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Issues:
1. Whether the Corporation acts as an agent of the State and carries out activities on behalf of the State? 2. Whether the income of the Corporation is actually the income of the State and exempt from income tax under the Constitution? Analysis: The case involved an application by the U.P. Forest Corporation under section 256 of the Income-tax Act, seeking a direction to the Income-tax Appellate Tribunal to refer two questions to the High Court. The questions pertained to whether the Corporation operates as an agent of the State and if its income should be considered as the State's income exempt from tax under the Constitution. The Corporation had declared a loss in the assessment year 1978-79 and claimed exemption under section 10(20) of the Income-tax Act. However, the Inspecting Assistant Commissioner denied the exemption, stating that the Corporation's profit-earning activities did not fall under the exemption. The Commissioner of Income-tax (Appeals) also rejected the plea for exemption. The Forest Corporation then appealed to the Income-tax Appellate Tribunal challenging the denial of exemption under section 10(20). In the subsequent appeal, the Corporation raised an additional ground asserting that its income should be exempt under article 289(1) of the Constitution as the income of the State Government. The Tribunal had previously ruled against the Corporation's claim under article 289(1) for the assessment year 1976-77. However, for the year 1978-79, the Tribunal, following its earlier decision, held that the Corporation's income was exempt under section 10(20). The Tribunal had rejected the Corporation's applications for reference in previous years, stating that no legal question arose for referral to the High Court. The High Court also rejected an application related to the assessment year 1976-77, as the Tribunal had already determined that the Corporation was not liable for assessment under the Income-tax Act. Regarding the present application for the assessment year 1978-79, the High Court found that since the Corporation was granted exemption under section 10(20), the question of the applicability of article 289(1) of the Constitution was deemed academic and unnecessary for decision. The Court emphasized that engaging in futile controversies was against settled law and cited precedents where irrelevant questions were not answered. Additionally, the Court referred to a previous order where it was noted that since the Revenue did not challenge the Tribunal's decision granting exemption under section 10(20), there was no basis for the Corporation to appeal. The Court cited a Supreme Court ruling emphasizing that a party not aggrieved by a Tribunal's order in its favor cannot file a reference application. In conclusion, the High Court rejected the Corporation's application, highlighting that the Tribunal's order favored the Corporation, and there was no need for further legal action. The Court emphasized that in such cases, there should be no order as to costs, and the application was dismissed.
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