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2024 (5) TMI 1395 - AT - Income TaxExemption from tax as the appellant is an instrument of state as per Article 12 of the Constitution - as per assessee it is not liable to tax as being a State under Article 289 of the Constitution of India engaged in public utility services - AO was of the view that the assessee is a partnership firm having perpetual succession - HELD THAT - We find that in the instant case Assessee/APSCHE is incorporated under Special Legislation i.e. APSCHE Act 1988. As per the said Act the State Government is only having power to appoint Chairman and other members in the Government Council i.e. full control of the State Government on the policy decisions as well as management. The Hon ble Supreme Court has therefore held that the autonomous bodies like State Transportation Corporation or Warehousing Corporation where there is full control by the Government either State or Central theseare instrumentalities of State only. Further perusal of Article 12 shows that the definition of the State given in Article is inclusive and not exhaustive. The expression other authorities used in Article 12 is neither defined in the Constitution of India nor in any other statute. Therefore the Hon ble Supreme Court of India and the Hon ble High Court have interpreted this expression in various judgements. The Hon ble Supreme Court of India while interpreting the expression other authorities in the case of Som Prakash Rekhi v. Union of India 1980 (11) TMI 113 - SUPREME COURT have culled out certain tests to determine as to when a Corporation should be said to be an instrumentality or Agency of the Government. If the body is found to be an instrumentality of the agency of the Government it would be an authority included in term State under Article 12 of the Constitution of India. However the tests indicated by the Hon ble Apex Court in the case of Som Prakash Rekhi Supra are merely indicative and not absolute and thus have to be applied discretely. If any Body or organisation falls within the criteria as laid down by the Hon ble Apex Court it can be considered that it falls within the term State . we observe that the assessee has satisfied majority of the conditions. We also further note that the assessee s Govt. Counsel has made an application both for cancellation of PAN which was issued wrongly as a partnership firm and also an application under 10(46) of the Act for exemption of specified income to the assessee. Considering the arguments of the Ld.AR that the assessee is under bonafide mistaken belief as being instrument of state is exempt from filing the return of income the assessee has not filed the return of income for the impugned year under consideration. Therefore considering the facts and circumstances of the instant case that the assessee is completely under the superintendence and control of the State Government financially and administratively the assessee falls under the definition of State as per Article 12 of the Constitution of India and in our view the assessee is entitled for immunity from taxation of it s income under the provisions of Income Tax Act. We are therefore inclined to allow Ground raised by the assessee. Further we are also of the opinion that since the assessee is fully exempt from tax there cannot be taxation on the income of the assessee or the receipts collected by the assessee. Assessee appeal allowed.
Issues Involved:
1. Condonation of Delay 2. Validity of Notice Issued u/s 148 3. Status of the Assessee as an Instrument of State and Exemption from Taxation 4. Addition of Unexplained Cash Deposits u/s 69A Summary: Condonation of Delay: The appeals were filed by the assessee with a delay of 17 days due to preoccupation with implementing an educational program and adherence to the Model Code of Conduct for General Elections 2024. The Tribunal found valid and sufficient cause for the delay and admitted the appeals for hearing in the interest of justice. Validity of Notice Issued u/s 148: The assessee did not press this ground, and it was dismissed as not pressed. Status of the Assessee as an Instrument of State and Exemption from Taxation: The assessee argued that it is a statutory body under the AP State Council of Higher Education Act, 1988, and falls within the definition of 'State' as per Article 12 of the Constitution of India, thus exempt from filing Income Tax Returns. The Tribunal examined the APSCHE Act and concluded that the assessee is under the complete superintendence and control of the State Government, both financially and administratively. Therefore, the assessee qualifies as an instrumentality of the State and is entitled to immunity from taxation under Article 289 of the Constitution of India. The Tribunal allowed this ground, stating that the assessee is fully exempt from tax. Addition of Unexplained Cash Deposits u/s 69A: Given that the assessee is exempt from taxation, the Tribunal held that there cannot be any taxation on the income or receipts of the assessee. Consequently, the addition of Rs. 18,99,93,014/- made by the AO towards unexplained cash deposits was not justified. Conclusion: The appeals for the A.Y. 2013-14 to 2017-18 were allowed, and the order was pronounced in the open court on 28th May, 2024.
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