9911796707
TMI Blog2024 (6) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of M/s Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] wherein it is provided that assessee cannot make any fresh claim before the assessing officer except by revising its return of income. As in this case no revised return has been filed by the assessee but the same case law doesn t stop the CIT(A) and ITAT to entertain the fresh claim of the assessee whether a revised return has been filed or not. We have thoroughly gone through the order of AO and found that assessee is applying more than 85% of the gross income towards objects of the institution. The surplus of the institution has been invested in the modes prescribed u/s 11(5) of the act. Assessee filed an audit report to form no. 10B. In view of these facts and the reason given by AO for not applying provisions of section 11 and 12 in the case of assessee, we found that the order of CIT (A) is correct and we find no perversity in the order of CIT (A). we do not find any sustainable reason assigned by AO which can justify the denial of assessee s claim for exemption under the provisions of sec 11 and 12 hence, ground nos. 1,2 and 3 raised by revenue are dismissed. Status of the Assessee as State - As there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e kept in focus while considering the question of taxability of interest earned on FDRs by an Instrumentality of the State and/or Department/Organization of the State: (1) Interest income arising out of the business/trading activity carried out by the instrumentality of the State would be taxable in its hands; (2) The statute under which the instrumentality of the State is brought into existence must expressly provide for principal and agent relationship betwixt the State and such instrumentality; and in the absence thereof, any interest income derived by such instrumentality would be taxable as income in their hands.; (3) Any income by way of interest earned by the instrumentality of the State after having received any amount of grant or subsidy for the implementation of project/scheme i.e., earmarked purpose of the State would not be taxable as income in the hands of such instrumentality of the State or the State.; (4) Any income by way of interest much less any income earned by a Department/Organization of the State would not be taxable in the hands of either the State and/or such Department/Organization of the State. (5) Carrying on business activity for profit motive by an ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the coordinate bench as additional ground. Again AO, disallowed all the claims made by assessee and assessed the income at Rs. 1,71,63,060/-. Assessee being aggrieved with this re-assessment order passed u/s. 143(3) r.w.s. 254 of the Act, preferred an appeal before the Ld. CIT (A), who in turn allowed the appeal of the assessee on the ground that assessee is eligible for exemption u/s. 11 and 12 of the Act without deciding the issue of exemption u/s. 10(23C) (iv) of the Act and additional ground raised before the coordinate bench and AO of being State . Now there is a cross-appeal before us, i.e., both from Revenue and assessee against the order of Ld. CIT (A) for giving relief to the assessee and not declaring assessee as State respectively. Assessee raised its grievance through filing of C.O. and main appeal was filed by the Revenue against the order of Ld. CIT (A). We are first taking up the appeal of the Revenue for sake of convenience in understanding the issue. 4. We have gone through the order of AO passed u/s. 143(3) r.w.s. 254 of the Act, order of Ld. CIT (A) passed u/s. 250 of the act and detailed submissions of the assessee. Assessee is a labour welfare board est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO is that such a claim has not been made in the original return filed before him hence he relied upon the judicial pronouncement on honorable supreme court in the case of M/s Goetze (India) Ltd. 284 ITR 323 (S.C) wherein it is provided that assessee cannot make any fresh claim before the assessing officer except by revising its return of income. As in this case no revised return has been filed by the assessee but the same case law doesn t stop the Ld.CIT(A) and ITAT to entertain the fresh claim of the assessee whether a revised return has been filed or not. 7. We have thoroughly gone through the order of AO and found that assessee is applying more than 85% of the gross income towards objects of the institution. The surplus of the institution has been invested in the modes prescribed u/s 11(5) of the act. Assessee filed an audit report to form no. 10B. In view of these facts and the reason given by AO for not applying provisions of section 11 and 12 in the case of assessee, we found that the order of Ld.CIT (A) is correct and we find no perversity in the order of Ld.CIT (A). we do not find any sustainable reason assigned by AO which can justify the denial of assessee s clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harashtra Labour Welfare Fund Act] [(2) It extends to the whole of the State of Maharashtra.] (3) It shall come into force in such area and on such date as the State Government may, by notification in the Official Gazette, appoint in this behalf. 