KUWAIT INVESTMENT AUTHORITY,MUMBAI vs. ADIT (IT) RG 3(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार/ Per Rajendra, A.M.- अनुसार Challenging the order,dated 1/03/2011,of the CIT (A)-10,Mumbai the assessee has filed the present appeal.Assessee,an approved Foreign Institutional Investor (FII) , was registered with SEBI to carry on investment activities in the Indian Securities Market.It filed its return on 31/07/2008,declaring total income of Rs.1,61,18,61, 706/-.The Assessing Officer (AO) completed the assessment on 07.12. 2011,u/s.143 (3)of the Act,determining the income of the assessee at Rs. 161.18 crores. 2.The effective ground of appeal

is about treating the assessee is a trust and not as an corporate entity.While completing the assessment order,the AO held that assessee was a trust as it was registered with the SEBI.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him,it was argued that assessee was part of the Sovereign i.e.State of Kuwait, that it was an artificial person, that it was not a person specifically defined within the categories listed in the definition of person under section 2(31) of the Act,that it should be treated as artificial juridical person.Alternatively, it was argued that the assessee could be treated at best a company, as per the provisions of section 2. (17) of the act that defined the word company, that the AO was not justified in treating the assessee as a Trust.

3081/M/11-Kuwait Investment 3.After considering the submission of the assessee and the assessment order, the FAA held that assessee was engaged in investment activities and was registered with SEBI as FII, that the FIIs, registered with the SEBI, were to be treated as trust under the Act, that the AO had rightly held that status of the assessee was of a trust, that principles of res judicata were not applicable to income tax proceedings, that decision taken in the earlier years was not relevant for the year under consideration about the status of the assessee. Finally, he dismissed the appeal filed by the assessee.

4.During the course of hearing before us,the Authorised Representative (AR) referred to the official Gazette of the government of Kuwait (pages.1-2 of the paper book) and stated that assessee was part of Kuwait government,that it was a public authority resident in the State of Kuwait,that in the earlier years the AO himself had treated the assessee as company,while passing the orders under section 143(3) of the Act, that in the subsequent years also the AO had treated the assessee has company.The Departmental Representative (DR) supported the order of the FAA. We have heard the rival submissions and perused the material before us. We find that assessee is registered as FII with the SEBI, that the government of Kuwait had established the entity as a public authority. In the official Gazette, dated 20/06/ 1982,the Ministry of Information of government of Kuwait rectified the establishment of a public authority is an independent judicial person.As per the Article 3 of the Gazette the authority was to be managed by the board of directors consisting of Minister of Finance,Minister of Oil and other members to be appointed by government.This, clearly establishes the fact that assessee was part of the State of Kuwait. It is also a fact that in the earlier and subsequent years the AO has treated the assessee as a corporate entity.While completing the assessment or deciding the appeal,the AO/FAA has not mentioned as to how the facts of the case under consideration were different from the facts of the earlier assessment years, as far as the status of the assessee was concerned. It is not the case of the Department that in the earlier years the returns filed by the assessee were processed under section 143 (1) of the Act.There is no doubt that principles of the res judicata do not apply to the income tax proceedings. But, it is equally true that principles of consistency are applicable to proceedings carried out under the Act.Without assigning any reason and without distinguishing the facts of the earlier years, the AO/FAA cannot alter the status of an assessee as per their wishes.In the case of Galileo Nederland BV ,(367 ITR 319),the Hon’ble Delhi High Court has held as under: 2 3081/M/11-Kuwait Investment