ITO, BHUBANESWAR vs. ORISSA COMPUTER APPLICATION CENTRE, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos.282 to 284/CTK/2015 Assessment Years : 2000-2001 to 2002-03

ITO, Ward 5(3), Vs. Orissa Computer Application Bhubaneswar Centre, No.N1/7-D, Acharya Vihar, Bhubaneswar PAN/GIR No.AAAQAO 0246 R (Appellant) .. ( Respondent)

C.O.Nos.39 to 41/CT/2015 (arising out of ITA Nos.282 to 284/CTK/2015 Assessment Years : 2000-2001 to 2002-03

Orissa Computer Application Vs. ITO, Ward 5(3), Centre, No.N1/7-D, Acharya Bhubaneswar Vihar, Bhubaneswar PAN/GIR No.AAAQAO 0246 R (Appellant) .. ( Respondent)

Assessee by : Shri Sandeep Kumar Jena, AR Revenue by : Shri Kunal Singh, CIT DR/D.K.Pradhan, DR

Date of Hearing : 03/10/ 2017 Date of Pronouncement : 04 /10/ 2017

O R D E R Per N.S.Saini, AM

These are appeals filed by the Revenue and cross objections filed by

the assessee against the order of the CIT(A)-2, Bhubaneswar dated for

the assessment years 2000-2001 to 2002-03, respectively.

except change in figures, they are heard together and are being disposed

of by this common order for the sake of convenience. Hence, we take up

the appeal for the assessment year 2000-2001 for our adjudication.

Government of Orissa and is registered under the Societies Registration

Act, 1850. It derives income from receipt on account of providing training

to Govt, employees and technical support and consultancy services to

Govt. Department and Agencies. The assessee's application for

registration u/s 12AA of the I.T Act, 1961 was rejected by the CIT,

Bhubaneswar by the order dated 21.12.2006. The Assessing Officer

noted that no return of income for the assessment year under

consideration was filed by the assessee. Accordingly, he issued notice u/s

148 of the I.T Act, 1961 dated 28.03.2007. The above notice was served

on the assessee on 28.03.2007. No return was filed by the assessee in

compliance to the said notice. Therefore, the Assessing Officer completed

the assessment u/s 144/147 of the I.T Act, 1961 on 31.12.2007

determining total at Rs.1,63,00,580/- being the surplus of income over

expenditure as per audited Income & Expenditure Account as well as

disallowances of expenses and liabilities for expenses.

assessee preferred an appeal before Ld. CIT (Appeals)-II, Bhubaneswar

who in his order passed in I.T Appeal No.0079/2009-10 dated 29.12.2009

partly allowed the appeal in excluding government grant and house rent

recovered from the employees from the total receipts and after allowing

pro-rata expenditure, determined revised surplus at Rs.17,21,344/-. The

CIT(A) also directed the Assessing Officer to allow depreciation after

verifying the assessee's correct claim of depreciation. Accordingly, the

assessee was requested to submit details regarding its claim of

depreciation vide letter issued dated 11.01.2010. In absence of furnishing

details of such claim, no depreciation was allowed vide order passed u/s

251 of the l.T.Act, 1961 dated 15.02.2010. Thereafter the assessee as

well as the department preferred appeals before the Cuttack Bench of the

Tribunal, who in its common order passed in ITA Nos.59,60&61/CTK/

2010 & ITA Nos82,83,&84/CTK/2010 dated 09.11.2011 for the A.Y. 2000-

01, 2001-02 & 2002-03 set aside the order and restored the issues to the

Assessing Officer for denovo assessment.

Act 1961 dated 01.08.2012 requiring the assessee to produce by-laws,

memorandum of association and activities of the society along with

audited books of account for the relevant period. In response to the said

notices, Sri Samir Kumar Parija, CA, A/R of the assessee appeared from

time to time and produced audited books of account such as cash book,

ledger along with a copy of the audited statement of account. The audited

books of account were verified with reference to the audited accounts.

The Assessing Officer required the assessee to furnish explanation on the

following points.

under:

“ABOUT THE ASSESSEE: That the Assessee, Odisha Computer Application Centre (OCAC) formed solely as a society, registered under the Societies registration Act XXI of 1860 on 21.03.1985 for carrying out the welfare object of the State Govt. The governing body of the Society was to be headed by the Addl. Chief Secretary to the Govt, of Odisha in the capacity of Chairman and other both Central and State Govt, officers are it's members. It acts as a nodal agency on behalf of the Govt, of Odisha to formulate and recommend a computer policy for the state, to disseminate knowledge on all aspects of information processing systems and to create computer awareness in the Government Departments and to train personnel at all levels. The objectives of the assessee as per resolution dated 23rd March, 1985, which are reproduced below:

i) To formulate and recommend a computer policy for the State Government, ii) Disseminate knowledge on all aspects of information processing systems and allied subjects and to foster the development of this specialized branch of technology, iii) To create computer awareness in the Government Departments and Public Undertakings and to train personnel at all levels,

iv) To prepare board based training programs in computer uses for personnel of the various departments of the Government and of the Public Undertakings,

v) To draw up a program for manpower development in the field of information processing,

vi) Help in the preparation / adoption of standard equipment and system development practices in the field of electronic data processing, vii) Provide support for software development.

viii) To assess requirements of hardware for implementing computer applications of use Government Departments and Public Undertakings and monitor the acquisition process,

ix) To co-ordinate computer facilities and functions of various Government Departments and Public Undertakings in the State with a view to data integration at all levels.

x) to assist implementation of modern management techniques viz, Organisation & Methods, Critical Path Methods, Program Evaluation & Review Technology etc. using computers,

xi) To encourage and promote the use of computers for scientific research and development, educational and governmental applications, xii) To keep computer applications up to date, to adopt modern concepts in information technology and to explore new fields for computer applications, xiii) To co-ordinate with sister agencies in other States and in the Centre, xiv) To arrange seminars and workshop on computer application, xv) To set up computer hardware facility for use by Government Departments, Public Undertakings and other uses, xvi) To do and perform such other acts, matters and things that may assist in, be conducive to or the necessary for the fulfillment of the above mentioned objectives of the Centre.