2. in this Act, unless the context otherwise requires (1) Board means [the Maharashtra Labour Welfare Board] constituted under section 4; 7[(1A) contribution means the sum of money payable to the Board in accordance with the provisions of section 6BB;] [(2) Employee means any person who is employed for hire or reward to do any work, skilled or unskilled, manual, clerical, supervisory or technical in an establishment directly by the employer or through contractor or any Other agency, but does not include any person (i) Who is employed mainly in a managerial capacity? (ii) who, being employed in a supervisory capacity, draws wages exceeding three thousand and five hundred rupees per mensem, or exercises powers or carries out, either by the nature of the duties attached to the office, or by reason of the powers vested in him, functions mainly of a managerial nature, or (iii) Who is employed as an apprentice under the Apprentice Act, l961;] (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Board who is not connected with the management of any establishment or who is not an employee, and includes an officer of Government nominated as a member; (8) Inspector means an Inspector appointed under section 12; (9) Prescribed means prescribed by rules made under this Act; (10) Unpaid accumulation means all payments due to the employees but not made to them within a period of three years from the date on which they became due whether before or after the commencement of this Act including the wages, and gratuity legally payable [but not including the amount of contribution if any, paid by an employer to a provident fund Established under the Employees Provident Funds Act, 1952]; [(11) wages means wages as defined in section 2 (vi) of the Payment of Wages Act, 1936, and includes bonus payable under the Payment of Bonus Act, 1965] ; (12) Welfare Commissioner means the Welfare Commissioner appointed under section 11. 2A. [Construction of certain references in the Act] Deleted by Mah. 36 of 1961 s.6. 3. 6[(1) The State Government shall constitute a fund called the Labour Welfare Fund, and notwithstanding anything contained in any other law for the time being in force or in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a body corporate by the name of the Maharashtra Labour Welfare Board having perpetual succession and a common seal, with power to acquire property both moveable and immovable, and shall by the said name sue and be sued. [(6) Notwithstanding anything contained in this section, until the Board for the State of Maharashtra is duly constituted in accordance with the provisions of sub-section (1), the existing Board functioning and operating immediately before the commencement of the Bombay Labour Welfare Fund (Extension and Amendment) Act, 1961, in any area of the State shall continue to function and operate in that area and shall be the Board for the purpose of this Act for that area ; and on the constitution of the Board for the whole of the State of Maharashtra under sub-section (1) (a) Such existing Board shall stand dissolved, and the members, thereof shall vacate office; (b) all properties, funds and dues which are vested in or realisable by the existing Board shall vest in, and be realisable by the Board so constituted ; (c) all rights and liabilities which were enforceable by or against the existing Board, shall be enforceable by or against the Board so constituted and wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the Board and form part of the Fund. 2[(2) The amount of contribution payable every six months in respect of every employee and an employee for each such employee shall be at the following rates, namely : (a) (i) in respect of an employee drawing wages up to and inclusive of [three thousand rupees per mensem, six rupees]; and (ii) in respect of an employee drawing wages exceeding 4[three thousand rupees per mensem, twelve rupees], only if the name of such employee stands on the register of an establishment on the 30th June and 31st December, respectively : [Provided that, the State Government may, on receipt of a proposal from the Board, by notification in the Official Gazette, increase once in every three years, the rate of employees contribution so, however that, such increase shall not exceed 30 per cent. of the rates of contribution.] 1[(b) in respect of an employer for each employee referred to in sub-clause (i) and (ii) of clause (a), thrice the amount of contribution payable by an employee.] (3) Every employer shall pay to the Board both the employer s contribution and the employee s contribution in accordance with the provisions of sub-section (2) before the 15th da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd as Trustees subject to the provisions and for the purposes of this Act. The moneys therein shall be utilized by the Board to defray the cost of carrying out measures which may be specified by the State Government from time to time to promote the welfare of labour and of their dependents. (2) Without prejudice to the generality of sub-section (1) the moneys in the Fund may be the utilized by the Board to defray expenditure on the following: (a) Community and social education centres including reading rooms and libraries ; (b) Community necessities (c) Games and sports; (d) Excursions, tours and holiday homes; (e) Entertainment and other forms of recreations; (f) Home industries and subsidiary occupations of women and unemployed persons; (g) Corporate activities of a social