M/s Visakhapatnam Dock Labour Board, Port Area., Visakhapatnam v. The ACIT, Circle-1., Visakhapatnam

ITA 516/VIZ/2006 | 2003-2004
Pronouncement Date: 17-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 51625314 RSA 2006
Assessee PAN AAAAV1409R
Bench Visakhapatnam
Appeal Number ITA 516/VIZ/2006
Duration Of Justice 3 year(s) 7 month(s) 30 day(s)
Appellant M/s Visakhapatnam Dock Labour Board, Port Area., Visakhapatnam
Respondent The ACIT, Circle-1., Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 17-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 17-08-2010
Date Of Final Hearing 11-05-2010
Next Hearing Date 11-05-2010
Assessment Year 2003-2004
Appeal Filed On 18-12-2006
Judgment Text
ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.515 & 516/VIZAG/2006 ASSESSMENT YEARS: 1998-99 & 2003-04 VISAKHAPATNAM DOCK LABOUR BOARD VISAKHAPATNAM VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 VISAKHAPATNAM (APPELLANT) PAN NO: AAAAV 1409R (RESPONDENT) ITA NOS.58 TO 60/VIZAG/2007 ASSESSMENT YEARS: 1999-2000 TO 2001-02 VISAKHAPATNAM DOCK LABOUR BOARD VISAKHAPATNAM VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 VISAKHAPATNAM (APPELLANT) PAN NO: AAAAV 1409R (RESPONDENT) S.P NOS.4 TO 8/VIZAG/2009 (ARISING OUT OF ITA NOS.515 & 516/V/06 58 TO 61/V/0 7 & ITA NO.295/V/08) ASSESSMENT YEARS: 1998-99 TO 2001-02 & 2003-04 VISAKHAPATNAM DOCK LABOUR BOARD VISAKHAPATNAM VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 VISAKHAPATNAM (APPELLANT) PAN NO:AAAAV 1409R (RESPONDENT) APPELLANT BY: SHRI C.V.S. MURTHY CA RESPONDENT BY: SHRI SUBRATA SARKAR CIT(DR) ORDER PER BENCH: ALL THESE APPEALS AND THE STAY PETITIONS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDERS PASSED BY LD. CIT(A) V ISAKHAPATNAM AND THEY RELATE TO THE ASSESSMENT YEARS 1998-99 TO 2001-02 A ND 2003-04. SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 2 OF 7 2. THE ASSESSEE HAS FILED COPIES OF TWO ORDERS OF C OD GRANTING PERMISSION FOR THE ASSESSMENT YEARS 1998-99 TO 2001 -02 AND 2003-04 TO RAISE THE FOLLOWING ISSUES BEFORE THIS TRIBUNAL: A) THE ASSESSING OFFICERS DECISION HOLDING THAT T HE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE NOT CHARITABLE IN NA TURE AND CONSEQUENT DENIAL OF EXEMPTION U/S 11. B) VALIDITY OF LEVY OF INTEREST U/S 234B. ACCORDINGLY THE OTHER GROUNDS RAISED BY THE ASSESSE E ARE DISMISSED FOR WANT OF COD APPROVAL. 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. T HE ASSESSEE HEREIN WAS FORMED UNDER THE DOCK WORKERS (REGULATION AND EMPLO YMENT) ACT 1948 AND IS ENGAGED IN THE ACTIVITIES OF SUPPLYING LABOU R TO VISAKHAPATNAM PORT TRUST IN ORDER TO HANDLE CARGO MOVEMENT IN THE PORT . THE ASSESSEE WAS REGISTERED AS A CHARITABLE TRUST U/S 12A OF THE ACT VIDE PROCEEDING IN CIT/HQRS.NO.III/34/87-88 DATED 22.8.1988 BY THE LEAR NED COMMISSIONER