The formation of the society, published under the notification in Odisha Gazette vide Notification No.3842-Tech-lll-15/85 STE dt.19.04.1985. In the Notification N0.857-RB-13/99 dt.06.01.00 Odisha Computer Application Centre, a State Govt. Agency comes under Information Technology Department. In the Notification N0.1637/IT dt.05.08.03, where in the Govt. of Odisha designated Odisha Computer Application Centre, a full-fledged State Govt. Agency to function as the Technical Directorate under the Department of Information & The Assessment has been framed on the basis of rejection of application filed by the assessee for grant of registration u/s 12AA of the I.T.Act,1961 dtd.21.12.2006.The Ld. Assessing Officer passed an order on 26.12.2008 deciding the status of the Assessee as AOP. Subsequently the matter was re-examined by the Ld. Commissioner of Income Tax ,Bhubaneswar passed an order on 06.01.2009 as follows.

" An application for grant of registration under section 12AA can only be made by a trust or other institution (society) established wholly for charitable purpose. .During the year under consideration the assessee has been found to be neither a trust nor an institution (society) but a full fledged agency under the Govt of Orissa vide its resolution dated 05.08.2003..Hence the application of the assessee for registration under section 12AA of the I.T.Act is treated as infructuous and stand disposed off."

The appellant filed appeal before the Income Tax Appellate Tribunal against the order by Ld.CIT ,Bhubaneswar on dt.21.12.2006 against cancellation of the registration u/s 12AA of the I.T.Act,1961. The appellant has submitted the order of Ld CIT ,Bhubaneswar passed on 06.01.2009 and drawn the attention of the Hon'ble Bench that the Ld. Commissioner has determined the very vital issue i.e. the status of the assessee as full fledged agency under the Govt of Orissa and the appellant is neither a trust nor institution (society) and grant of registration u/s 12AA is not applicable to the Appellant and further submitted that impugned order passed by the Ld.CIT on 21.12.2006 as infructuous as there is no cause of action.

The Hon'ble bench of ITAT,Cuttack passed an order on 05.05.2009.

"After hearing the rival submissions and on careful perusal on the materials available on record, we accept the prayer made by the assessee that the aforesaid appeal has now become infructuous as there is no cause of action."

It is now necessary to specify and examine objectives, the appointment of governing body, finance, funds and accounts of the Assessee Society. From such objectives it is absolutely clear that the Assessee is not indulged in to any business or commercial activities for and on behalf of the state like other cooperative society of the state. On plain reading of the aims and objectives of the society, it is clear that the Assessee is a State Government agency and coming under the definition of 'Other Authority'. Therefore the Assessee is a 'state' or an instrumentality of the Govt, of Odisha within the meaning of Article 12 of the Constitution. It will carry out specific mandates of the Government as and when assigned.

That Article 12 in Part III of the Constitution of India, which defines the "State" includes the Government and Parliament of India and the Government and the legislature and each of the states and all local and other authorities within the territory of India or under the control of the Government of India.

The definition of "State" is not confined to a Govt. Department and the Legislature but extends to any action administrative whether statutory or non- statutory, Judicial or Quasi-judicial which can be brought within the fold of state action. The aforesaid article of the constitution has also specified "Other Authorities" the instrumentality or agencies of the Govt. Govt. Department. A Society registered under Society Registration Act, unless it can be held that the society was an instrumentality or agency of the state or exercise statutory power to make rules, bye-laws or regulations have been statutory force. The purpose of creating an agency by the state is that as the state is an abstract entity, it can only act through the instrumentality or agency of natural or judicial persons; therefore there is nothing strange in the notion of the state acting through a corporation or a society by making it an agency or instrumentality of the state. The Hon'ble Apex Court in the case of "RAMANA DAYARAM SHETTY -Versus- INTERNATIONAL AIR PORT AUTHORITY OF INDIA " AIR 1979 SC, 1628, specifies the acid test for determining as

to when a Corporation can be said to be an instrumentality or agency of the Govt, as follows:

(1 "One thing is clear that if the entire share capital of the corporation is held by Government it would go a long way towards indicating that the corporation is an instrumentality or agency of Government."

(2) "Where the financial assistance of the state is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental character."

(3) "It may also be a relevant factor.... Whether the corporation enjoys monopoly status which is the state conferred or state protected."

(4)"Existence of "deep and pervasive state control may afford an indication that the corporation is a state agency or instrumentality."

(5) "If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of government."

(6) "Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government."

The Constitutional Bench of the Hon'ble Apex Court in the case of AJAY HASIA - VRS-KHALID MUJIB SEHRAVARDI reported in AIR 1981 SC 487 held that the society was also found to be an instrumentality or agency of the state for the following reasons:

"........The composition of the Society is dominated by the representatives appointed by the State Government and Central Government. The monies required for running the Society are provided entirely by the Government and even if any other monies are to be received by the society, it can be done only with the approval of the state and central government. The rules to be made by the society are also required to have prior approval of the state or central government and the account of the society have also to be submitted before the Government lor their scrutiny and satisfaction. The society is also to comply with all such directions as may be issued by the Government. The control of the Government is indeed so deep and pervasive that no immovable property of the society can be disposed off in any manner without the approval of the Government. The Government has even the power to appoint any other person or persons to be members of the society and any member of the society other than a member representating the State or Central government can be removed from the membership of the society by Government approval. The direction and control of the affairs of the society and of its income and property is also largely controlled by the nominees of the Government..."

This fact has also been supported by another judgment of Hon'ble Apex Court in the case of "B.S. MINHAS -Vs.- INDIAN STATISTICALS INSTITUTE & ORS.", AIR 1984 SC, 363. In this judgment the Hon'ble Apex court by following the judgment of International Air port Authority has given a finding that Indian Statistical Institute registered under Society Registration Act is an authority within the meaning of Article 12 of the Constitution.

Same proposition has also been held by the Hon'ble Apex Court in the case of "P.K. RAMACHANDRA AYER-VS. - UNION OF INDIA" AIR 1984 SC, 541.

Now a very vital question will arise whether the income or property of the state will subject to union taxation or not? Article 289 of the Constitution clearly specify that

(1) The property and the income of the state shall be exempted from the union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorizing 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 ay 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.

The scope of Article 289 provides for the immunity of Union Taxation on the income and property of a state. According to the federal principle while Article 285 provides that the property of the union shall be exempted from state of local taxation, Article 289 declares that the property and Income of a state shall be immune from union taxation, excepting commercial undertaking carried on by the state, unless such undertaking are declared by parliament to be incidental to the ordinary functions of Government. Both the Article envisages inter Governmental immunity from taxation.

