proper to restore it back to the file of the Assessing Officer who shall consider and adjudicate it as per law.

The reliance placed by the ld. DR on the judgment of the Hon'ble Bombay High Court in the case of Ultratech Cement Ltd. (supra), in our view, is quite misplaced in the facts and circumstances of the instant case. In the case before the Hon'ble High Court, a new claim was raised by the assessee without there being any evidence on record in the relevant year for its support. In fact, it was found that the claim required leading of evidence for the relevant year before the Assessing Officer, which was impermissible. For the said reasons, the Hon'ble High Court upheld the stand of the Tribunal not to admit the fresh plea. The fact-situation in the present case stands on a different footing inasmuch as we are dealing with an entity which has been set-up by an act of legislature and secondly, the statute under which it functions is already in the know of the Revenue inasmuch as from Assessment Year 2011-12 onwards it has been accorded exemption by the Chief Commissioner of Income Tax-10, Mumbai under Section 10(23C)(iv) of the Act by order dated 28.12.2012. Therefore, for all the aforesaid reasons, we deem it fit and proper to admit the fresh plea of the assessee, which seeks to determine the root of the jurisdiction of the Assessing Officer to bring the assessee into the tax fold in the light of Article 289 of the Constitution of India.

In view of the aforesaid discussion, we hereby set-aside the order of CIT(A) and restore the entire matter back to the file of the Assessing Officer who shall pass an order de novo, as per law. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and only thereafter he shall pass an order afresh in accordance with law.

Before parting, we may clarify that our decision to admit and restore the additional Ground of appeal for adjudication by the Assessing Officer is no reflection on the merits of the issue, which shall be gone into and decided by the Assessing Officer after considering the submissions put forth by the assessee on merits as per law.

Resultantly, appeal of the assessee is allowed, as above.