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2018 (12) TMI 834 - HC - Income TaxObligation to seek exemption under Section 12AA - real income accrued to society - 'statutory levy' under the VAT Act, 2005 is being collected by virtue of the powers entrusted by the State Government to the respondent Assessee - surplus of income over expenditure - whether the retention of a part of the VAT collected by the respondent Assessee till the process of determination of its actual expenditure incurred on the collection, followed by deposit of balance surplus amount in the Government Treasury for onward transmission to the State Government, can be treated as the 'real income' in the hands of the respondent Assessee for the purpose of IT Act, 1961? Held that:- Assessee continued to receive ₹ 5/ per Form till May, 2009 out of which Re.1/ was straightaway deposited in the Government Treasury and out of the balance of ₹ 5/, only the actual expenditure incurred by it on collection process was deducted and the balance amount (80% as assessed by the authorities) was duly deposited in the Government Treasury to be paid to the Excise and Taxation Department of the State Government. In this entire process, the respondent Assessee neither gained anything nor earned any profit. The VAT amount recovered by the respondent Assessee was/is an entrustment of the statutory function of the State which alone is competent to levy VAT under Section 34 of the VAT Act, 2005. The respondent Assessee thus neither created any source of income nor generated any profit or gain out of such source. The Assessee merely performs the statutory functions under the VAT Act, 2005 and collects the tax amount for and on behalf of the State and transfers such collection to the Government Treasury. Even if the tax collection remains temporarily parked with the Assessee for some time, it cannot be treated as 'income' generated by the Assessee as the said amount does not belong to it. The Tribunal has thus rightly concluded that the surplus of income over expenditure, as reflected in the entries or the Returns filed by the respondent Assessee, also belonged to the State Government which was duly deposited in the Government Treasury. Hence, it does not partake the character of 'profit or gain' earned by the respondent Assessee. The non-registration of the respondent Assessee, under Section 12AA of the IT Act, 1961 is inconsequential, for an occasion to seek exemption from payment of tax on the income by a Trust or Institution serving the cause of general public utility would arise only when some actual income is derived. The respondent Assessee though is a 'juristic person' but in the absence of any income having been earned by it through 'profits or gains' within the meaning of Section 2 (24) of the IT Act, 1961, the respondent Assessee is indeed not obliged to seek exemption under Section 12AA of the IT Act, 1961, for it does not have any taxable income. - Decided in favour of assessee.
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