Considering the case of the assessee, who is as an agency of the Government, the money required for running the assessee society is entirely provided by the State Government as grant and even if any other money are to be received by the assessee society as per Govt, instruction, it can be done only with the approval of the Government, and the account of the society have also to be submitted before the Government for their scrutiny and satisfaction. Therefore the control of the government is deep and pervasive to all intents and purposes

(1) GRANT IN AID: The Govt, of Odisha has sanctioned funds in shape of grant in aid to assessee for the purpose of different schemes of Govt, for its implementation. The copy of the sanctioned letters is

enclosed for verification. The assessee may draw your honour's kind attention to that.

a)The Grant in Aid is a state Govt, budgetary allocation for its implementation of different schemes executed by the assessee as an agent on behalf of the Govt. b) The Under secretary and Additional secretary to the Govt, Dept of Information and technology are declared as drawing disbursing officer (DDO) and counter signing authority of the said grant.

c) The grant should be drawn and utilized by the assessee for the purpose of which it is sanctioned. The drawls position should be intimated immediately for review of expenditure by the Govt.

d) The utilization certificate shall be furnished the Govt, in specified form duly audited by the auditor.

e) The Grantee i.e. the assessee should maintain register with regards to the Grant. The grant is subject to audit by examiner of local fund audit duly test check by the Accountant General, Odisha / administrative department.

From the aforesaid terms and condition of the grant it would be reasonably appreciated that the grant has been issued by the Govt, of Odisha for implementation of the scheme and the assessee has no right for appropriation of the grant as and when it likes rather assessee fully control and guided by the Govt, for disbursement/utilization of such grant.

Therefore the grant received by the assessee is not a business receipts rather the assessee has received the grant as an agency of the Govt, to implement the specific scheme of the Govt. The sanction order of grant- in-aid and the utilization of the same are That the Assessee being a full fledged Govt, agency has received certain Grant in aid from the Govt, for specific purpose and for implementation of scheme and for certain obligation attached thereto as decided by the Govt. It well settled that any amount received from the Govt, for any specific purpose and certain obligations were attached thereto it could not be treated as revenue receipts. In the present case the Grant in aid has been received by the assessee from the Govt, for specific purpose as decided and there was no control or domain over the funds by the assessee in its own right .The assessee being a conduit pipe to canalize the grant in aid received from the Govt, for certain specified objectives .The impugned receipts were therefore not in the nature of revenue receipts chargeable to tax in the hands of the assessee. Please see ITO vs. Gujurat Handicrafts and Handlooms Development Corporations Ltd (1984) 9 ITD 488 (ITAT,Ahm).

It is also well settled that if an assessee is only the disbursing agency of the fund belongs to the Govt the receipt of the amount shall not constitute as an income in the hands of the assessee. Please see CIT vs U.P. Upobhokta Sahakari Sangh Limited (2007) 288ITR106 (All) It has also been held in catena of decisions by the Honble Apex court that for

determination of any receipt as subsidy or grant in aid in the hands of the recipient has to be determined in respect of the purpose of which such funds have been granted therefore before treating the grant as a business receipt the assessing officer has to apply the purpose test. Please see CIT vs Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC)

It is further submitted that the assessee is not engaged in any trading activities and the grants were received by the assessee from the Govt, in order to enable it to discharge its statutory duties in public interest therefore the grant or subsidy could not be considered as revenue receipts. Pi see CIT Vs. Kerala Land Development Corporation (1998) 232 ITR 575 (Ker).

(2) HOUSE RENT:

(copy of letter bearing No. 3817 dated 21.04.1993)

consolidation and expansion of its main activities .therefore the rent is not an income either under the head from Business or Profession or Income from House property rather its incidental to the grant received by the assessee for implementation of the govt. The officer order has been communicated vide letter no 9652 dated. 23.11.96,

From the aforesaid documents it would be reasonably appreciated that the land and rigs constructed thereon belongs to the Govt, and the assessee has no right, title and interest over it, rather whatever decision has been taken for construction of the building and development of the same has been taken by the Govt, is being carried out by the assessee as :- - agency of the Govt. For the sake of argument it is further submitted that if the assessee is the owner of the said building, and the rent received there from will be subject to tax under the head income from business or profession then it could have been claimed for depreciation in the books of accounts maintained by the assessee.

(3) TRAINING FEES, JAPANESE LANGUAGE TRAINING FEES:

On behalf of the State Govt. OCAC is functioning as an educational institution imparting computer education like "A" level course, "0" level course, Auto card training, Japanese language to the different level of students of the State. These activities are carried out as mentioned in Memorandum of Association. Therefore the so called income of Rs.21,26,675/-and Rs.2,21,700/- which is incidental to the main activities of the Appellant. This income is exempted u/s 10(23C) of the Income Tax Act 1961.

(4) CONSULTANCY FEES

That so far as the consultancy fees collected by the Appellant from various state Govt, organizations is concerned, the Appellant act as a nodal committee and collected fees @ 10% of the project cost by notification by Govt, of Orissa as a consultant. The purpose of the same is only to give financial support to the Appellant to develop computer awareness in various departments of Govt, of Orissa as well as public. That recently vide resolution dated 03.06.2008 the Govt, has reduced the technical consultancy fees from 10% to 5%, from which it is crystal clear that the Appellant does not have any control over its technical consultant fees rather the Govt, has decided the same and directed the Appellant to acted upon. . The technical fees collected by the Appellant not to achieve any

profit from trading practice, but it is just like payment made by the Govt, from self to self. Therefore the technical consultancy fees of Rs 18,45,287/- collected as per the instruction of the Govt, does not constitute income rather it is a Govt. Grant indirectly supported by Govt.

INTEREST ON FIXED DEPOSIT:

OCAC is functioning under IT Department of Govt of Odisha. All IT related projects was managed by OCAC. The funds belong to State Govt, and Central Govt, were routed through OCAC and it was parked in the hands of OCAC. OCAC was implementing the project. All the grants are received were deposited in Bank Account for administrative decision. As the agreement in the grant one clause was that any interest will accrue to the Grant it will be treated as grant and the same amount will be deducted from the further Grant. Accordingly, utilization certificate were issued to the Grantee. During the financial year Rs 44,68,814/- was received as interest which was credited to the Grantee. The said amount is not to be taken as income of the assessee. The assessee relies on the decisions of 221 ITR 317 in the case of Gujarat Municipal Finance Board vs DCIT.