OF INCOME TAX VISAKHAPATNAM. SINCE THEN THE ASSESSEE HAS BEEN FILING ITS RETURN OF INCOME UNDER THE STATUS ASSOCIATION OF P ERSONS-TRUST AND IS CLAIMING EXEMPTION U/S 11 OF THE ACT. FOR THE ASSE SSMENT YEAR 2002-03 THE LEARNED CIT SET ASIDE THE SUMMARY ASSESSMENT MA DE U/S 143(1) OF THE ACT AND DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSMENT IN THE LIGHT OF THE DISCUSSIONS MADE BY HIM IN THE ORDER PASSED U/S 263 OF THE ACT. IN THE SAID ORDER LEARNED CIT HAD OPINED THAT THE ACTIVIT IES CARRIED ON BY THE ASSESSEE ARE NOT CHARITABLE IN NATURE. BASED ON TH E OBSERVATIONS OF LEARNED CIT IN THE REVISION ORDER CITED ABOVE THE ASSESSING OFFICER REOPENED THE ASSESSMENTS RELATING TO THE ASSESSMENT YEARS 1998-99 TO 2001-02 AND THE EXEMPTION U/S 11 WAS DENIED BY HOLD ING THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE IN NATURE. SIMI LARLY THE EXEMPTION U/S 11 WAS DENIED TO THE ASSESSEE FROM THE ASSESSMENT YEAR 2003-04 IN THE REGULAR ASSESSMENT PROCEEDINGS. THE ORDER PASSED B Y THE ASSESSING OFFICER WAS CONFIRMED BY LEARNED CIT(A) IN ALL THESE YEARS. HENCE THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 3 OF 7 4. THE FIRST ISSUE THAT NEEDS TO BE ADJUDICATED IS WITH REGARD TO THE DENIAL OF EXEMPTION U/S 11 BY HOLDING THAT THE ACTI VITIES CARRIED ON BY THE ASSESSEE ARE NOT CHARITABLE IN NATURE. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE SAID ISSUE HAS BE EN SETTLED BY THIS BENCH OF THE TRIBUNAL IN THE ORDER DATED 08 TH JANUARY 2010 PASSED IN THE CASE OF M/S CARGO HANDLING PVT. WORKERS POOL VISAKHAPATNAM IN ITA NOS.272 TO 274/VIZAG/2005. WE HAVE GONE THROUGH THE ABOVE SAI D ORDER FILED BEFORE US BY THE ASSESSEE. WE NOTICE THAT THE M/S CARGO H ANDLING PVT. WORKERS POOL WAS FORMED TO MEET THE SHORTAGE OF LABOUR IN T HE DOCK YARD OPERATIONS. THE BACK GROUND WHICH LEAD TO THE FORM ATION OF M/S CARGO HANDLING PVT. WORKERS POOL HAS BEEN EXPLAINED IN PA RA 5 OF THE ORDER CITED ABOVE AS UNDER. 5. THE ASSESSEE HAS FILED A NOTE BEFORE LD CIT (A) ON THE CIRCUMSTANCES WHICH NECESSITATED THE CREATION OF TH E ASSESSEE TRUST. THEY ARE SET OUT IN BRIEF. THE DOCK LABOUR B OARD IN VISAKHAPATNAM PORT IS THE AUTHORIZED BODY WHICH REG ULATES EMPLOYMENT OF WORKERS FOR DOCK WORKS IN VISAKHAPATN AM PORT. ACCORDING TO THE SCHEMES FRAMED BY THE GOVT. OF INDI A BOTH THE WORKERS WHO SEEK TO WORK ON BOARD VESSELS AND THE SHIPPING COMPANIES WHO SEEK TO USE THE SAID WORKER S ARE REQUIRED TO BE REGISTERED WITH THE VISAKHAPATNAM DO CK LABOUR BOARD. SINCE 1985 THE VISAKHAPATNAM DOCK LABOUR BO ARD WAS PERMITTING THE SHIPPING COMPANIES TO ENGAGE PRIVATE WORKERS ON SHIFT TO SHIFT BASIS IN CASE OF SHORTAGE OF WORK ERS REGISTERED WITH THE VISAKHAPATNAM DOCK LABOUR BOARD. AS THE RE QUIREMENT OF PRIVATE WORKERS INCREASED IT CREATED MANY PROBL EMS IN THE DOCK WORK