High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 24.07.2007CORAM:THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJATax Case(Appeal) Nos.112 to 114 and 205 of 2004Commissioner of Income TaxChennai III.. Appellant in TC.Nos.112 to 114/04 Deputy Commissioner of Income TaxSpecial Range II121, Nungambakkam High Road,Chennai 600 034... Respondent in T.C.No.205 of 2004 -vs-State Industries Promotion Corporation ofTamil Nadu LimitedChennai 600 008...Respondent in T.C.Nos.112 to 114 of 2004/Appellant in T.C.No.205 of 2004TAX CASE APPEAL Nos.112 to 114 of 2004 filed under Section 260 A of theIncome Tax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras 'B' Bench dated 28.03.2003 in ITA Nos.573 to 575/Mds/95for the assessment years 1989-90, 1991-92 and 1990-91 respectively.TAX CASE APPEAL No.205 of 2004 filed under Section 260 A of the Income TaxAct, 1961 against the order of the Income Tax Appellate Tribunal, 'C'Bench, Chennai in ITA Nos.1855/Mds/95 dated 31.07.2003 for the assessmentyear 1992-93.(ITA.No./64,63 and 65/94-95 dated 24.1.1995 and ITL No. 1=/9596 dated14.7.1995 respectively on the file of the Commissioner of ;Income Tax(Appeals) VII Chennai againstGI.No. 16-5/89-90 dated 3.3.1994GI.No. 16-5/91-92 dated 10.3.1994, GI.No. 16-5/90-91 dated 20.2.1995 and GI.No. 16-5/93-93 dated 20.2.1995respectively on the file of the Deputy Commissioner of Income Tax SpecialRamge-II, Chennai)For Appellant in TC.No.112 to 114 and for Respondent in TC.No. 205/04: Mrs. Pusya SitaramanSenior Counsel for IT.For Respondent: Mr.Ramachandran, Senior Counselin TC.No 112 to 114/04for Ms.Anitha Sunanth andFor Appellant in TC.No. 205/04 https://hcservices.ecourts.gov.in/hcservices/ C O M M O N J U D G M E N T (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J)Tax Case Appeal Nos.112 to 114 of 2004 are filed by raising thefollowing substantial questions of law:-"1. Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in holding that the assessee Company was entitledto exemption under Section 10(20A) of the Income TaxAct 1961 even though the assessee Company has not beenformed under specific law for the purpose ofdevelopment as per the requirements of Section 10(20A)?2. Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in holding that the assessee Company was eligibleunder Section 10(20A) of the Income Tax Act, 1961 eventhough the assessee has not substantially complied withthe requirements of Section 10(20A)?3. Whether the Income Tax Appellate Tribunal wasright in directing granting of relief for theassessment yea4rs 1989-90 and 1990-91 when the scope ofproceedings under Section 147 is limited to assessmentof income that has escaped assessment and in directingdeduction in income to NIL for the assessment year1991-92 when the assessee itself has been returned apositive income?2. Tax Case Appeal No.205 of 2004 is filed by raising the followingsubstantial questions of law:-"1. Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in law in holding that the appellant would not beentitled to the benefit of exemption under Section 10(20A) of the Income Tax Act 1961?2. Whether on the facts and in the circumstancesof the case, the Appellate Tribunal was right in law inholding that the Judgment of the Supreme Court in thecase of "Gujarat Industrial Development Corporatio;nand others reported in 227 ITR 383 would not apply toappellant's case?3. Whether on the facts and in the circumstancesof the case, the Hon'ble Income Tax Appellate Tribunalis right in not following the earlier orders of theTribunal dated 06.01.2003 and 28.03.2002 granting thebenefit under Section 10(20A) of the Income Tax Actand is justified in differing from the view taken byanother Bench? https://hcservices.ecourts.gov.in/hcservices/