nature; (h) Cost of admeasuring the Act [including the salaries, allowances, pension, provident fund and gratuity and any other fringe benefits of the staff] appointed for the purposes of the Act ; and (i) such other object as would in the opinion of the State Government improve the standard of living and ameliorate the social conditions of labour : Provided that the Fund shall not be utilized in financing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with the sums payable into Fund. 2[Inspectors appointed, whether by a local authority or the State Government under the Bombay Shops and Establishments Act, 1948, in relation to any area, shall be deemed to be also Inspectors for the purposes of this Act, in respect of establishments to which this Act applies, and the local limits within which such Inspector shall exercise his functions under this Act shall be the area for which he is appointed under the said Act.] (2) Any Inspector may (a) with such assistance, if any, as he thinks fit, enter at any reasonable time any premises for carrying out the purposes of this Act ; (b) Exercise such other powers as may be prescribed. 13. (1) The Board shall take over and employ such of the existing staff under the control of the Commissioner of Labour, Bombay, as the State Government may direct and every person so taken over and employed shall be subject to the provisions of this Act and the rules made thereunder : Provided that (a)during the period of such employment all matters relating to pay, leave, retirement, allowances, pensions, provident fund and other conditions of service of the said staff shall be regulated by the Bombay Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be paid to the Board or into the Fund, the manner of making such payment and the agency for, and manner of, collection of any such sum;] (b) the manner in which the accounts of the Fund shall be maintained and audited under sub-section (3) of section 3 ; (c) The procedure for making grants from the Fund under section 7; (d) the procedure for defraying the expenditure incurred in administering the Fund ; (e) the number of representatives of employers and employees, independent members and representatives of women on the Board, and the allowances, if any, payable to them, under section 4 ; (f) The manner in which the Board shall conduct their business; (g) The duties and powers of the Inspectors and the conditions of service of the Welfare Commissioner and Inspectors appointed under this Act; Commissioner and the conditions and limitations subject to which the powers may be exercised or functions discharged ;] (h) The percentage of the annual income of the Fund beyond which the Board may not spend on the staff and on other administrative members; 2[(i) the registers and records to be maintained and returns to be sent to the Board under this Act;] (j) The publication of the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution of Industries, Energy and Labour Dept. No. MIW-1171/119016/kamgar-3b, 15 Jan 1972, Labour Commissioner, Mumbai is declared drawing and disbursing officer for payment of Government Contribution, Commissioner of Labour will prepare the bill of payment and funds shall be disbursed to MLWB. b) Maharashtra Labour Welfare Board will be required to submit its books of Accounts along with the necessary documents, as per the Bombay Financial Rules, 1969 para No.2, Schedule No 32. Board shall invest and spend its funds as per regular directions and as per the norms as prevailed. c) This expenditure shall be made Magani Kamgar -164, mahalekha shirshak 2230, kamgar va seva yojana 103, General Labour Welfare (00) (01) Mumbai kamgar Kalyan Nidhi Abhiyan 1953. These Government Resolution Industries, Energy and Labour Department No.BUD-2016 / 2016-17 prakra. 2016-17 (prakra 50) dated 06.05.2016 is issued by using its Financial Power. By order and in the name of Governor of Maharashtra Pravin Gaikwad (Section Officer) *** Regarding Payment of Unpaid Salaries of the staff of Maharashtra Labour Welfare and, for the period from 1/1/2006 to 31/10/2013 Government of Maharashtra Industry, Ene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secretary. 2. Hon'ble Minister (labour) Maharashtra State, Mantralaya, Mumbal their personal secretary 3. Hon'ble state Minister (labour) Maharashtra State, Mantralaya, Mumbai their personal secretary 4. Hon'ble State Minister (finance) Maharashtra State, Mantralaya, Mumbai their personal secretary 5. Secretary (labour), Industry, energy and labour department, Mantralaya Mumbai 32 personal secretary 6. Accountant General ( audit and License ) 1, Maharashtra State, Mumbai 7. Accountant General ( audit and ------------) 2, Maharashtra State, Mumbai 6.12 I have considered the submissions made by the assessee in this regards. The contentions of the assessee are not acceptable in view of the following further reasons Maharashtra Labour Welfare Board is an association of persons created by the Govt. of Maharashtra Being the Board in terms of MLWF Act, as well as within the meaning of the existing Section 10(20) and 10(20A) of the Income-tax Act, 1961, it had the blanket exemption under the Income Tax Act up to the assessment year 2002-03 as per the Provisions of Section 10(20) 10(20A) The Finance Act, 2002 deleted the provisions of section 10(20A) and introduced a new definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its