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2020 (6) TMI 51 - AT - Income Tax


Issues Involved:
1. Validity of the order under section 143(3) r.w.s. 147 of the Income Tax Act for A.Y 2011-12.
2. Validity of the notice issued under section 148.
3. Whether the appellant qualifies as a "state" under Article 289 of the Constitution of India.
4. Whether the appellant is a "person" for the purposes of the Income-tax Act and liable to file a return of income.
5. Assessment of surplus under "income from business and profession" when no such income exists.
6. Liability to file a return of income due to tax deduction by a payer.
7. Assessability of the appellant under the Act and its existence for public purposes.
8. Applicability of section 10(46) of the Income-tax Act to the appellant.

Detailed Analysis:

1. Validity of the Order under Section 143(3) r.w.s. 147:
The appellant challenged the correctness of the CIT(A)’s order dated 28th November 2018, related to the assessment under section 143 r.w.s. 147 of the Income Tax Act for the assessment year 2011-12. The Tribunal noted that the issue in appeal is covered by a coordinate bench decision in the appellant’s own cases for the assessment years 2007-08 and 2010-11, where it was observed that the appellant is an instrumentality of the state and thus not liable for taxation under the Income Tax Act.

2. Validity of the Notice Issued under Section 148:
The appellant contended that the notice issued under section 148 was invalid. The Tribunal, referencing the coordinate bench decision, upheld that the appellant is an instrumentality of the state and therefore, the notice under section 148 was not applicable.

3. Qualification as "State" under Article 289:
The Tribunal examined the statutory provisions and the control exercised by the State Government over the appellant. It concluded that the appellant is engaged in the advancement of public utility services and operates under the complete control of the State Government. Therefore, it qualifies as a "state" under Article 12 of the Constitution of India and is entitled to immunity from taxation under Article 289.

4. Status as a "Person" under the Income-tax Act:
The Tribunal found that the appellant, being an instrumentality of the state, does not fall under the definition of a "person" for the purposes of the Income-tax Act. Consequently, it is not liable to file a return of income.

5. Assessment of Surplus as "Income from Business and Profession":
The Tribunal noted that the appellant’s activities do not constitute trade, commerce, or business. The income sources, such as fees from candidates, receipts from printed educational material, and government grants, are not considered business activities. Thus, the assessment of surplus under "income from business and profession" was erroneous.

6. Liability to File Return Due to Tax Deduction by a Payer:
The Tribunal held that mere tax deduction by a payer does not impose an obligation on the appellant to file a return of income, given its status as an instrumentality of the state.

7. Assessability and Public Purpose:
The Tribunal reiterated that the appellant exists for public purposes and is under the complete control of the State Government. Therefore, it is not assessable under the Income-tax Act.

8. Applicability of Section 10(46):
The Tribunal noted that the appellant had received exemption under section 10(46) of the Income-tax Act for specified incomes for the financial years 2015-16 to 2018-19. Although the exemption was not explicitly for the assessment year under consideration, the Tribunal held that the appellant’s income is inherently exempt due to its status as an instrumentality of the state.

Conclusion:
The Tribunal allowed the appeal, holding that the appellant is a "state" under Article 289 of the Constitution of India and is entitled to immunity from taxation under the Income-tax Act. The grounds of appeal raised by the appellant were sustained, and the order was pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962.

 

 

 

 

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