OPERATIONS IN VIEW OF ABSENCE OF ANY SYST EMATIC PROCEDURE. HENCE A SETTLEMENT WAS REACHED BETWEEN T RADE UNION AND TRADE REPRESENTATIVES BEFORE THE ASSISTAN T LABOUR COMMISSIONER IN JUNE 1992 AND ACCORDINGLY IT WAS A GREED TO ADOPT A SYSTEMATIC PROCEDURES TO REGULATE ENGAGEMEN T OF PRIVATE WORKERS. IN PURSUANCE THERE OF THE VISAKHAPA TNAM STEVEDORS ASSOCIATION AND THE CUSTOMS CLEARANCE AND FORWARDING AGENTS ASSOCIATION JOINED TOGETHER TO FO RM A TRUST TO REGULATE THE EMPLOYMENT OF PRIVATE WORKERS AND A CCORDINGLY THE ASSESSEE TRUST WAS FORMED IN JANUARY 1994 BY BOTH THE ASSOCIATIONS WITH THE OBJECTS MENTIONED IN PARA 4 S UPRA. THUS IT CAN BE SEEN THAT THE ASSESSEE HEREIN IS THE AUTHORISED BODY TO REGULATE THE EMPLOYMENT OF WORKS FOR DOCK WORKS IN THE VISAKHAPATNAM ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 4 OF 7 PORT. IN ORDER TO MEET THE EXCESS DEMAND OF LABOURE RS M/S CARGO HANDLING WORKERS PVT. POOL WAS FORMED WITH OBJECTIVES WHICH ARE IDENTICAL WITH THAT OF THE ASSESSEE HEREIN. THE SAID TRUST WAS ALSO GI VEN REGISTRATION U/S 12A OF THE ACT. IN THAT CASE ALSO THE ASSESSMENT OFFIC ER DENIED EXEMPTION U/S 11 OF THE ACT BY HOLDING THAT THE ACTIVITIES CARRIE D ON BY THAT ASSESSEE ARE NOT CHARITABLE IN NATURE. EVENTUALLY THE MATTER CA ME UP BEFORE THE TRIBUNAL. THE OBSERVATIONS OF THE TRIBUNAL WHICH ARE RELEVANT TO THE ISSUE BEFORE US ARE EXTRACTED BELOW: 8. ON THE ASSIMILATION OF FACTS OF THE CASE IN OU R OPINION WE NEED TO ADJUDICATE THE FOLLOWING ISSUES: A) WHETHER THE ASSESSING OFFICER IS ENTITLED TO PRO BE INTO THE OBJECTS OF THE CHARITABLE TRUST WHICH IS ALREADY RE GISTERED U/S 12A OF THE ACT AND HOLD THAT THE OBJECTS ARE COMMERCIAL IN NATURE AND CONSEQUENTLY DENY EXEMPTIO N U/S 11. B) WHETHER THE ACTIVITIES CARRIED ON BY THE ASSESSE E CAN BE TERMED AS BUSINESS ACTIVITY IN TERMS OF SEC.11 (4A) OF THE ACT. C) D) . E) . 9. NOW LET US DEAL WITH THE FIRST ISSUE. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE TRUST HAS BEEN GRANTED REGISTRATION BY LD CIT VISAKHAPATNAM U/S 12A OF TH E ACT FROM THE DATE OF ITS INCEPTION. IN THIS REGARD IT IS P ERTINENT TO NOTE THE CASE LAW RELIED UPON BY LD AR. IN THE CASE OF ACIT VS. SURAT CITY GYMKHANA (2008) (300 ITR 214) THE HONBLE SUP REME COURT HAS AFFIRMED THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF HIRALAL BHAGWATI VVS. CIT (2000) (246 I TR 188 (GUJ) IN HOLDING THAT THE REGISTRATION OF A TRUST U/S 12A OF THE INCOME- TAX ACT OF 1961 ONCE DONE IS A FAIT ACCOMPLI AND TH E ASSESSING OFFICER CANNOT THEREAFTER PROBE INTO THE OBJECTS OF THE TRUST. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE HEAD NOTES OF THE SURAT CITY GYMKHANA CASE CITED SUPRA: THE REGISTRATION OF A TRUST UNDER SECTION 12A OF T HE INCOME-TAX ACT 1961 ONCE DONE IS A FAIT ACCOMPLI AND THE ASSESSING OFFICER CANNOT THEREAFTER MAKE FURTHER PROBE INTO THE OBJECTS OF THE TRUST. THE ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 5 OF 7 DECISION OF THE HIGH COURT IN THE HIRALAL BHAGWATI V.CIT (2000) 246 ITR 188 (GUJ) ATTAINED FINALITY ON THIS POINT ALSO SINCE THAT DECISION ALSO COVERED TH IS POINT AND THE DEPARTMENT HAD NOT CHALLENGED THAT DECISION BEFORE THE SUPREME COURT WE NOTICE THAT THE ASSESSING OFFICER HAS DEALT IN D ETAIL TO STATE THAT THE OBJECTS OF THE TRUST ARE NOT CHARITABLE IN NATURE. IN VIEW OF THE DECISION OF THE HONBLE APEX COURT THE ASS ESSING OFFICER IS NOT RIGHT IN LAW IN PROBING INTO THE OBJECTS OF THE TRUST DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. ACCORDING LY THE DENIAL OF EXEMPTION U/S 11 IS ALSO NOT IN ACCORDANCE WITH LAW. 10. THE NEXT QUESTION THAT COMES FOR CONSIDERAT ION IS WHETHER THE ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST CAN BE TERMED AS BUSINESS ACTIVITY AS PER THE VIEW OF THE AO. IT IS NOW WELL SETTLED PREPOSITION THAT THE TERM BUSINESS DENOTES CONTI NUOUS AND SYSTEMATIC EXERCISE OF AN OCCUPATION OR PROFESSION WITH THE OBJECT OF MAKING INCOME OR PROFIT . HENCE THE PROFIT MOTIVE IS ONE OF THE MAIN INGREDIENTS TO TEST THE NATURE OF ACTIV ITY CARRIED ON BY THE ASSESSEE. 10.1 THE PREAMBLE OF THE TRUST DEED STATES THAT THE ASSESSEE TRUST WAS CONSTITUTED IN ORDER TO ORGANIZE THE FUNC TIONING OF PRIVATE WORKERS POOL FOR THE BENEFIT OF SUCH WORKER S . CLAUSE 16 OF THE TRUST DEED STATES THAT THE BOARD OF TRUSTEES SHALL NOT BE ENTITLED TO ANY REMUNERATION AND SHALL WORK IN AN H ONORARY CAPACITY. CLAUSE 34 OF THE TRUST DEED STATES THAT T HE IN THE EVENT OF THE DISSOLUTION OF THE TRUST THE REMAINING PROP ERTY SHALL NOT BE DISTRIBUTED AMONG THE MEMBERS OF THE TRUST BUT S HALL BE GIVEN OR TRANSFERRED TO ANY OTHER INSTITUTION WITH SIMILAR OBJECTIVES AND AIMS AND WHICH IS REGISTERED U/S 12A OF THE INCOME-TAX ACT. THE MAIN OBJECTS FOR WHICH THE TRUS T WAS FORMED AS EXTRACTED IN PARA 4 SUPRA DOES NOT DEPI CT ANY PROFIT MOTIVE. THE PRIMARY OBJECT OF THE TRUST IS TO IDEN TIFY ENROLL ALLOT THE WORK AND REGULATE THE OPERATION OF THE PR IVATE WORKERS. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS CARRYING O N THE VERY SAME ACTIVITY SINCE ITS INCEPTION. THE SURPLUS EARNED O N CARRYING ON THE SAID ACTIVITY ARE NOT TO BE DISTRIBUTED BETWEEN THE TRUSTEES BUT TO BE RETAINED BY THE ASSESSEE TRUST FOR THE PU RPOSE OF CARRYING ON THE OBJECTS OF THE TRUST. HENCE IN THE ABSENCE OF THE PROFIT MOTIVE ATTACHED TO THE ACTIVITIES CARRIED ON BY THE TRUST IN OUR OPINION THE ACTIVITIES CARRIED ON BY THE TRUST CANNOT BE TREATED AS A BUSINESS ACTIVITY. FURTHER THE ASSESS EE TRUST WAS FORMED ONLY FOR THE PURPOSE OF THE REGULATING THE O PERATIONS OF THE PRIVATE WORKERS IN THE DOCK YARD AND SAID OBJEC T HAVE BEEN APPROVED AS CHARITABLE PURPOSE