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2020 (10) TMI 602 - AT - Income TaxRevision u/s 263 - Assessee company claimed exemption u/s.10(20A) of the Act till A.Y. 2002-03 and Section 10(20A) was omitted by the Finance Act w.e.f. 01.04.2003 therefore, under income Tax Act, 1961, no exemption is available to the company - assessee declared income earned from the Govt. of Maharashtra as an agent - HELD THAT - As decided in own case when the AO accepted the assessee is an agent and completed the assessment u/s 143(3) over the years, it means that the AO completed the assessment with one particular view, whereas Pr. CIT intends to correct the above view and presumed that the case of assessee falls under Article 289(1) and come to a conclusion that assessee is not comes under Article 289 and subjected to tax under Income Tax Act, therefore, in our view, this is another view in the case of assessee.- Pr. CIT cannot invoke the provision of section 263 of the Act when two views are possible as held in the case of CIT vrs. Max India 2007 (11) TMI 12 - SUPREME COURT . - Decided in favour of assessee.
Issues Involved:
1. Whether the order passed by the Assessing Officer under section 143(3) was erroneous and prejudicial to the interest of revenue. 2. Whether the assessee company qualifies as an agent of the State Government and is thereby exempt from Union Taxation under Article 289 of the Constitution of India. 3. The applicability of section 10(20A) of the Income Tax Act and its omission. Issue-Wise Detailed Analysis: 1. Erroneous and Prejudicial Order: The learned CIT observed that the Assessing Officer's order dated 28.12.2017 under section 143(3) was erroneous and prejudicial to the interest of revenue. The CIT noted that the company claimed exemption under section 10(20A) of the Income Tax Act until A.Y. 2002-03. However, this section was omitted by the Finance Act effective from 01.04.2003, making the company's income taxable under various heads as per the provisions of the Income Tax Act, 1961. The CIT issued a notice under section 263 to the assessee, arguing that the income should be taxable and the Assessing Officer's order was prejudicial to the revenue's interest. 2. Agent of the State Government and Exemption under Article 289: The CIT considered the assessee's claim that it was an agent of the State Government and thus exempt from taxation under Article 289(1) of the Constitution of India. Article 289(1) exempts the property and income of a State from Union Taxation. However, the CIT concluded that the assessee company was not a surrogate of the State Government and did not perform tasks exclusively reserved for the government. The CIT emphasized that even if the company was fully owned by the government, it did not mean it was performing government tasks. The CIT also referenced Article 289(2), which allows Union Taxation on state government-owned companies involved in trade or business. 3. Applicability and Omission of Section 10(20A): The CIT noted that the company claimed exemption under section 10(20A) until A.Y. 2002-03. With the omission of this section, no exemption was available from A.Y. 2003-04 onwards. The CIT observed that the company filed returns for A.Y. 2003-04 to 2008-07, either under section 139 or in response to notices under section 148, declaring income in its own hands. The CIT argued that the company's claim of being an agent of the State Government was an afterthought to escape tax liability. The CIT also highlighted that the company's claim for TDS credit in A.Y. 2015-18 confirmed that the income belonged to the company and was taxable. Tribunal's Findings: The Tribunal set aside the CIT's order, referencing a similar case for A.Y. 2014-15 where the Tribunal had ruled in favor of the assessee. The Tribunal observed that the assessee was a statutory body incorporated with the entire share capital subscribed by the Government of Maharashtra and appointed as a new town developer and special planning authority. The Tribunal emphasized that the Government of Maharashtra appointed the assessee as an agent under section 113(3A) of the MRTP Act. The Tribunal noted that the Hon'ble High Court of Bombay had held that the assessee was an agent of the Government of Maharashtra. The Tribunal also referenced the Supreme Court's judgment in Malabar Industrial Company Ltd. vs. CIT, which held that if two views are possible, the CIT cannot invoke section 263. The Tribunal concluded that the CIT's view was another possible view and that the Assessing Officer's order was not erroneous, even if it was prejudicial to the revenue. The Tribunal also noted that the department had accepted the assessee's status as an agent in previous assessment years, except for A.Y. 2006-07 and 2007-08, which were under appeal. The Tribunal set aside the CIT's order, allowing the assessee's appeal. Conclusion: The Tribunal ruled in favor of the assessee, setting aside the CIT's order under section 263. The Tribunal held that the Assessing Officer's order was not erroneous, and the assessee was considered an agent of the Government of Maharashtra, thereby exempt from Union Taxation under Article 289(1) of the Constitution of India. The Tribunal emphasized that the CIT could not invoke section 263 when two views were possible.
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