ITO, CHENNAI v. The Tamil Nadu Urban Development Fund, CHENNAI

ITA 1121/CHNY/2009 | 2006-2007
Pronouncement Date: 02-02-2012 | Result: Allowed

Appeal Details

RSA Number 112121714 RSA 2009
Assessee PAN AAATT0859N
Bench Chennai
Appeal Number ITA 1121/CHNY/2009
Duration Of Justice 2 year(s) 6 month(s) 26 day(s)
Appellant ITO, CHENNAI
Respondent The Tamil Nadu Urban Development Fund, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 02-02-2012
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 02-02-2012
Date Of Final Hearing 02-02-2012
Next Hearing Date 02-02-2012
Assessment Year 2006-2007
Appeal Filed On 07-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NOS. 1543 & 1544/MDS/2008 (ASSESSMENT YEARS : 2006-07 & 2007-08) THE TAMIL NADU URBAN DEVELOPMENT FUND VAIRAM COMPLEX 1 ST FLOOR 112 THYAGARAYA ROAD T. NAGAR CHENNAI - 600 017. PAN : AAATT0859N (APPELLANT) V. THE INCOME TAX OFFICER WARD II(4) CHENNAI - 600 034. (RESPONDENT) I.T.A. NOS. 1121 & 1122/MDS/2009 (ASSESSMENT YEARS : 2006-07 & 2007-08) THE INCOME TAX OFFICER BUSINESS WARD II(4) CHENNAI - 600 034. (APPELLANT) V. THE TAMIL NADU URBAN DEVELOPMENT FUND VAIRAM COMPLEX 1 ST FLOOR 112 THYAGARAYA ROAD T. NAGAR CHENNAI - 600 017. (RESPONDENT) ASSESSEE BY : SHRI STANLY ADVOCATE (FOR DR. ANITA SUMANTH) REVENUE BY : SHRI ANIRUDH RAI CIT-DR DATE OF HEARING : 02.02.2012 DATE OF PRONOUNCEMENT : 02.02.2012 I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 2 O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : FIRST TWO APPEALS OF THE ASSESSEE ASSAIL THE ADDI TIONS MADE FOR THE IMPUGNED ASSESSMENT YEARS WHEREAS THE LAST T WO APPEALS OF THE REVENUE ASSAIL THE DELETION OF PENALTY LEVIED U NDER SECTION 271(1)(C) OF INCOME-TAX ACT 1961 (IN SHORT 'THE ACT') FOR THE RESPECTIVE ASSESSMENT YEARS. 2. APPEALS OF THE ASSESSEE ARE TAKEN UP FIRST FOR D ISPOSAL. ASSESSEE HAS FILED 15 CONCISE GROUNDS FOR BOTH THE YEARS. THE ISSUES INVOLVED IN THESE GROUNDS ARE CLAIM OF EXEMP TION BASED ON MUTUALITY SURPLUS ARGUED AS TAXABLE ONLY IN THE HA NDS OF THE CONTRIBUTORS AND AGAINST DENIAL OF BENEFIT UNDER S ECTION 10(23G) OF THE ACT. THESE APPEALS WERE DISMISSED BY THIS TRIB UNAL FOR WANT OF COD APPROVAL. ASSESSEE MOVED THE HONBLE JURISDICT IONAL HIGH COURT AGAINST SUCH ORDER OF THIS TRIBUNAL IN TCA NO S. 28 & 29 OF 2010 AND HONBLE JURISDICTIONAL HIGH COURT VIDE ITS JUDG EMENT DATED 16.2.2010 DIRECTED THE TRIBUNAL TO RECONSIDER THE I SSUE WHETHER THIS ASSESSEE WAS REQUIRED TO OBTAIN CLEARANCE FROM THE COD AFTER CONSIDERING THE CONSTITUTION OF THE TRUST AND ROLE OF THE STATE GOVERNMENT THEREIN. AFTER THIS JUDGEMENT OF JURISD ICTIONAL HIGH COURT HONBLE APEX COURT IN THE CASE OF ELECTRONICS CORPO RATION OF INDIA V. I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 3 UOI (332 ITR 58) HAS HELD THAT THE PURPOSE FOR WHIC H COD APPROVAL WAS MADE MANDATORY HAD OUTLIVED ITS UTILITY AND IT IS NOW NOT REQUIRED FOR PUBLIC SECTOR UNDERTAKINGS TO OBTAIN ANY SUCH A PPROVAL BEFORE MOVING APPEALS ON THEIR GRIEVANCES. WE ARE THEREFO RE OF THE OPINION THAT THE APPEALS OF THE ASSESSEE HAVE TO BE ADMITTE D IN VIEW OF THE DECISION OF HONBLE APEX COURT (SUPRA). 3. ISSUES RAISED BY THE ASSESSEE IN THESE APPEALS A RE SUBSTANTIALLY SIMILAR TO THE ISSUES IN ITS APPEALS FOR ASSESSMENT YEARS 1997-98 TO 2005-06 AND THIS TRIBUNAL IN ITS ORDER D ATED 21.9.2007 IN I.T.A. NOS. 1176 TO 1180/MDS/2004 AND I.T.A. NOS. 2 435 & 2436/MDS/2004 ORDER DATED 9.11.2007 IN I.T.A. NO. 396/MDS/2006 AND ORDER DATED 26.11.2007 IN I.T.A. NO. 108/MDS/20 07 HAD REMITTED THE WHOLE MATTER BACK TO THE ASSESSING OFFICER FOR CONSIDERATION AFRESH. 4. AGGRIEVED BY SUCH ORDER FOR THE EARLIER YEARS A SSESSEE HAD MOVED HONBLE JURISDICTIONAL HIGH COURT AND THE HON BLE JURISDICTIONAL HIGH COURT VIDE ITS JUDGEMENT DATED 17.3.2008 FOR THOSE YEARS IN TCA NOS.85 TO 93 OF 2008 HAD HELD AT PARAS 4 AND 5 AS UNDER:- 4. THE ORDERS OF THE TRIBUNAL IS VERY CATEGORICAL T HAT THE ENTIRE ISSUE HAS BEEN REMITTED BACK TO THE ASSESSIN G OFFICER FOR I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 4 RECONSIDERATION WHICH IS MANIFEST FROM THE OBSERVA TIONS OF THE TRIBUNAL WHICH GOES AS FOLLOWS:- RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENT WE REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER. THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. WE MAKE IT CLEAR THAT WE HAVE NOT ADJUDICATED UPON OTHER ISSUE S RAISED IN THIS APPEAL AS ADJUDICATION OF THE ADDITI ONAL GROUNDS RAISED WILL GO TO THE ROOT OF THE MATTER. 5. THE OBSERVATIONS IS MADE WITHOUT ANY AMBIGUITY T O THE EFFECT THAT THE WHOLE MATTER HAS BEEN REMITTED BACK TO THE ASSESSING OFFICER FOR CONSIDERATION AS IT IS EVIDEN T FROM THE FACT THAT THE TRIBUNAL HAS NOT ADJUDICATED THE OTHE R ISSUES RAISED. THIS WOULD AMPLY SAFEGUARD THE INTEREST OF THE ASSESSEE. HENCE WE FIND THAT THERE IS NO ERROR OR ILLEGALITY IN THE ORDER OF THE TRIBUNAL AND NO QUESTION OF LAW HAS ARISEN. AL L THESE APPEALS ARE DISMISSED WITH THE ABOVE OBSERVATIONS. 5. ONE OF THE GRIEVANCES RAISED BY THE ASSESSEE IN THE SAID APPEALS WAS THAT THE TRIBUNAL HAD NOT ADJUDICATED I TS GROUND REGARDING CLAIM OF EXEMPTION UNDER SECTION 11 OF TH E ACT WHICH MADE IT TO MOVE IN THE MATTER. FACTS RELATING TO THE I SSUES RAISED BY THE ASSESSEE IN SAID APPEALS HAVE BEEN SUCCINCTLY SUMMA RIZED BY THEIR LORDSHIP AT PARA 2 OF ORDER IN TC(A) NOS.85 TO 93 O F 2008 (SUPRA) AND IT IS REPRODUCED HEREUNDER FOR EASY REFERENCE:- THE ASSESSEE IS A TRUST SET UP BY THE GOVERNMENT OF TAMIL NADU AND CONSTITUTED UNDER A TRUST DEED DATED 29.11.1996. THE TRUST IS EXECUTED BY THE GOVERNMEN T OF TAMIL NADU IN FAVOUR OF TAMIL NADU URBAN INFRASTRUCTURE T RUSTEE COMPANY LIMITED A PUBLIC LIMITED COMPANY. THE GOV ERNMENT OF I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 5 TAMIL NADU HAD SET UP A FUND KNOWN AS THE MUNICIPAL URBAN DEVELOPMENT FUND FOR ESTABLISHING DEVELOPING AND P ROVIDING FINANCIAL SUPPORT FOR INFRASTRUCTURE PROJECT IN THE STATE OF TAMIL NADU UNDERTAKEN BY THE URBAN LOCAL BODIES/STATUTORY BODIES/PUBLIC SECTOR UNDERTAKINGS/ PRIVATE INDUSTRI ES. THE ASSESSEE WAS CONSTITUTED FOR THE PURPOSE OF FINANCI NG INFRASTRUCTURE PROJECTS WHICH INCLUDES WATER SUPPL Y SOLID WASTE MANAGEMENT SANITATION ROADS TRANSPORTATION SYSTE MS SITES AND SERVICES AREA DEVELOPMENT OTHER REMUNERATIVE AND NON- REMUNERATIVE URBAN INFRASTRUCTURE CONTRIBUTING TO T HE IMPROVEMENT OF THE LIVING STANDARDS OF THE URBAN PO PULATIONS AND PLAYS AN ADVISORY ROLE AS WELL. THE TRUST WAS CONS TITUTED WITH AN INITIAL SUPPORT OF RS.5 000/- BY THE GOVERNMENT OF TAMIL NADU AS SETTLOR. THE TRUST FUND COMPRISES THE INITIAL SETT LEMENT CONTRIBUTING FUNDS INVESTMENTS LOANS AND FUNDS AN D PROPERTIES HELD BY THE TRUST. THE TRUST DEFINES THE VARIOUS E XPRESSIONS. ONE AMONG THEM IS THE CONTRIBUTIONS WHICH IS DEFI NED TO MEAN PROPERTY PAID OR TRANSFERRED OR AGREED TO BE PAID O R TRANSFERRED TO THE TRUST BY THE CONTRIBUTORS. PURSUANT TO THE ARRANGEMENT BETWEEN THE TRUST AND CONTRIBUTORS A CONTRIBUTION AGREEMENT WAS ENTERED INTO ON THE 18 TH NOVEMBER 1996 BETWEEN THE TAMIL NADU INFRASTRUCTURE TRUSTEE COMPANY LIMITED (THE TR USTEE) TAMIL NADU URBAN INFRASTRUCTURE FINANCIAL SERVICES LIMITED (THE FUND MANAGER) AND THE CONTRIBUTORS (GOVERNMENT OF T AMIL NADU ICICI LIMITED HOUSING DEVELOPMENT FINANCE CORPORAT ION LIMITED AND INFRASTRUCTURE LEASING AND FINANCIAL SERVICES L IMITED). AS PER THE AGREEMENT TAMIL NADU URBAN INFRASTRUCTURE FINANCIAL SERVICES LIMITED A PUBLIC LIMITED COMPANY WAS TO F UNCTION AS FUND MANAGER OF THE TRUST. THE CONTRIBUTION AGREEM ENT SET OUT THE TERMS AND CONDITIONS AGREED WITH REGARD TO CONT RIBUTIONS AND ALLIED MATTERS. UNDER THE AGREEMENT THE NET INCOM E RECEIVED BY THE TRUST EXCEPT IN RESPECT OF THE INITIAL SETTLEME NTS WILL BE DISTRIBUTED TO THE CONTRIBUTORS IN PROPORTION TO TH EIR RESPECTIVE CONTRIBUTIONS AND THE ASSESSEE TRUST IS INTENDED TO PROVIDE FINANCIAL ASSISTANCE IN RESPECT OF THE PROJECTS OF PUBLIC IMPORTANCE. ON THE ABOVE FACTS THE ASSESSEE CLAIM ED THAT THE SURPLUS DERIVED BY IT DOES NOT CONSTITUTE INCOME IN ITS HANDS. THE ASSESSEE ALSO CLAIMED THAT THE OBJECTS OF THE T RUST ARE CHARITABLE IN NATURE AND EVEN ON THIS GROUND INCOME IF ANY I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 6 DERIVED BY THE TRUST IS TO BE CONSIDERED TO BE ELIG IBLE FOR EXEMPTION. THE ASSESSEE FURTHER CLAIMED THAT THE P ROVISIONS UNDER SECTION 61 OF THE INCOME-TAX ACT WOULD BE APP LICABLE TO THE SURPLUS DERIVED AND EVEN IN THIS VIEW OF THE MA TTER THE SURPLUS CANNOT BE SUBJECTED TO TAX. HOWEVER THE A SSESSING AUTHORITY REJECTING THE CONTENTION OF THE ASSESSEE FRAMED ASSESSMENT FOR THE ABOVE MENTIONED ASSESSMENT YEARS UNDER SECTION 143(3) OF THE INCOME-TAX ACT. THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPE ALS) WHO CONFIRMED THE ORDERS OF ASSESSMENT. AGAINST WHICH THE ASSESSEE CARRIED THE MATTER ON FURTHER APPEAL TO TH E TRIBUNAL. BEFORE THE TRIBUNAL THE ASSESSEE CONTENDED FOR THE FIRST TIME THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SE CTION 11 OF THE INCOME-TAX ACT. UPON HEARING THE ARGUMENTS OF THE LEARNED COUNSEL WHO CONTENDED THAT THOUGH THE ASSESSEE HAS NOT MADE AN APPLICATION UNDER SECTION 12-A FOR REGISTRATION BU T IT WAS ONLY A FORMAILITY. THE CLAIM OF THE ASSESSEE UNDER SECTIO N 11 MIGHT BE CONSIDERED INDEPENDENTLY. THE TRIBUNAL HAVING REG ARD TO THE SAID CONTENTION WHICH WAS TAKEN FOR THE FIRST TIME BEFORE THE TRIBUNAL SET ASIDE THE ORDERS OF THE AUTHORITY BU T REMITTED BACK THE MATTER. THE TRIBUNAL TAKEN ITS STAND FOLL OWING THE DECISION OF APEX COURT DECISION IN CIT VS. U.P. FO REST CORPORATION REPORTED IN 230 ITR 945. THOUGH THE SA ID ORDER HAS BEEN PASSED BY ACCEPTING THE CONTENTION O F THE ASSESSEE THE ASSESSEE THOUGHT IT FIT TO FILE THE P RESENT APPEALS ON THE APPREHENSION THAT THE REMITTAL ORDER IS ONLY IN RESPECT OF THE APPLICABILITY OF SECTION 11 OF THE INCOME-TAX A CT AND OTHER ISSUES HAVE NOT BEEN DECIDED. SO IN ORDER TO PROT ECT THE INTEREST OF THE ASSESSEE THE APPEALS ARE FILED. 6. FOLLOWING THESE ORDERS WE ARE OF THE OPINION FO R THE IMPUGNED ASSESSMENT YEARS ALSO THE MATTER HAS TO GO BACK TO THE FILE OF A.O. FOR CONSIDERATION AFRESH. ORDERS OF THE LOWER AUTH ORITIES ARE THEREFORE SET ASIDE AND SIMILAR DIRECTIONS ISSUED AND THE MAT TER IS REMITTED BACK TO THE LD. A.O. FOR CONSIDERATION DE NOVO. I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 7 7. IN THE RESULT APPEALS OF THE ASSESSEE FOR BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. 8. NOW WE TAKE UP APPEALS OF THE REVENUE FOR THESE YEARS. 9. GRIEVANCE OF THE REVENUE IS THAT LD. CIT(APPEALS ) DELETED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT LEVIED O N THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS. 10. IN ASSESSEES APPEALS AGAINST THE ASSESSMENTS DONE FOR THE IMPUGNED ASSESSMENT YEARS WE HAVE SET ASIDE THE O RDERS OF THE AUTHORITIES BELOW AND REMITTED THE ISSUES BACK TO THE FILE OF THE A.O. FOR DE NOVO CONSIDERATION. SINCE THE ASSESSMENTS H AVE BEEN SET ASIDE THE PENALTY WHICH IS BASED ON SUCH ASSESSME NTS HAVE NO LEGS TO STAND. HENCE WE CONFIRM THE DELETION OF L EVY OF PENALTY BY LD. CIT(APPEALS) SUBJECT TO THE RIDER THAT THE A.O. IF HE DEEMS FIT MAY INITIATE FRESH PENALTY PROCEEDINGS AFTER COMPLETION OF FRESH ASSESSMENTS IN ACCORDANCE WITH LAW. 11. IN THE RESULT APPEALS OF THE REVENUE FOR BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS.1543 & 1544/MDS/08 I.T.A. NOS.1121 & 1122/MDS/09 8 12. TO SUMMARISE THE RESULT APPEALS OF THE ASSESSE E AS WELL AS REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 2 ND FEBRUARY 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 2 ND FEBRUARY 2012. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A)-VI CHENNAI-34 (4) CIT CHENNAI-IV CHENNAI (5) D.R. (6) GUARD FILE