BY THE LD CIT. FU RTHER AS POINTED OUT BY LD AR AS PER SEC.42 OF THE MAJOR PO RT TRUST ACT ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 6 OF 7 1963 THE PERFORMANCE OF SERVICE BY BOARD OR OTHER PERSON INCLUDE RECEIVING REMOVING SHIFTING TRANSPORTING STORING OR DELIVERING GOODS BROUGHT WITHIN THE BOARD PREMISES. HENCE THE ACTIVITIES OF THE ASSESSEE TRUST FALLS IN THE CATEG ORY OF ONE OF THE SERVICES AS DEFINED IN THE MAJOR PORT TRUST ACT 19 63. SINCE THE ACTIVITIES CARRIED ON WITHOUT ANY PROFIT MOTIVE AND ONLY FOR THE PURPOSE OF THE WELFARE OF THE WORKERS IN OUR OPINI ON IT CANNOT BE TREATED AS BUSINESS ACTIVITY FOR THE DETAILED RE ASONS DISCUSSED (SUPRA). 5. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CITED CASE WE HOLD THAT THE ASSESSING OFFICER IS NOT RIGHT IN LAW IN PROBIN G INTO THE OBJECTS OF THE TRUST DURING THE COURSE OF ASSESSMENT PROCEEDINGS A ND ACCORDINGLY THE DENIAL OF EXEMPTION U/S 11 IS ALSO NOT IN ACCORDANC E WITH LAW. SIMILARLY THE ASSESSING OFFICER IS NOT CORRECT IN LAW IN HOLDING THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE NOT CHARITABLE IN NATURE. AC CORDINGLY WE DIRECT THE ASSESSING OFFICER TO GRANT EXEMPTION U/S 11 TO THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FILED A WRITTEN SUBMISSION IN WHICH IT HAS BEEN OBSERVED THAT THE VIEWS OF THE HON'BLE SUPREME COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX V SURAT CITY GYMKHANA (300 ITR 214) ON THE BASIS OF WHICH THE TRIBUNAL HAS RENDERED ITS DECISION IN THE CASE CITED ABOVE DOES NOT REPRESENT CORRECT LEGAL POSITION. SUCH A COMMENT HAS BEEN MADE BY LE ARNED DEPARTMENTAL REPRESENTATIVE WITH OUT PROPERLY APPRECIATING THE L EGAL POSITION IN THAT REGARD. IT MAY BE NOTED THAT UNDER ARTICLE 141 OF THE CONSTITUTION THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL COURTS WITHIN THE TERRITORY OF INDIA. THUS THE PRONOUNCEMENT OF THE HIGHEST COURT OF LAND IS BINDING ON ALL COURTS TRIBUNALS AND ALL AUTHORITIE S IN VIEW OF ARTICLE 141. (CIT V VALLABHDAS 253 ITR 543 (GUJ.)). 7. WITH REGARD TO THE SECOND ISSUE VIZ. THE V ALIDITY OF CHARGING INTEREST U/S 234B OF THE ACT NO ARGUMENT TOOK PLACE AT THE TIME OF HEARING. ACCORDINGLY WE DISMISS THE SAID GROUND OF THE ASSES SEE. ITA NOS 515-516 OF 06 58-60 OF 07 & 474 OF 06 & I SP 4T O8 OF VISAKHAPATNAM DOCKLABOUR BOARD VISAKHAPATNAMVIZAG PAGE 7 OF 7 8. SINCE WE HAVE DISPOSED OF THE APPEALS THE S TAY PETITIONS FILED BY THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE AR E PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 17-8-2010. COPY TO 1 THE VISAKHAPATNAM DOCK LABOUR BOARD VISAKHAPATNA M PORT TRUST VISAKHAPATNAM 530 035 2 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 (1) VISAKHAPATNAM 3 4. THE CIT 1 VISAKHAPATNAM THE CIT(A) VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM