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2016 (9) TMI 443 - AT - Income TaxAssessee port trust status - whether the assessee port trust could be assessed in the status of a local authority or in the status of a company - Held that - The assessee s status to be assessed as a local authority and its income was exempt u/s 10(20) of the Act was accepted by the Income Tax Department upto Asst Year 2002-03. Only pursuant to an amendment made in section 10(20) of the Act with effect from Asst Year 2003-04, the situation has undergone change wherein the activities of the assessee port trust would not fall under the definition of the expression local authority . At the cost of repetition, we state that the said definition inserted in section 10(20) is only applicable for the purpose of section 10(20) of the Act and for assessee s claiming exemption under that section. It is not in dispute that the assessee had not claimed any exemption u/s 10(20) of the Act for the impugned assessment years under appeal before us. Hence the amendment in section 10(20) is not at all applicable to the assessee port trust. We also find from the paper book filed by the assessee vide pages 77 to 83 of paper book that major port trusts in India had given confirmation to the assessee port trust that they are being assessed only as a local authority and not in the status of a company under the Income Tax Act and the same has been accepted by the Income Tax Department - Assessment u/s 147 quashed for want of jurisdiction - Decided in favor of assessee.
Issues Involved:
1. Whether the assessee port trust should be assessed as a 'local authority' or a 'company'. 2. Validity of the initiation of reassessment proceedings under section 147 of the Income Tax Act, 1961. Detailed Analysis: 1. Status of the Assessee: Local Authority vs. Company The primary issue was whether the assessee port trust should be assessed as a 'local authority' or a 'company'. The assessee argued that it should be assessed as a 'local authority' based on the General Clauses Act, which defines 'local authority' to include bodies like port commissioners. The assessee had not claimed any exemption under section 10(20) of the Income Tax Act, which was amended to restrict the definition of 'local authority' for the purposes of that section. The Tribunal found that the definition of 'local authority' in section 10(20) is relevant only for the purposes of that section and not for determining the status of the assessee for taxation purposes. The Tribunal noted that the assessee had been consistently assessed as a 'local authority' in previous years and that other major port trusts in India were also assessed as 'local authorities'. The Tribunal held that the assessee should be assessed as a 'local authority' and not as a 'company'. 2. Validity of Reassessment Proceedings The second issue was the validity of the reassessment proceedings initiated under section 147 of the Income Tax Act. The assessee contended that the reassessment was based on a mere change of opinion and that there was no failure on its part to disclose full and true particulars of income. The Tribunal observed that the original assessment had been completed after considering all relevant information, and no new material had been brought on record to justify the reopening of the assessment. The Tribunal referred to the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which held that reassessment cannot be initiated on a mere change of opinion. The Tribunal concluded that the reassessment proceedings were invalid as they were based on a change of opinion without any tangible material. Consequently, the reassessment orders were quashed and declared void ab initio. Conclusion: The Tribunal allowed the appeals of the assessee and dismissed the appeals of the revenue. It held that the assessee port trust should be assessed as a 'local authority' and not as a 'company'. The reassessment proceedings initiated under section 147 were declared invalid and void ab initio. The decision for the assessment year 2003-04 was applied with equal force to the assessment years 2004-05 and 2005-06.
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