DIRECTOR OF INCOME TAX vs. M/S. BANGALORE

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 12TH DAY OF FEBRUARY, 2016

:PRESENT: THE HON’BLE MR.JUSTICE N.K. PATIL

AND

THE HON’BLE MRS.JUSTICE S. SUJATHA

I.T.A.NO.301 OF 2015 Between:

Director of Income Tax (Exemptions), C.R. Building, Queens Road, Bangalore-560 001. …Appellant (By Sri. E.I. Sanmathi, Advocate)

And :

M/s. Bangalore Metropolitan Transport Corporation, Central Office, Shanthi Nagar, Bangalore-27.

…Respondent (By Sri. A. Shankar, Advocate) ***

This ITA is filed U/s. 260A of the Income Tax Act, 1961, praying to formulate the substantial question of law, allow the appeal and set aside the order dated 20/02/2015 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bangalore, in ITA No.39/Bang/2012.

This ITA coming on for Admission, this day, N.K.PATIL J., delivered the following:

:J U D G M E N T:

This appeal by the Revenue is arising out of the impugned order dated 20/02/2015, passed in ITA No.39/Bang/2012, by the Income Tax Appellate Tribunal, Bangalore Bench-A, Bangalore, for consideration of the following substantial questions of law: (1) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee is entitled for registration under section 12A of the Act, even when the objects of KSRTC will fall under the limb “any other object of General Public Utility” under section 2(15) of the IT Act and the activities of BMTC under this limb will be hit by the proviso to section 2(15) of IT Act amended w.e.f. 1.4.2009 as the transport services are provided to all sections of the society on commercial basis like any other private transporter and generating such huge surplus year after year and is running its activities on commercial basis?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee is entitled for registration under section 12A of the Act, even when the functions of BMTC include providing casual contract and chartered services, including luxury buses like Volvo and Mercedes

fully air-conditioned are run as well as provided on hire for the occasions like wedding, excursion, pilgrimage and rallies or whenever the general public needs dedicated buses for their travel and these are charged on commercial basis. It is also seen that BMTC is providing Advertisement space on buses to the private sector charging substantial fee, which activity is nothing but commercial activity and there is a deviation from its predominant object of providing transport service?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee is entitled for registration under section 12A of the Act, even when the KSRTC under the head “Non- operating revenue”- Non-traffic Revenue, has accounted a receipt of Rs.91,47,94,000/- as miscellaneous income which are mainly from advertisement and transportation of luggage and goods are obviously out of its commercial purpose is involved and is charging for every services provided?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee is entitled for registration under section 12A of the Act, when BMTC was formed by the Government of Karnataka as a Corporation by a legislative Act and is a public limited company under section 25 of Indian Companies Act and in view of the amended provisions of Section 2(15) and as BMTC is run on commercial basis like any other private transporter, the registration granted under section 12A is rightly been cancelled?

(5) Whether, on the facts and in the circumstances of the case, the Hon’ble Tribunal was right in following the judgment of Hon’ble High Court in the case of the KIADB wherein it is held that the first proviso to section 2(15), which was introduced by Finance Act, 2008 w.e.f. 01.04.2009, cannot be invoked by the registering authority for the purpose of cancellation of registration under section 12AA(3), even if the assessee is found to be carrying on of any activity in the nature of trade, commerce or business?

(6) Whether, on the facts and in the circumstances of the case, the Tribunal was right in following the judgment of Hon’ble High Court in the case of the KIADB wherein it is held that in the event of first proviso to section 2(15) becomes applicable to an assessee who has already been granted registration under section 12A, the power to deny the benefit of exemption to such assesses vests only with the Assessing Authority under section 13(8) rather than the registering authority under section 12AA (3) by way of cancellation of registration?

(7) Whether, on the facts and in the circumstances of the case, the Tribunal was right in following the judgment of Hon’ble High Court in the case of the KIADB wherein it is held that the two conditions stipulated under section 12AA(3), which empowers the registering authority to cancel registration, do not exist in the case of the assessee?

(8) Whether, on the facts and in the circumstances of the case, the Tribunal was right

in following the judgment of Hon’ble High Court in the case of the KIADB wherein the Hon’ble High Court was correct in law in not considering the statutory position that the assesse would enjoy the benefit of registration under section 12AA and benefit of exemption under section 11 and 12 during the period in which it continued pursuing the objects as enshrined in the original trust deed and in the event of amendment of such objects, the registering authority would suo moto assume the power of review of the registration granted?

(9) Whether, on the facts and in the circumstances of the case, the Tribunal was right in following the judgment of Hon’ble High Court in the case of the KIADB wherein the Hon’ble High Court in the case of the KIADB wherein the Hon’ble High Court was not correct in law in holding that cancellation of registration by the registering authority is not permitted without appreciation the fact that by virtue of the amended provisions of section 2(15), the activities of the assessee cannot be considered as charitable in nature and the aggregate value of the receipts from the activities of the assessee has exceeded the threshold limit fixed thereof?”

Division Bench of this Court dated 7th November 2014 in ITA No. 261/2013 (The Director of Income Tax (Exemption) and another Vs. Karnataka Industrial Area Development Board). Therefore, they submitted that following the said judgment and in terms of the same, this appeal may also be dismissed holding that substantial questions of law are answered in favour of assessee and against revenue.

and answering the substantial questions of law in favour of the assessee and against the revenue. Learned counsel Sri. A.Shankar is permitted to file vakalath for respondent within four weeks.

SD/- JUDGE

SD/-

JUDGE tsn*