9911796707
TMI Blog1991 (1) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... lity has been given up and, therefore, the only question which arises is the claim to exemption under section 11. 5. The assessee is a State Government undertaking wholly owned by the Orissa Government and assessed in the status of a company. Its claim to exemption under section 11 was rejected on the ground that it was not a trust and that no registration was granted to it under section 12A. 6. The learned Counsel for the assessee submitted that although the assessee was not a trust, its case was covered by Explanation 1 to section 13(4) which provides, inter alia, that for the purpose of sections 11, 12, 12A and this section "trust" includes any other legal obligation. According to him, the assessee held its capital amount in trust for certain purposes which resulted in a legal obligation in nature of a trust. He drew our attention to the resolution dated 27-8-1980 of the Orissa Govemment which states as follows :-- " With a view to implementing the Scheme of distribution of Essential Commodities and to ensure easy availability of some selected items of essential articles of mass consumption at reasonable prices, the question of establishment of a State Level Civil Supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enues for the State by levy of taxes, etc. To my mind, there is no justification for doing so, as the supply of foodgrains to the consumer under PDS is not a commercial transaction inviting taxation. It is all the more unfortunate because the tax revenues are raised at the cost of the common consumer in the State." (3) Letter dated January, 1958 from the State Government to the Collector, Chatrapur (Ganjam) which, inter alia, states as follows :-- ". . . Consequent on the purchase of stocks of rice and paddy at rates higher than that of last year without corresponding increase in the normal issue prices, it has been decided that the scheme of Procurement and Distribution should run on 'No-profit no-loss' basis." It was submitted on this evidence that the sale price of the commodities was subsidised, that the public distribution system was not a commercial transaction, and that the Scheme of Procurement and Distribution was to run on 'no-profit no-loss basis'. This, according to him, shows that the assessee-corppration fulfilled the requirement of relief of the poor and serving the general public utility. In this connection, he also pointed out the letter dated 7-11-1989 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, relying upon the following sentence at its beginning :-- "An Act to provide, in the interests of the general Public, for the control of the production, supply and distribution of and trade and commerce in certain commodities." 8. On the other hand, the learned Departmental Representative submitted that although the assessee-corporation was owned by the Government, it was a separate entity, relying upon the decision of the Supreme Court in the case of Andhra Pradesh State Road Transport Corpn. v. ITO [1964] 52 ITR 524. He pointed out from clause 1 of the object clause of the assessee that the assessee's object was to engage either on its own or as the agent of Government or any firm, company or institution in the production, purchase, ptocessing, storage, transport, distribution and sale of foodgrains, foodstuffs and such other essential commodities as it may choose and to provide assistance, advice and services. He emphasised that the object of serving the poor was not in the object clause and if essential commodities were to be supplied at control prices not only the poor but everybody would benefit. He submitted that the Government could give directives generally to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shareholders the Corporation remained a separate entity, according to the Supreme Court. Consequently, even if the Corporation was controlled by one shareholder, as in this case by the Orissa Government, it would still remain a separate entity. The Court has gone on to say that though the majority of its shares were owned by the Government and its activities were controlled by the State, the Corporation had still a separate personality of its own. Therefore, the factum of full control, as in this case, was taken into account by the Supreme Court. The later decision of the Andhra Pradesh High Court in the case of Andhra Pradesh State Civil Supplies Corpn. Ltd. (1) was concerned with a case similar to ours. The object of the Corporation was similar to that of die present assessee and all the shares were owned by the Government. Not only that, the Board of Directors were appointed by the Government and they were required to carry out the directives issued by the Government from time to time in the management of its affairs. The Court held :-- " That the Corporation complied with all the requirements necessary to show that it was an instrumentality of the Government. However, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... function. 13. Further, we also agree with the contention of the learned Departmental Representative that the assessee-corporation cannot be said to be performing the function under section 2(15) of the Income-tax Act, 1961 because its actual object clause did not make any such provision. The power of the Government to give directives under Article 111 of the Constitution is binding on it. But that does not alter or make any added provision in the object clause. The nature of the assessee has to be judged from its object clause which would define the parameter of its activity. If the nature of the assessee-corporation, that is, charitable or not, was to be judged from the directives given by the Government, then in some cases and sometimes the assessee may be an entity having a charitable object and sometimes may not be so. This is an untenable position. 14. We are unable to accept the contention of the learned Counsel for the assessee that the Income-tax Officer had not discharged the burden to show that the assessee was not entitled to the exemption claimed. The assessment order clearly shows that the assessee had claimed exemption under section II and the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness through storage agents in different districts. Although it is true that suits were filed, the realisation of dues, if at all, would in such cases be very doubtful and would involve a long time. This is well known. During hearing, we asked the assessee's Counsel whether any amount has been realised so far and he replied that nothing has been realised so far. Moreover, if any amount is recovered it can be taxed in that year. We, therefore, see no reason why this amount should not be allowed this year. This ground is, therefore, allowed. 21. There is a third ground but that is not pressed. Accordingly, it is rejected. 22. In thedepartment's appeal, the ground raised is that the Commissioner of Income-tax (Appeals) should not have deleted the addition of Rs. 19,90,207 made under the head 'Shortage'. 23. The Income-tax Officer had disallowed this amount observing : "(3) Shortage : Audit report reveals that there was a shortage of Rs. 19,90,207 on purchase of rice from Andhra Pradesh State Civil Supplies Corpn., and the same was debited to P L a/c. The assessee failed to file evidence as regards steps taken to realise the said shortage. Hence the same is added .... Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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