Under the aforesaid written submission your honour is requested to verify the receipt of : whether it is coming under the definition of Income as defined under the Act and further requested not to consider the surplus of Income taxable at marginal rate.

With regard to the details of acquisition of Fixed assets the assessee has already reduced the Cash Book, Ledger, Fixed Assets ledger where addition of fixed assets are properly accounted for. Therefore your honour is requested to allow Rs 49,31,893=00 towards Depreciation as provided in the Books of accounts."

assessee by observing as under:

“As stated above, the assessee is a society registered on 21.03.1985 under the Societies Registration Act, 1860. It was formed by a Resolution of the Department of Science, Technology & Environment of the Government of Orissa issued in No.3842-Tech-lll -15/85 - STE dtd.23.03.1985. It was formed with multiple objectives of training of government employees and other, to act as the nodal agency to advise the Govt, departments regarding hardware purchase, and to provide technical consultancy to various departments of Govt, regarding computerization. It had filed an application on 17.08.2006 in Form No 10A for grant of registration u/s 12AA of the I.T. Act, 1961. This application was rejected by the Ld. C1T., Bhubaneswar by an order dated 21.12.2006 with the following observation.

"It was seen that the society is mainly providing training to Govt, employees. Apart from that, it also provides technical support and consultancy services to different Govt. Departments and Govt. Agencies.

It collects fees for such activities. Therefore, no charity is involved in the activities of the organization. In view of the above reasons, the application filed by the assessee for grant of registration u/sl2AA of the I.T. Act 1961 is rejected." It is pertinent to mention here that being aggrieved with the above, the assessee society preferred appeal before the Hon'ble IT AT, Cuttack Bench, Cuttack who in its order passed in ITA No.200/CTK/2008 dated 05.05.2009 has upheld the order of the Ld. CIT in rejecting the registration.

In absence of registration u/s 12AA, the benefit of exemption u/s 11 is not available to the assessee. As per section 2(7) of the I.T Act, 1961 the word assessee means a person who is liable to pay any tax or any other money under the Income Tax Act, 1961. Further the word person has also been defined in section 2(31) of the Act to include an association of persons or a body of individuals whether incorporated or not. A society is in law, an association of persons. The Act has clearly laid down items of income which are exempt u/s 10 of the I.T. Act,1961. Unless income is specifically exempted by the I.T. Act 1961, no entity whether it is constituted or controlled by a State Government or not, can claim, that it is part of the Govt, and is therefore, exempt from taxation. Reference here is made to Resolution of the Dept. of Information Technology in No.l637/lT Bhubaneswar/IT(OCAC) 08/2003 dtd.05.08.2003 which reads asunder.

The matter relating to overseeing the mandate of utilizing Information Technology for efficient delivery of Services was under active consideration of Govt, for sometime past. After careful consideration, the Government have been pleased to designate Orissa Computer Application Centre (OCAC), a state Government Agency to function as the Technical Directorate under the Department of Information Technology. It will carry out specific mandate of the Government as and when assigned. The head of the Agency i.e the Chief executive is designated as the Ex-officio Deputy Secretary /Joint Secretary / Additional Secretary, as the case may be, depending on his seniority. The officer so designated will be part of the administrative department i.e the Department of Information Technology.

This issue with the concurrence of the Finance Department vide their U.O.R No 287ESI1I dt.14.07.2003

ORDER: ORDERED THAT THIS RESOLUTION BE PUBLISHED IN THE NEXT ISSUE OF THE ORISSA GAZETTE AND COPiES BE FORWARDED TO ALL CONCERNED

BY Order of the Government

A.K. Tripathy Commissioner-cum Secretary to Government

By virtue of the above resolution, the Society has now become a Department of the Government of Orissa and is therefore, exempt from

tax. Since the Notification is dated 05.08.2003 the status of the assessee does not stand changed for the assessment year 2001-02. Hence the status of the society is taken as AOP and its income has to be computed in accordance with the provisions of sections 28 to 44 of the I.T Act,1961.

The audited income and expenditure account of the society for the year ended 31.03.2002 revealed the following position

SI No Particulars of Income Amount (in Rs) i Training fees 21,26,675=00 ii JLT Fees 2,11,700=00 iii Consultancy charges 18,45,287=00 iv Govt. Grant 26,61,000=00 V Rent from premises 66,72,720=00 vi House rent Recovered 25,582=00 vii Interest on Fixed Deposit 44,68,814=00 viii Miscellaneous Income 2,08,910=00 Total 1,82,20,688=00

SI No Particulars of Expenditure Amount (in Rs) i Staff payments 59,38,907=80 ii Admn. & General Expenses 35,38,150=82 iii Repair & Maintenance 2,58,281=98 iv Depreciation 49,31,893=91 V Other expenses 15,06,960=90 Total 1,61,74,195.41

As per income and expenditure account total receipts for the year was Rs. 1,82,20,688/-. All the receipts are revenue receipts and hence taxable. After accounting for total expenses of Rs. 1,61,74,195/- (including depreciation of Rs. 49,31,893=91), the surplus of income over expenditure worked out to Rs. 20,46,493/-. In course of assessment proceeding, the assessee society was categorically asked to furnish particulars of assets added during the relevant financial year and for earlier years with supporting documentary evidence. No supporting bills in respect of addition made to fixed asset was produced for the earlier years as well as for the current financial year 1999-2000. However, the A/R of the produced copies of audit report for the F/Y(s).1989-90, 1990-91 & 1995-96 as well as schedule for fixed assets for the F/Y(s) 1991-92, 1992-93, 1993-94 & 1994-95. Although the valuation of fixed assets have been reflected in the audited accounts, the basis of opening balance as on 01.04.1999 seems doubtful. It is because in the notes on accounts of the audit report for the F/Y.1995-96, the auditor has certified the followings in schedule-F.

" 2.1 Fixed assets includes assets acquired out of capital grants received adjustment is year to be made out of such capital grant in respect of depreciation provided in income and expenditure account

in line with guidelines of accounting standard issued in this regard by the Institute of Chartered Accountants of India.