4. Whether on the facts and circumstances of thecase, insofar as there is a decision of another Benchof the Appellate Tribunal in the appellant's own casefor earlier years, the Appellate Tribunal is justifiedin taking a different view without referring the matterto a Special Bench?3. The facts as culled out of the statement of facts are under:-The appellant in T.C.No.205 of 2004 is a State Government undertakingengaged in the promotion of industrial activities and making provision forinfrastructure to industries. It has as its various objects, promotion ofindustrial growth, development of industrial infrastructure for which itacquires land, develops it and provides facilities like power water, etc.For the assessment year (T.C.No.205 of 2004) 1992-93, assessee filedreturn on 28.12.1992 admitting 'nil' income. The assessment was completedby order dated 20.02.1995 denying exemption to the assessee. On an appealbefore the First Appellate Authority, the CIT Appeals, by order dated14.07.1995 partly allowed the assessee's appeal. On further appeal beforethe Income Tax Appellate Tribunal, the Tribunal held that exemption wouldnot available to the assessee. Thus the appeal by the assessee beforethis Court.4. In respect of earlier assessment years, 1989-90, 1990-91 and 1991-92, the Tribunal granted the claim of exemption in favour of the assessee,which was put in issue by the Revenue in T.C.Nos.112 to 114 of 2004. 5. The learned Senior Counsel appearing for the assessee in thefirst instance has contended that though for the earlier years as referredto above, the department itself has granted the benefit to the assesseeunder Section 10(20A) of the Income Tax Act, it has deviated from theearlier decision for the assessment year 1992-93 for no reason. However,the learned counsel for the department sought to sustain the order of theTribunal by contending that the assessee would not claim rather cannotcome within the ambit of Section 10(20A) of the Income Tax Act to claimthe exemption. Thus she contends that the order of the Tribunal inT.C.No.205 of 2004 is correct and that of the decision in T.C.Nos.112 to114 of 2004 is not correct.6. We have heard the learned counsel on either side and perused thematerial available on record.7. Section 10(20A) of the Income Tax Act, 1961 reads as follows:-"any income of an authority constituted in Indiaby or under any law enacted either for the purpose ofdealing with and satisfying the need for housingaccommodation or for the purpose of planning,development or improvement of cities, towns andvillages, or for both".8. It is an admitted case that the assessee is not an authorityconstituted in India by or under any law enacted either for the purposeof dealing with and satisfying the need for housing accommodation or forthe purpose of planning, development or improvement of cities, towns andvillages, or for both. It is also an admitted case that the assessee hasbeen incorporated under the provisions of the Companies Act, 1956. Hence, https://hcservices.ecourts.gov.in/hcservices/ the assessee cannot claim the benefit under Section 10(20A) of the IncomeTax Act, 1961, though it might come with the later part of the provisionsof Section 10(20A) of the Income Tax Act, 1961. 9. For arriving the opinion, we can take the support of similar viewtaken by the Allahabad High Court in the case of Sharda Sahayak SamadeshKshettra Vikas Nigam Ltd., vs Commissioner of Income Tax reported in 244ITR 364, in which, while answering the question as to whether the Tribunalwas justified in holding that the assessee Company was not an authority asenvisaged Section 10(20A) of the Income Tax Act, 1961 has held that thethe assessee Company was not entitled to exemption under Clause 20A ofSection 10 of the Income Tax Act , in as much as it was registered as aGovernment Public Company as defined in Section 617 of the Companies Act,1956 and not an authority constituted by or under any law enacted eitherfor the purpose of dealing with and satisfying the need for housingaccommodation or for the purpose of planning, development or improvementof cities, towns and villages. 