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2014 (12) TMI 973 - AT - Income TaxImmunity from taxation under Article 289(1) of the Constitution of India Assessee being A.P. Pollution Control Board separate legal/juristic entity or not from the State Govt. Held that - The assessee board was created with effect from 24/01/1976 as Andhra Pradesh State Board for the Prevention and Control of Water Pollution and subsequently rechristened as Andhra Pradesh Pollution Control Board after enactment of the AIR (prevention and control of pollution) Act, 1981, but, the assessee board never claimed immunity from payment of income-tax under article 289 of the Constitution of India - only after assessee lost the claim of exemption u/s 10(20) of the Act, by virtue of amendment to the definition of the expression local authority w.e.f. 01/04/2003 and it failed in its attempt, either in getting approval u/s 10(23C)(vi) or being registered u/s 12AA of the Act for the AY, as a last resort it staked its claim of immunity from payment of income-tax under article 289 of the Constitution of India, that too at the stage of proceeding before the FAA - during the assessment proceeding also for the AY, assessee never claimed that its income is exempt from taxation by virtue of article 289(1) of the Constitution of India - the income generated by the board which goes to constitute its own fund does not go to the consolidated fund of the state and is distinct and separate from the fund of the state govt. Section 62 of The Water (prevention and control of pollution) Act, 1974 empowers the state govt. to supersede the state pollution control board, if it is of the opinion that the state board has persistently made defaults in the performance of the functions imposed on it by or under the Act or circumstances exist which render it necessary in the public interest to do so - only upon supersession of the state board the state govt. takes over all the powers and functions and duties performed by the state board and also property owned or controlled by the board shall vest in the state govt. - therefore, it becomes clear that until supersession of the state board, not only it retains its distinct and independent identity but also the funds and property of the board also remains in its possession. The income/receipts of the board remain as its own funds and not transferred to the coffers of the state govt. - when the income/receipts of the board remain with the board itself and not transferred to the state govt. such income/receipt has to be considered as income/receipt of the board and not of the state govt. - Therefore, such income/receipt cannot be immune from taxation under article 289(1) of the Constitution of India - under no circumstances it can be held that the income/receipts of the assessee is that of the state govt. - not only assessee is a distinct and separate legal/juristic entity but funds of the assessee also belong to assessee - assessee by its own actions considers itself to be a separate legal entity distinct from the state govt. - That being the case, the income/receipts of the board has to be treated as its own income and not of the state govt. - CIT(A) rightly was of the view that assessee cannot get immunity from taxation under article 289 of the Constitution of India. Rejection of exemption claimed u/s 10(23C)(iv) Held that - Considering the fact that assessee s writ application is pending before the Hon ble Jurisdictional High Court, the directions of the CIT(A) are upheld Decided against assessee.
Issues Involved:
1. Immunity from taxation under Article 289(1) of the Constitution of India. 2. Rejection of exemption claimed under Section 10(23C)(iv) of the Income Tax Act. 3. Determination of income at Rs. 32,77,52,980 as against Rs. 19,46,56,470. 4. Levy of interest under Sections 234A and 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Immunity from taxation under Article 289(1) of the Constitution of India: The assessee argued that its income should be exempt from taxation under Article 289(1) of the Constitution, claiming that its functions are state functions and thus its income is the income of the state. The Tribunal analyzed the provisions of the Water (Prevention and Control of Pollution) Act, 1974, and the Air (Prevention and Control of Pollution) Act, 1981, and found that the funds of the board are its own and not the state's. The Tribunal cited the Supreme Court's decision in Adityapur Industrial Area Development Authority vs. Union of India, which held that the income of a statutory authority is distinct from the state's income. Therefore, the Tribunal concluded that the assessee's income could not be considered the income of the state and thus is not exempt under Article 289(1). 2. Rejection of exemption claimed under Section 10(23C)(iv) of the Income Tax Act: The assessee contended that it should be granted exemption under Section 10(23C)(iv) of the Income Tax Act. The Tribunal noted that the Chief Commissioner of Income Tax had rejected the assessee's claim for approval under this section, and the assessee had filed a writ petition challenging this decision, which was pending before the High Court. The Tribunal upheld the CIT(A)'s direction to the AO to ascertain the status of the writ petition and decide the issue based on the High Court's directions. 3. Determination of income at Rs. 32,77,52,980 as against Rs. 19,46,56,470: The assessee argued that the correct figure of income should be Rs. 19,46,56,470 instead of Rs. 32,77,52,980 as determined by the AO. The Tribunal directed the AO to verify the correct figure of income after providing a reasonable opportunity for the assessee to be heard. 4. Levy of interest under Sections 234A and 234B of the Income Tax Act: The assessee contested the levy of interest under Sections 234A and 234B. The Tribunal held that the levy of such interest is automatic and mandatory, and thus, there was no reason to interfere with the AO's decision. Conclusion: The Tribunal partly allowed the appeal for statistical purposes, directing the AO to verify the correct income figure. The Tribunal upheld the CIT(A)'s decision regarding the rejection of exemption under Article 289(1) and Section 10(23C)(iv). The levy of interest under Sections 234A and 234B was also upheld. Separate Judgments: No separate judgments were delivered by different judges in this case. The decision was a collective judgment of the Tribunal.
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