2.3 Fixed assets register has not been updated and assets reconciliation has not been carried out during the year."

From the above notes it is clear that the opening balance of the fixed assets as reflected in the audited account is not correct. Accordingly, no depreciation is required to be allowed on the incorrect WDV of assets shown in the audit report.

In absence of non production of supporting bills in respect of assets acquired, the claim of depreciation amounting to Rs. 49,31,893=91 can not be allowed in computing income for the assessment year under consideration.

In absence of registration u/s 12AA, the assessee society is not entitled to get exemption u/s 11. Accordingly, the surplus of income over expenditure determined at Rs. 20,46,493/- plus depreciation of Rs. 49,31,893=91 aggregating to Rs.69,78,387/-is considered as income of the assessee society to be taxed at maximum marginal rate.”

“ ………….. i) Against these conceptual warps and wefts that make up the contextual fabric, the Appellant during the F.Y. 1999-00 can be seen to be of the nature of a permanent organization established and situated in the machinery of government that is responsible for the oversight and implementation of the specific functions stated in its Memorandum of Association namely imparting computer education like "A" and "O" level courses, Autocad Training, and Japanese language training to different categories/levels of students in the state, providing consultancy to different Government Departments, etc. Significantly, the activities of the Appellant cannot be stated to be commercial in nature.

j) As already stated by the Appellant, Article 289(1) of the Constitution exempts a State Government from Union taxation in so far as its property and income is concerned. The AO has held in the impugned assessment order that the Appellant is a "person" as defined u/s 2(31) of the Act. While the provisions of this section will be disambiguated later on in this order to determine whether the Appellant is really so, we first try to determine what the Hon'ble Courts of the land have decided about this. It has only been in areas like Tax Collection at Source (TCS) and Services Tax - which are only methods of collection of tax - that a State Government is held to be a "person" under the Income-tax Act and therefore a collector of tax on behalf of Revenue with respect to the income of the taxpayer concerned. The following judicial ratios of the Hon'ble Courts are relevant:

(i) Hon'ble High Court of Patna, in the matter of State of Bihar v. CBDT [2011 ] 199 Taxman 142; [2011] 336 ITR 506

(ii) Hon'ble Madhya Pradesh High Court in the case of Government of Madhya Pradesh v. Tax Recovery Officer [2008] 171 Taxman 466

In the latter case, the Hon'ble Court has clearly stated (as reproduced as follows) under what conditions a Government (Union or State) can be held to be a "person" under the Income-tax Act (emphases in bold italics supplied by me): "Art. 289 exempts property and income of the State Government from taxation by the Union of India. In the present case, the proposed action of the respondent Department or the Union of India is not to tax property or income of the State Government. What is being taxed in this case is income accrued by the lease holders to whom lease is granted by the State Government. It is, therefore, taxing of the income earned by the lease holders on the basis of grant made by the State Government. Accordingly the provision of Art. 289 of the Constitution of India will not apply, in the facts and circumstances of the present case as income or property of the State Government is not being taxed by the impugned action. "Person" is defined in s. 2(31) and it includes an individual, an HUF, a company, a firm, an AOP or a BOI, whether incorporated or not, a local authority and every artificial juridical person, not falling within any of the preceding sub-clauses. If the entire scheme of s. 206C is evaluated and the process of deducting tax at source, its accounting and submission of return is evaluated it would be seen that a person collecting tax is required to submit a return with regard to the tax deducted at source under these provisions. Sub-s. (5A) contemplates that every person collecting tax as per the section is required to prepare return and deliver the tax collected to the prescribed IT authority. Sub-s. (5B) contemplates a provision for submission of returns. The proviso to sub-s. (5B) clearly indicates that where the person collecting tax as per the provisions of sub-s. (1C) of s. 206C is a company or the Central Government or the State Government, such person is required to deliver or cause to be delivered, within the prescribed time returns as contemplated there. Complete reading of these provisions indicate that the person collecting tax under S.206C would include not only a company but also the Central Government and the State Government as these authorities are required to submit returns in accordance to this provision. Complete reading of this section alongwith definition of “person” clearly indicates that the State Government comes within the purview of "person" as contemplated under s.206C(lC) and is liable to collect tax at source from lease holders and deposit it with the Central Government in accordance with the provisions of sub-section (3) of Se.206C. State Government would be a juristic person when it comes to right of State to institute proceedings or for instituting proceedings against the State. Similarly when the legislative intents for providing Scheme for deducting income-tax at source as contemplated under s. 206C is evaluated, it would be clear that every person including the State Government which is granting lease is liable to deduct income earned by any person under the lease and deposit it with the Central Government. So far as the arguments with regard to word "every person" missing after the word "seller" is concerned, the words 'seller' and 'every person' under ss. 206C(1) and

206C(1C) are used with regard to different purpose. Mere absence of the word "every person" in the definition of "seller" as contained in Explanation cl. (c)to s. 206C cannot be construed to mean that the provisions of s. 206C do not apply to the State Government'.

k) In the instant case, it is clear that it is not TCS or any method of taxation that is involved but the conceptual fundament and foundation of tax, what is sought to be taxed and who is sought to be taxed. OCAC, as a registered society or as a Departmental Agency is the property (along with the properties nominally owned by it) of the State Government, and the incomes derived or earned or received by it are owned by the State Government. These properties and incomes (earned of these properties or otherwise) are therefore covered under the provisions of Article 289 of the Constitution and cannot be charged to Income-tax. The Income-tax Act is a code in itself and for levying taxes certain terms have been defined in particular manners and they carry special meanings. The word 'person' is one among them. In contrast to what the AO has decided, despite being a Registered Society during the impugned A.Y. 2000-01, the Appellant (OCAC) cannot be held be a "person" on whom taxes can be held as chargeable. OCAC cannot own or hold property on its own, cannot derive or earn incomes on its own and cannot be sued independently of the Government in a Court of law. As an organism part of the Government, it can have and has no existence outside of the Government. Therefore the Appellant cannot be held as a defaulter of taxes under the charging provisions of the Act, and only as a defaulter as a conduit of tax collections made on behalf of some one else who is so chargeable.

l) In the case of Service Tax, certain Government departments and agencies, including railways, security service at airports and others, pay service tax on services provided to the public such as the railways leasing out space for advertisements, the Central Industrial Security Force (CISF) providing security services at airports and other such establishments, the Directorate General of Supplies & Disposals (DGSD) doing procurement, etc. Once again, it is the services provided by these departments and agencies to the public (and therefore the public) that are taxed and not the departments/agencies per se. The taxes collected are passed on to the public who receive the Services through the recovery process. To understand this distinction better, it is also the case that if one government department renders service to another Government department, there will be no liability of service tax as these two departments would not be treated as two separate entities.

m) The AO has sought to tax the surplus of the incomes over expenses under the head "Profits and Gains from Business or Profession" by holding the Appellant as an AOP. This is patently incorrect since a Government or a true-to-its-description Charitable Society ab initio cannot be held to be running a business or earning business income. The Explanation to Section 2(31) of the Act that defines "person" reads as follows: "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". The Memorandum of Objectives of the Appellant make it clear that OCAC was not set up or formed or established or incorporated with the object of deriving income, profits or gains. Even if it is assumed that the Appellant is a person as defined u/s 2(31) of the Act, it is not the intention of the Act that every person so defined needs to be taxed on any surplus receipts that he/it may possess in a given financial year. It needs to be additionally shown that such surplus is taxable under any of the relevant heads of income that cause "total income" as defined u/s 2(45) of the Act.

(i) Under Section 2(45), "total income" means the total amount of income referred to in Section 5 of the Act, computed in the manner laid down in this act. Section 5 in turn determines the scope of total income for a resident or a non-resident assessee. For a resident assessee, the total income will include all incomes that accrue, arise, earned or received in India (except those incomes which accrues or arises outside India). Chapter III of the Income- tax Act that follows further lays down which incomes would not form part of total income. Within this, the incomes held as tax- exempt u/s 10(46) of the Act which is applicable from 01.06.2011 is reproduced below:

"any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) 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) referred to in this clause, which the Central Government may, by notification in the Official Gazette, specify in this behalf.

It can be readily seen that even if the Appellant is held to be a body or authority that has been constituted by the State Government of Odisha with the object of administering the objectives stated in its Memorandum of Objectives, the "income" earned by the Appellant squarely meets all the criteria and conditions in the above Section. Although the above Section is not applicable to the impugned F.Y. 1999-00, the legislative intent and purpose of the said Section appears to be to act as a prophylactic for problems and disputes such as those in the instant case, and can be held to be an argument that is supportive of the Appellant's case.

ii) However, if OCAC is held to be a Government body which is nothing but "Government" and the "state" in the fullest sense of these terms, then

neither is certification required u/s12 AA nor a retrospective validation needed u/s 10(46) of the Act. In substance, it can be readily seen that the surplus amounts available in the funds of the Appellant are not its Earnings but amounts provided from time to time as Grants by the Government of Odisha or collections made in manners prescribed by the Government or accruals or earnings on property/assets placed at its disposal but owned by the Government. The mere technicality that it tried to obtain a certificate of registration u/s 12AA should not be held against the Appellant. In the case of McDowell and Co. Ltd. v. Commercial Tax Officer, (154 ITR 148) (SC), albeit in a case of tax planning through mitigation of sales tax by having the buyers separately pay the excise duty, the Hon'ble Supreme Court reaffirmed the view of English cases while examining a legally valid transaction, and held that the Revenue should proceed objectively and not hypothetically attribute 'motives' behind the taxpayer's action.

n) Whether the decision of the CIT, Bhubaneswar in the year 2009 that the Appellant as a Government agency need not obtain Registration u/s 12AA is retrospectively applicable in the impugned F.Y. 1999-00 is dependent on whether a Registered Society that is established by the Government can be considered to be a Government Agency. The AO has also employed Section 2(31) to argue that the Appellant, among other things, could be considered as an AOP. We therefore need to determine conclusively whether the Appellant is: a) an AOP; b) a Body of Individuals (BoI); c) a Local Authority; or d) an Artificial Juridical Person (AJP), any of which would classify it (the Appellant) as a taxable Income-tax "person".

(i) Societies are governed by the Societies Registration Act 1860, an all-India Act. Many states have variants on the Act. The applicants must register the society with the state Registrar of Societies having jurisdiction in order to be eligible to apply for tax-exempt status. A registration application includes the society's memorandum of association and rules and regulations. In general, Indian citizens serve as members of the managing committee or governing council of societies, although there is no prohibition in the Societies Registration Act against non-natural legal persons or foreigners serving in this capacity. The governance of societies also differs from that of trusts; societies are managed by a governing council or managing committee, whereas trusts are governed by their trustees. Individuals or institutions or both may be members of a society. Furthermore, in a society, all property is held in the name of the society, whereas all of the property of a trust legally vests in the trustees. The above mean that the fact the Government has established a society and allocated/assigned funds and property to such society does not mean that the society is not part of the Government or represents "less" of Government, and is therefore not a Government agency. (ii) A Cooperative Society (but and importantly, not any society) is a taxable entity under the Income Tax Act, 1961. A Cooperative Society under the Act is to be treated as an association of persons (AOP), which is included in the definition of person'

under the Income Tax Act, 1961. A Government society on the other hand, is not an AOP because the only "person" that is involved and has established such society is the Government who cannot be considered to be a person simpliciter as defined in the Act whose activities are automatically chargeable to tax. Therefore, there is no question of any Association (which means more than one person or entity in common parlance) in the case of a Government society such as the Appellant. The individuals who run the society are not separate persons in the context of the Act as they are only its directors who are employees of the Government and are deputed to the said society on lien or other instrument. The cooperative society, in contrast represents an entity where several persons have come together to form it (the cooperative society), The set of the directors or even of all the employees or sub- departments within do not define or constitute or make up the Government society, which has been constituted or placed together by the Government from above and not from within. The Government occupies and suffuses every part of the continuum of the Appellant's (which in view of earlier discussions can be held to be its organismic pseudopodia arm or wing) soul, just as the soul can be held to occupy and suffuse every part of the human body and God held to occupy and suffuse every part of the soul. Just as the body looks to the soul and the soul to the Almighty for existence, succor and solace, the Appellant looks to the Government for these bestowals and mercies.

(iii) By the same logic as above the Appellant society also cannot be held to be a Body of Individuals (Bol).