10. Mr.Ramachandran, learned Senior Counsel appearing for theassessee submits that in COMMISSIONER OF INCOME TAX VS. U.P.FORESTCORPORATION reported in (1998) 230 ITR 945, the Supreme Court whilerejecting the finding of the High Court that the U.P.Forest Corporation isa local authority, however remitted back the matter to the authoritiesconcerned to consider whether the U.P.Forest Corporation is entitled totake advantage of the provisions of Section 11 of the Income-tax Act. Thesame treatment may be given to the assessee herein by relegating them togo before the authorities to advance their case that they are entitled tothe advantage of the provisions of Section 11 of the Act. 11. Here again, we are not able to accept the suggestion made by thelearned Senior Counsel for the reason that in that case during the courseof assessment proceedings for 1977-78, 1980-81 and 1984-85, the ForestCorporation claimed its status to be that of a local authority entitled toexemption under Section 10(20). The assessing officer rejected the claimand in respect of assessment years 1977-78 and 1980-81, he taxed it in thestatus of artificial juridical person and in respect of the assessmentyear 1984-85 as a company. The assessee then filed an appeal in respect ofthe assessment year 1977-78 and 1980-81 and the Commissioner of Income-tax(Appeals) came to the conclusion that the respondent was a local authorityand as such its income was exempted from tax. That order was challenged inappeal by revenue before the Tribunal, which set aside the order of theCommissioner of Income-tax (Appeals). Instead of following the procedureprescribed by the Act by way of reference under Section 256 of the Income-tax Act, the assessee filed three writ petitions in the Allahabad HighCourt challenging the orders of High Court in respect of the assessmentyears 1977-78 and 1980-81 and the order of the assessing authority for theassessment year 1984-85. The writ petitions were allowed by coming to theconclusion that the Forest Corporation was a local authority andtherefore its income was exempt from tax. Before the High Court, it wascontended that the assessee was a charitable institution and therefore itsincome was in any case entitled to be exempted under Section 11(1) of theAct. That contention was found favoured by the High Court. On appeal byrevenue to the Supreme Court, the Supreme Court has held that the HighCourt was not correct in coming to the conclusion that the respondent wasa local authority and entitled to exemption under Section 10(20) of theAct, however relegated the assessees before the authorities to seek the https://hcservices.ecourts.gov.in/hcservices/ claim under Section 11 of the Act. The facts of the present case are notcomparable to that of the decision of the Supreme Court so as to grant therelief by way of relegation to the authorities. In that case, the SupremeCourt has also given a cautionary note that the High Court would not haveentertained the writ petitions and granted the relief. Hence, we are notable to accept the contention and the contention is rejected. 12. The reliance made in Gujarat Industrial Development Corporationvs. Commissioner of Income Tax reported in 227 ITR 414 by the assesseedoes not also advance the case of the assessee in view of the fact thatthe assessee in the cited case was an authority created under theprovisions of Gujarat Industry Development Act, 1962 which satisfied therequirement of Section 10(20A) of the Act. But the assessee in this casewas incorporated under the Companies Act.13. In the light of the above discussions, the question of law Nos.1and 2 in T.C.Nos.112 to 114 of 2004 and question of law Nos.1 to 4 inT.C.No.205 of 2004 are answered against the assessee. The question of lawNo.3 in T.C.Nos.112 to 114 of 2004 does not arise for consideration in thefacts and circumstances of the case and hence the same is not answered.Thus T.C.Nos.112 to 114 of 2004 are allowed and T.C.No.205 of 2004 isdismissed.rgSd/-Assistant Registrar,/true copy/Sub Assistant Registrar.To1.The Registrar, Income tax, Appellate Tribunal, Rajaji Bhavan-III Floor,Besabt Nagarm, Chennai.2.Commissioner of Income TaxChennai III.3.The Deputy Commissioner of Income TaxSpecial Range II121, Nungambakkam High Road,Chennai 600 034.4. The Commissioner of Income tax, (Appeals) VII Chennai.+ Two CCs to Mrs. Pusya Sitaraman, Sr. Standing Counsel for It SR46341,46343+ 4 CC tko Ms. Anitha Sumanth Advocate sR 45715,45714JRG (co)sg /8/07Tax Case(Appeal) Nos.112 to 114 and 205 of 200424.07.2007