own is so firmly rooted in our notions derived from common law that it is hardly necessary to deal with it elaborately, and so, prima facie, the income derived by the appellant from its trading activity cannot be claimed by the State which is one of the shareholders of the corporation. The Hon'ble Supreme Court after analyzing the different clauses of Article 289(1) in the context of the claim made by the assessee held as under: The main point which we are examining at this stage: is the income derived by the appellant from its trading activity, income of the State under article 289(1) In our opinion, the answer to this question must being the negative. Far from making any provision which would make the income of the corporation the income of the State, all the relevant provisions emphatically bring out the separate personality of the corporation and proceed on the basis that the trading activity is run by the corporation and the profit and loss that would be made as a result of the trading activity would be the profit and loss of the corporation. There is no provision in the Act which has attempted to lift the veil from the face of the corporation and thereby enable th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the said trading activity is the income of the State. That is how ultimately, the cure of the problem is to determine whether the income in question is the income of the State and on this vital test, the appellant fails. In view of the ratio, as decided in the case of APSRTC by Hon'ble Supreme Court, the assessee cannot be treated as agent of state government and its income cannot be treated as income of Maharashtra State Government. 11. The exemption in the CBDT notification dated 29-3-2016 is valid for financial years 2015-16 to 2018-19. Admittedly no return of income was filed by the assessee for the assessment year under consideration. The assessee initially argued that under bona fide mistaken belief that the assessee is being instrument of state is exempted from filing return of income, the assessee has not file return of income for the assessment year under consideration. Considering, the facts that the assessee Board is under complete superintendence, and control of the State Government financially as well as administratively falls under the definition of 'State' as per article 12 of the Constitution of India. And it is entitled for immunity from the taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to both. By the express terms of Article 12, the expression the State includes: 1. The Government and the parliament of India; 2. The Government and Legislature of each state. 3. All local or other Authorities within the territories of India. 4. All local and other authorities under the control of the government of India. 15. The term 'State' thus includes executive as well as the legislative organs or the Authorities of the Union States. Further, it may be noted that according Webster's Dictionary Authority means a person or body exercising power to command. In the context of Article 12 the word authority means the power to make laws, orders, regulations, bye-laws, notification etc which have the force of la and power to enforce those laws. Further 'Local authorities' as defined in Sec ion 3 (31) of the General Clauses, Act refers to authorities like Municipalities, District Boards, Panchayats, Improvement Trust and Mining Settlement Boards. 16. In Article 12 the expression 'other authorities' is used after mentioning a few of them such as, the Government, Parliament of India, the Government and Legislature of each of the States and all local authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion made to the Board, the CBDT vide its notification published in the Gazette of India dated 29.03.2016 notified the streams of income disclosed by the Board in its return of income as exempt for the purpose of clause (46) of the section 10 of the Act. The notification made by CBDT covers Assessment Years 2015-16 to 2018-19 but that would not take away the status of assessee State within the meaning of Article-12 r.w.s. Article 289 of the Constitution of India. The CBDT has specifically exempted certain income by way of this notification. There is no change in the activities of the assessee since inception which establishes the fact that the assessee was never into the business of commercial activities. Once the CBDT found and exempted various stream of income as exempted in case of assessee, all such activities are covered by notification must be treated as exempted. The source of income of assessee consists of grant from State Government, fees collected from candidate to appear in various examinations, receipt from printed education material, receipt from other government bodies for conducting courses and exams like Common Entrance Test (CET) or interest on deposits. None of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est, the Hon'ble Supreme Court has held, as discussed hereinabove, that the autonomous bodies like State Road Transport Corporation or Warehousing Corporation where there is a full control by the Government, either Central or State, these are the instrumentalities of the Government only. 21. The term Government is very much wide under the constitutional set up. Government may be central or State or it may be Local Government which is envisaged