(iv) The test for determining whether a body is a local authority has been laid down by the Hon'ble Supreme Court in the case of Union of India vs. R.C. Jain AIR [1981] SC 951; [1981] 2 SCR 854. In the context of applicability of the Bonus Act, 1965, the question which arose there was whether the Delhi Development Authority was a local authority. In construing the meaning of the expression "local authority" as defined in section 3(31) of the General Clauses Act, it was observed by the Hon'ble Court as follows (emphases in bold italics provided by me): "Let us, therefore, concentrate and confine our attention and enquiry to the definition of local authority' in section 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of section 3(31) suggests that an authority in order to be a local authority, must be of like nature and character as a municipal committee, district board or body of port commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a municipal committee, district board, or body of port commissioners, but possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and management of a municipal or local fund. What then are the distinctive attributes and characteristics, all or many of which a municipal

committee, district board or body of port commissioners' shares with any other local authority? First, the authorities must have separate legal existence as corporate bodies. They must not be mere Governmental agencies but must be legally independent entities. Next, they must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. Next they must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of dependence may vary considerably but an appreciable measure of the autonomy there must be. Next, they must be entrusted by statute with such Governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services, etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfillment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority". It is clear that the Appellant violates many of the criteria that would enable it to be classified or categorized as a local authority.

(v) The case of an Artificial Juridical Person (AJP) is different. The Hon'ble Karnataka High Court held in the case of the Commissioner of Income-tax & Othrs vs. M/s Children's Educational Society in ITA.No.1078 of 2006 dated 18.03.2013; 2013 (7) TMI 519 that once a body/society is incorporated under a statute, it becomes a juridical person. By the said argument or the same token, the appellant can be seen to not escape the definition envelope of an AJP.

o) All of the above help conclude that during the F.Yrs 1999-00 to 2001- 02, the Appellant being a "Registered society established and owned by the Government of Odisha can at best be examined for consideration as an AJP. Whether the surplus generated in the hands of such "person" during the financial years in question is taxable, and if yes, taxable in the hands of the AJP are others question. A juridical personality allows one or more natural persons (universities personarum) to act as a single entity (body corporate) for legal purposes. Such artificial personality allows that entity to be considered under law separately from its individual members (for example in a company limited by shares, its shareholders). They may sue and be sued, enter contracts, incur debt, and own property. Entities

with legal personality may also be subjected to certain legal obligations, such as the payment of taxes. An entity with legal personality may shield its members from personal liability. The concept of juridical personality is not absolute. "Piercing the corporate veil" refers to looking at the individual natural persons acting as agents involved in a company action or decision; this may result in a legal decision in which the rights or duties of a corporation or public limited company are treated as the rights or liabilities of that corporation's members or directors. Not all organizations have legal personality. For example, the board of directors of a corporation, legislature, or governmental agency typically are not legal persons in that they have no ability to exercise legal rights independent of the corporation or political body which they are apart of.

p) Therefore, the Appellant having no right or authority to sue and be sued, enter contracts, incur debt, and own property and no ability to exercise legal rights independent cannot be held to be an AJP in the tax- liable sense of the term, if the veil of what is apparent is pierced to reveal what is real. The Appellant therefore is nothing but a Government agency or instrumentality, and cannot be taxed separately as a person under the Income-tax Act. The various decisions of the Hon'ble Courts cited by the Appellant in this regard are accepted.

q) From all the above, the following broad pictorial schematic emerges:

r) In sum and substance, the argument of the AO that the surplus derived by the Appellant as taxable under the Sections 28 to 44 of the Act holing the Appellant as an AOP is not correct. The Appellant has been shown to be at best an AJP that is not an AJP in the taxable and tax-liable sense of the term, as well as not a "person" whose surpluses or retained funds or receipts or other sums possessed or held by it can be brought to tax under the Statute. As a Government Agency and Instrumentality, it is an organismic arm or wing of the Government, belongs to the Government and is therefore nothing by Government, possesses no commercial or profit motive, and is thus fully tax exempt under Article 289 of the

Constitution. The law of identity (in logic and syllogisms), which the above presupposes and exemplifies, states that "each thing is the same with itself and different from another". By this it is meant that each thing (be it a universal or a particular) is composed of its own unique set of characteristic qualities or features, which the ancient Greeks called its essence. Consequently, things that have the same essence are the same thing, while things that have different essences are different things. In logical discourse, violations of the above result in the fallacy of equivocation, which means that we cannot use the same term in the same discourse while having it signify different senses or meanings, even though the different meanings are conventionally prescribed to that term. In the facts of the instant case, to split hairs on the law of identity and to hold that that a Government-owned agency is not sufficiently Government-like or Government in spirit and essence, and on the basis of this to hold amounts that are indubitably owned by the Government to be taxable, is equivalent to questioning the motive of the Government in employing its funds, and cannot be upheld as proper. To that extent, the Ground C preferred by the Appellant that "the assessment order passed by the Ld. Assessing Officer is not to meet the ends of justice but to create a fictitious demand on the appellant knowing fully well that the appellant is an instrumentality of Govt, of Odisha" is upheld as valid. The AO knew that the Appellant was Government and yet adopted a protective and cautious approach, in keeping with his circumstances and intellectual and psychological predilections and propensities.

The Yoga Sutras of Patanjali, contextually, speak of five stages/properties/capacities of the human mind which are: pramaana (the capacity to recognize identity, viz. to know fact), viparyaya (the capacity to know and recognize error), vikalpa (the capacity to imagine even without any material correlates), nidra (the capacity to shut down, viz. sleep) and smriti (the capacity to remember and memorize). Of the above, it would appear that the AO has conveniently and obediently ignored/disavowed pramaama and viparyaya and engaged in vikalpa and nidra on the principal matter of the visible forest (of the Appellant being Government) while in frenetic search of the infinitesimally bonsai tree (viz. the many constituents and parts of the Appellant which when described in worded disconnectedness sans its life and spirit will appear to be eternally and infinitely distant from Government).

To show how words, phraseology and arguments bereft of foundations can make things that are apparent invisible and vice versa, we refer to Plato's dialogue Theaetetus in which Socrates attempts to establish that what we call "sounds" and "colours" are two different classes of thing. The exchange is reproduced below:

Socrates: About sounds and colours, do you in the first place admit that they both exist? Theaetetus: Yes. Socrates: Do you also admit that either of them is different from the other, and the same with itself?

