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2024 (6) TMI 920 - AT - Income TaxIssues Involved: 1. Eligibility for exemption u/s 10(23AAA), 11, and 12 of the Income Tax Act. 2. Status of the assessee as "State" within the meaning of Article 289(1) of the Constitution of India. 3. Time-barred assessment u/s 153(3) of the Income Tax Act. Summary: 1. Eligibility for Exemption u/s 10(23AAA), 11, and 12: The assessee, originally assessed as an AOP, claimed its income exempted u/s 10(23AAA) of the Income Tax Act. The AO denied this exemption and assessed the total income chargeable to tax at Rs. 1,71,63,060/-. The assessee's appeal to the CIT (A) upheld the AO's order. Upon further appeal, the Coordinate Bench restored the matter to the AO for a de-novo assessment. The AO again disallowed the claims, but the CIT (A) allowed the appeal based on the assessee's eligibility for exemption u/s 11 and 12, without deciding on the exemption u/s 10(23C)(iv) and the status of the assessee as "State." The Tribunal found that the assessee met the conditions for exemption u/s 11 and 12, including applying more than 85% of its gross income towards its objectives and investing surplus funds in prescribed modes u/s 11(5). Therefore, the Tribunal upheld the CIT (A)'s order, dismissing the Revenue's appeal. 2. Status of the Assessee as "State": The assessee claimed it was a "State" within the meaning of Article 289(1) of the Constitution of India, exempt from income tax. The Tribunal examined the Maharashtra Labour Welfare Fund Act, 1953, and relevant legal precedents, including the Supreme Court's decision in APSRTC (52 ITR 524), which distinguished between the income of the State and that of a corporation. The Tribunal found that the assessee, a labour welfare board established by the Maharashtra government, was under deep and pervasive state control, enjoyed monopoly status, and performed functions of public importance closely related to governmental functions. Therefore, it classified the assessee as an instrumentality or agency of the Government, making it a "State" under Article 289(1) and exempt from Union taxation. 3. Time-Barred Assessment u/s 153(3): The CIT (A) chose not to comment on the assessee's claim that the assessment was time-barred u/s 153(3). The Tribunal did not specifically address this issue in its final decision. Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the assessee's cross-objections, concluding that the assessee was eligible for exemption u/s 11 and 12 and was a "State" within the meaning of Article 289(1) of the Constitution of India, thus exempt from income tax. The order was pronounced in the open court on 25th September 2023.
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