by our Constitution, like Zilla Parishad, Municipal Corporations, Municipal Councils, and Panchayat Samithi s, etc. The Public Works Department is part of the Government. In our opinion, this aspect has not been considered by the authorities below and they have closed door to the assessee to make out the case for examination under Rule 6DD. We are, therefore, of the opinion, that in the light of our above discussion, the plea of the assessee need reconsideration by the Ld. CIT (Appeals). We, therefore, set aside the issue in respect of the disallowance made u/s. 40A (3) to the file of the Ld. CIT (A) to decide the same de novo in the light of our above observations and discussion. Accordingly, the relevant Grounds taken by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Som Prakash Rekhi are merely indicative and not absolute and thus, have to be applied discretely. If any body or organisation falls within the criteria as laid down by the Hon'ble Apex Court it can be considered that it falls within the term State . 25. In CIT v. Karnataka Urban Infrastructure Development Finance Corpn., decided by the Hon'ble High Court of Karnataka, the assessee - corporation, a fully owned State Government company was appointed as a nodal agency for the implementation of the Mega-city scheme worked out by the Planning Commission of Ministry of Urban and Employment for Development of Urban Infrastructure to Bangalore city, for which purpose the Central Government provided the money to the assessee for implementing the said scheme. The money so received from the Government of India was parked by the assessee in various bank deposits during the unutilised period. The interests earned during the year on these deposits were transferred to the Mega-city scheme account directly with an appropriate disclosure in the notes to the accounts. The assessee also performed the other projects of development of infrastructure apart from the activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the interest accrued therefrom on deposits in bank though in the name of the assessee has to be applied only for the purpose of welfare of the Nation/States as provided in the guidelines; the whole of the fund belongs to the State Exchequer and the assessee has to channelise them to the objects of centrally sponsored scheme of infrastructural development for Mega-city of Bangalore. Funds of one wing of the Government are distributed to the other wing of the Government for public purpose as per the guidelines issued. The monies so received, till it is utilised, is parked in a bank. The finding recorded by the Tribunal clearly shows that the entire money in question is received for implementation of the scheme which is for a public purpose and the said scheme is implemented as per the guidelines of the Central Government and, therefore, the assessee is only acting as a nodal agency of Central Government for implementation of these projects. It is not the case of the revenue that the assessee was carrying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project could not be fully implemented, is deposited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution. Strictly, the income earned by the State through its instrumentalities carrying on a trade and/or a business is not exempt by virtue of Article 289 of the Constitution of India. 28. To perform the functions, the Government has its various departments and to facilitate its working, the Government itself may be divided into various Sections. To carry out the commercial activities by the State, the Corporations have been established by enactment of Statutes and the power to charter Corporations is incidental to or in aid of Governmental functions. Such Corporations would ex-hypothesis be agencies of the Government. Thus, until and unless the statute, under which the instrumentality has been brought into existence, provides that such an instrumentality shall be the agent of the State, the instrumentality shall not be a State. The pertinent observation in regard thereto, made by the Supreme Court in the case of Heavy Engg. Mazdoor Union v. State of Bihar reads as under: The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statute setting up a corporation so provides, such a corporation can easily be identified as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port Corporation constituted under the Road Transport Corporations Act, 1950, by a notification issued by the Andhra Pradesh Government, was held not be immune from liability to income-tax on income derived from its trading activities, under article 289 of the Constitution of India for the reason that though the majority of its shares are owned by the Andhra Pradesh Government and its activities are controlled by the State, the Corporation has a separate personality of its own, the trading activities are the trading activities of the Corporation and the profit and loss arising therefrom are the profit and loss of the Corporation and therefore, the income derived by the Corporation from its trading activities cannot be said to be the income of the Andhra Pradesh State under Article 289. The Supreme Court for reaching the aforesaid conclusion referred to the following observations which had been made by Lord Denning in the case of Tamlin v. Hannaford [1950] 1 KB 18: The corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