Theaetetus: Certainly.

Socrates: And that both are two and each of them one? Theaetetus: Yes.

s) It can also be readily seen from the various documents provided by the Appellant during the assessment and Appellate proceedings, such as the 2003 Resolution no.l637/It dated 05.03.2003 by which the Government of Odisha has designated the OCAC, a State Government Agency to function as the Technical Directorate under the Department of Information & Technology, that the intent of the Government in establishing the OCAC (the Appellant) was never in doubt. The Appellant was in every sense of the word to be Government and be part of the Government and implement policies of the state. The progression of notifications that have ensured over the years only makes this fact too clear. (i) The Grants-in-Aid received from the Government to carry out its activities are not business receipts, but funds received to implement the specific schemes of the Government. The ratio cited by the Appellant of the ITAT, Ahmedabad Bench in the case of ITO vs. Gujarat Handicrafts and Handlooms Development Corporation Ltd. [1984] 9 ITD 488 (ITAT, Ahm) is accepted. Also, if an assessee was only the disbursing agency of funds that belonged to the Government, the receipt of such amount would not constitute an income in the hands of such assessee. The Appellant cited in support the ratio of the Hon'ble Allahabad High Court in the case of GIT vs. U.P. Upabhokta Sahakari Sangh Limited [2001] 288 ITR 106 (All) which is applicable and hence accepted.

(ii)The peculiar circumstances where funds are granted by the government to a corporation, a special purpose vehicle (SPV), or a nodal agency for executing a project of public importance came up on the issue of their taxability before the Hon'ble Karnataka High Court in CIT vs Karnataka Urban Infrastructure Development and Finance Corpn. [2006] 155 Taxman 228 (Kar.), which held such funds/grants received to be not- taxable. The funds allotted were parked in temporary investments pending utilisation thereof, and hence the question arose whether the interest earned on such investments would be liable to tax in the hands of the corporation, the SPV or the nodal agency. The assessee in question was appointed the nodal agency for the implementation of the mega-city scheme worked out by the Planning Commission and the Ministry of Urban Development in respect of urban infrastructure of Bangalore. The Central Government had provided the money to the assessee for implementing the scheme. This money was parked by the assessee in various bank deposits when not in use. The interest earned during the year on these deposits was transferred to the mega-city scheme account directly with an appropriate disclosure in the notes to the accounts. The assessee has been involved in 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. 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, was treated as income of the assessee and the Assessing Officer brought the amount to tax.

In its Order, the ITAT, Bangalore Bench looked into the guidelines that provided the background of the scheme. The Tribunal also looked into the terms of the scheme, and held the assessee as a trustee of the funds entrusted to carry out the objects of the Government, and was therefore held to have acted as an agent of the governments of both the Central and the States for implementing the scheme of developing the mega-city.

The Hon'ble High Court in its order observed that the material on record clearly showed that the very purpose of constitution of the assessee was to act as a nodal agency for implementation of mega-city scheme worked out by the Planning Commission. Both the Central and the State governments were expected to provide requisite finances for implementation of the project. The funds from the Central and State governments would flow directly to the specialised institution or nodal agency as grant and the nodal agency would constitute a revolving fund with the help of Central and State shares out of which finance could be provided to various agencies such as water, sewage boards, municipal corporations, and so on. There was no profit motive as the entire fund was earmarked for a specific object and the interest accrued on deposits in banks, though in the name of the assessee, had to be applied only for the specific purpose as provided in the guidelines. The whole of the fund belonged to the State Exchequer and the assessee had to channel them to the objects of the centrally sponsored scheme of infrastructure development for the mega-city of Bangalore. Funds of one wing of the government were disbursed to the other wing(s) for a public purpose as per the guidelines issued. The monies so received, until they were utilised, were parked in a bank. The finding recorded by the ITAT clearly showed that the entire money in question had been received for implementation of the scheme, which was for a public purpose. The scheme was implemented as per the guidelines of the Central government and, therefore, the assessee was only acting as a nodal agency of the Central government for implementation of these projects. The Hon'ble Court held that it was 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.

(iii) On the above issue of the taxability of interest accruals on Government funds, the ratio of the Hon'ble Gujarat High Court in the case of Gujarat Municipal Finance Board vs. Dy. Commissioner of Income Tax [1996] 221 ITR 317 (Guj.) that has been submitted by the Appellant is applicable and hence accepted. The Appellant has also submitted that it had been held in various decisions of the Hon'ble Courts that for the determination of any receipt as a grant-in-aid/subsidy in the hands of the recipient, the "purpose test" (the purposes for which these were granted) would need to be applied. The ratio of the Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC) is applicable and is hence accepted. The ratio of the Hon'ble Kerala High Court in the case of CIT vs. Kerala Land Development Corporation [1998] 232 ITR 575 (Ker.) too is held as applicable.

(iv) The other receipts of the Appellant such as Consultancy Fees Received, Rent, etc. too represent accruals on Government assets and

property and are not chargeable to tax u/s 5 of the Act read with Article 289 of the Constitution.

Assessing Officer and ld A.R. supported the order of the CIT(A).

available on record, we find that the CIT(A) after appreciating the entire

facts has deleted the addition. Further, the submission of the assessee

before the lower authorities that CIT, Bhubaneswar by an order passed on

6.1.2009 has held that the status of the assessee as full-fledged agency

under the government of Orissa and hence, was neither a trust nor

society and grant of registration u/s.12AA was not applicable could not be

controverted by the ld D.R. by bringing any positive material on record. .

Ld D.R. could not point out any specific mistake in the above quoted order

of the CIT(A). Hence, we confirm the findings of the CIT(A) and dismiss

the ground of appeal of the revenue.

order of the CIT(A). Since, we have confirmed the order of the CIT(A),

the cross objections have become infructuous and same are dismissed.

by the assessee are dismissed.

Order pronounced on 04 /10/2017. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 04 /10/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. ITO, Ward 5(3), The Appellant : Bhubaneswar 2. objector: Orissa The Respondent. /cross Computer Application Centre, No.N1/7-D, Acharya Vihar, Bhubaneswar 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT-2, Bhubaneswar BY ORDER, 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack