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TMI Blog2017 (10) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... r constitution of India vide order enacted either for the purpose of dealing with or setting up the housing scheme for the purpose of planning and development of the improvement of the cities, town and villages or both for which the authority are created to carry out the function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges. Deletion of 20A will not make difference in case of assessee. In our considered opinion, Clause-3 will come in the help of the assessee. In that view of the matter, we are considered opinion, that the authority assessee is a local authority for the purpose of carrying out of the improvement and development function of the State. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961 and therefore, it was not exempt from income tax?" D.B. ITA No. 706/2008 (i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in holding that the expenditure of ₹ 11,74,15,986/- incurred by the assessee is of revenue in nature ignoring that the expenditure was incurred in bringing the inventories to the present location and condition as stipulated in the Accounting Standard-2 of ICAI and therefore are part of closing stock? (ii) Whether under the facts and circumstances of the case and in law the Tribunal was justified in deleting the disallowance made out of depreciation claimed even when it was not claimed on written down value of the asset? (iii) Whether under the facts and circumstances of the case and in law the Tribunal was justified in confirming the order of CIT(A) on the issue wherein the additions of ₹ 18,31,68,938/- made in the value of closing stock was reduced arbitrarily to ₹ 10,87,50,513/-thereby granting a whopping relied ₹ 7,44,18,425/- without appreciating that the value of opening stock has to be taken as closing stock of preceding year?" D.B. ITA No. 294/2009 "Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the purpose of this clause, the expression "local authority" means (i) Panchayat as referred to in clause (d) of article 243 of the constitution; or (ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or (iii) Municipal Committee and District Bioard, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924)." 4. Taken into consideration local fund in view of the Section 61, 62 63 & 64 where under the Chapter the finance authority has total control as statutory authority and they are carrying on the urban development work as foundation of the State Government and in view of Section 105 of the Act of Rajasthan Urban Improvement Act 1959, it is very clear that ultimately its fund has to be merged into local authority namely Municipal Corporation Board. 5. He has also pointed out in view of item 5 of State list which reads as under:- "5.Local government, that is to say, the constitution and powers of municipal corporations, improvement trusts, district boards, mining settlement authorities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority." 8. He contended that the view taken by the Tribunal is required to be reversed and the view taken by the Assessing Officer is required to be upheld. 9. However, counsel for the respondent-assessee Mr. Jhanwar contended that in view of the definition of the person under Section 231 Sub-clause (iv) read with explanation, it is clear that the present local authority is included. 10. He has also taken us to the provisions of Section 10(20A) and Section 10(20) which was made effective from different dates and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area, (iii) 30% of the items (i) and (ii), to cover administrative and establishment charges, and (iv) 20% of the items (i), (ii) and (iii), to cover maintenance cost for a period upto five years. The appellant failed to provide the basis on which the reserves prices were fixed. Further it also failed to show that it had adhered to the provision of Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974, the AO rejected the books of accounts by invoking provisions of Section 145(3) of the Act. The AO noted that the appellant during the relevant period had sold land worth ₹ 5,04 crore for an amount of ₹ 12.48 crore. He accordingly concluded that the rise in fair market price was at 147.62% of the value of stock disclosed by the appellant. He also added further amount as per the Rule 6(2) of Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974 as referred to above. He worked out the total value of opening stock at ₹ 432,98,69,111 and closing stock at ₹ 446,26,09,367/-. He accordingly made an addition of ₹ 18,31,68,398/- in the income of the appellant. 5.1 During the appellate proceedings the AR of the appellant objected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the generally accepted accounting principles and Accounting standard the stock is to be valued at cost or marker price which ever is less. Administrative, establishment and maintenance cost should not form part of the valuation of the inventories. The AO without any basis increased the valuation of the stock by ₹ 6,57,52,952/- (3,52,24,706+3,05,25,156) on account of administrative and maintenance expenses. The valuation of the above closing stock is incorrect. (i) The valuation of the stock is governed by Accounting Standard provides the following basis for valuation of inventories:- Para 5 - Inventories should be valued at the lower of cost and net realizable value. Para 6 - The cost of inventories should comprise all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Para 13 - In determining the cost of inventories in accordance with Para 6, it is appropriate to exclude certain costs and recognize them as expenses in the period in which they are incurred. Examples of such costs are: (a) Abnormal amounts of wasted materials, labour or other production costs. (b) Storage cost, unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion arose in relation to the levy of property tax on lands and buildings owned by the State Governments which was "property of the State Government". In the instant case, we are concerned with the income of the appellant/Authority and the same principles apply. The exemption can be claimed only if the income can be said to be the income of the State Government. In the facts of this case, it is not possible to hold that the income of the appellant/Authority is the income of the State Government. Learned counsel for the Union of India also relied upon two decisions reported in : AIR1999SC2573 Food Corporation of India v. Municipal Committee, Jalalabad and Anr. and MANU/SC/0416/1999 : AIR1999SC2552 Board of Trustees for the Visakhapatnam Port Trust v. State of A.P. and Ors. and submitted that this Court has consistently taken the view that a Corporation having the attributes of a Company must be held to be distinct from the Central Government, and not eligible for exemption from taxation under Article 285. The High Court also in its impugned judgment and order has referred to several decisions of this Court wherein this Court dealing with cases arising under Article 285 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by clause (20A) on such an Authority was taken away. Thus, in view of the fact that section 10(20A) was omitted and an Explanation was added to section 10(20A) of the Act, enumerating the "Local Authorities" contemplated by section 10(20A), the assessee i.e. Jammu Development Authority could not claim any benefit under those provisions after April 1, 203. The benefit conferred by section 10(20A) of the Act on the assessee upto the A.Y. 2002-03 has been expressly taken away and the explanation added to section 10(20) enumerates the "Local Authority" which do not cover the Authority. The assessee i.e. Jammu Development Authority subsequently claimed that its objects falls under the provisions of section 2(15) of the Act and has complied with all the eligibility criteria for grant of registration u/s 12A of the Act, which was allowed vide property which make the Authority a commercial organization. Therefore, the objects pursued by the Authority cannot be said to be charitable in view of the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for the purpose of dealing with or setting up the housing scheme for the purpose of planning and development of the improvement of the cities, town and villages or both for which the authority are created to carry out the function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges. 18. In that view of the matter, deletion of 20A will not make difference in case of assessee. In our considered opinion, Clause-3 will come in the help of the assessee. In that view of the matter, we are considered opinion, that the authority assessee is a local authority for the purpose of carrying out of the improvement and development function of the State. 19. In that view of the matter, the issue is required to be answered in favour of the assessee against the department. In view of the answer, other issues are become academic, therefore, we are not deciding those issue. 20. The appeals filed by the department are dismissed and that of assessee are allowed." 4. In that view of the matter, AO will be bound by this judgment and follow the same. Other questions kept open. 5. With the above observations, al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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