2018 (9) TMI 1398 - AT - Income Tax

Status of the assessee as Company or in the status of An association of Persons - Held that - The undisputed facts of the case is that the assessee company is registered as a Private Limited Company under the Registration of Companies Act Sikkim 1961. The definition of Company under the Income Tax Act, 1961 is given u/s 2(22A) of the Act. This definition does not include a company registered under the Companies Act of Sikkim, 1961. Reliance placed by the ld. D/R, on the 145th Report of the Parliament of India (Rajya Sabha) Petition praying for Protection of interest of Bona Fide Indian National Residing in Sikkim Prior to its merger with India in 1975, presented on 6th August, 2013, has no relevance as far as this issue is concerned. The Indian Income Tax Act, 1961, has been extended to the State of Sikkim w.e.f.01/04/1989. The revenue has not brought on record any evidence of merger of the Companies Act of Sikkim with the Indian Companies Act, 1956. Hence, the propositions of law laid down by the Tribunal extracted above still holds the field. Hence, we uphold the contention of the assessee that it has to be assessed as an Association of persons and not as a Company . - Decided in favour of assessee.

Summary

Issues:
Assessment status of the assessee - Company or Association of Persons

Detailed Analysis:

Issue 1: Assessment status of the assessee - Company or Association of Persons

The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) relating to the Assessment Year 2013-14. The assessee, registered under the Registration of Companies Act Sikkim 1961, contended to be assessed as an "Association of Persons" based on a previous tribunal decision. However, the Assessing Officer treated the assessee as a company for assessment purposes. The key issue was whether the assessee should be assessed as a company or as an association of persons.

The Income Tax Appellate Tribunal analyzed the definition of a company under the Income Tax Act, which did not include a company registered under the Companies Act of Sikkim, 1961. Referring to a previous case, the Tribunal highlighted the unique status of companies incorporated under the Companies Act (Sikkim), 1961, due to the Constitutional provisions granting special status to the State of Sikkim. The Tribunal emphasized that unless a notification extends the Indian Companies Act to Sikkim, the state continues to be governed by its own laws. Therefore, the Tribunal accepted the contention of the assessee to be assessed as an Association of Persons.

The Tribunal dismissed the relevance of a parliamentary report presented in 2013, stating that the Indian Income Tax Act had been extended to Sikkim in 1989, and there was no evidence of the merger of Sikkim's Companies Act with the Indian Companies Act. Consequently, the Tribunal upheld the assessee's status as an Association of Persons and allowed the appeal. The judgment was delivered on July 20, 2018, in favor of the assessee.

In conclusion, the Tribunal's decision clarified the assessment status of the assessee, emphasizing the unique legal status of companies incorporated under the Companies Act (Sikkim), 1961, and the Constitutional provisions governing Sikkim's legal framework. The judgment highlighted the importance of legal provisions and notifications in determining the appropriate assessment status for tax purposes.