TMI Blog2017 (10) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges. Deletion of 20A will not make difference in case of assessee. In our considered opinion, Clause-3 will come in the help of the assessee. In that view of the matter, we are considered opinion, that the authority assessee is a local authority for the purpose of carrying out of the improvement and development function of the State. - Decided in favour of assessee. - D.B. Income Tax Appeal No. 285/2016, D.B. Income Tax Appeal No. 286/2016, D.B. Income Tax Appeal No. 287/2016, D.B. Income Tax Appeal No. 288/2016 And D.B. Income Tax Appeal No. 289/2016 - - - Dated:- 23-10-2017 - Mr. K.S. Jhaveri And Mr. Vijay Kumar Vyas JJ. For the Appellant(s) : Mr. Sanjay Jhanwar with Mr. Prakul Khurana Ms. Archana For the Respondent(s) : Mr. Sameer Jain with Mr. Daksh Pareek ORDER 1. By way of these appeals, the appellants have challenged the judgment and order of the Tribunal whereby Tribunal has partly allowed both the appeals of the department as well as assessee. 2. This Court while admitting the ITAs No.285/2016, 286/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961 and therefore, it was not exempt from income tax? D.B. ITA No. 706/2008 (i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in holding that the expenditure of ₹ 11,74,15,986/- incurred by the assessee is of revenue in nature ignoring that the expenditure was incurred in bringing the inventories to the present location and condition as stipulated in the Accounting Standard-2 of ICAI and therefore are part of closing stock? (ii) Whether under the facts and circumstances of the case and in law the Tribunal was justified in deleting the disallowance made out of depreciation claimed even when it was not claimed on written down value of the asset? (iii) Whether under the facts and circumstances of the case and in law the Tribunal was justified in confirming the order of CIT(A) on the issue wherein the additions of ₹ 18,31,68,938/- made in the value of closing stock was reduced arbitrarily to ₹ 10,87,50,513/-thereby granting a whopping relied ₹ 7,44,18,425/- without appreciating that the value of opening stock has to be taken as closing stock of preceding year? D.B. ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20) of the Income Tax Act which reads as under:- Explanation. For the purpose of this clause, the expression local authority means (i) Panchayat as referred to in clause (d) of article 243 of the constitution; or (ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or (iii) Municipal Committee and District Bioard, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924). 4. Taken into consideration local fund in view of the Section 61, 62 63 64 where under the Chapter the finance authority has total control as statutory authority and they are carrying on the urban development work as foundation of the State Government and in view of Section 105 of the Act of Rajasthan Urban Improvement Act 1959, it is very clear that ultimately its fund has to be merged into local authority namely Municipal Corporation Board. 5. He has also pointed out in view of item 5 of State list which reads as under:- 5.Local government, that is to say, the constitution and powers of mun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority. 8. He contended that the view taken by the Tribunal is required to be reversed and the view taken by the Assessing Officer is required to be upheld. 9. However, counsel for the respondent-assessee Mr. Jhanwar contended that in view of the definition of the person under Section 231 Sub-clause (iv) read with explanation, it is clear that the present local authority is included. 10. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of final cost of compensation determined by the competent court, (ii) Cost of development based on the prevailing PWD Schedule of rates for the area, (iii) 30% of the items (i) and (ii), to cover administrative and establishment charges, and (iv) 20% of the items (i), (ii) and (iii), to cover maintenance cost for a period upto five years. The appellant failed to provide the basis on which the reserves prices were fixed. Further it also failed to show that it had adhered to the provision of Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974, the AO rejected the books of accounts by invoking provisions of Section 145(3) of the Act. The AO noted that the appellant during the relevant period had sold land worth ₹ 5,04 crore for an amount of ₹ 12.48 crore. He accordingly concluded that the rise in fair market price was at 147.62% of the value of stock disclosed by the appellant. He also added further amount as per the Rule 6(2) of Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974 as referred to above. He worked out the total value of opening stock at ₹ 432,98,69,111 and closing stock at ₹ 446,26,09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which works out to ₹ 3,06,44,23,524/- as against ₹ 3,20,87,56,328/- considered by the AO. The closing stock is thus overvalued by ₹ 14,43,32,804/- (3,20,87,56,328-3,06,44,23,524). (ii) As per the generally accepted accounting principles and Accounting standard the stock is to be valued at cost or marker price which ever is less. Administrative, establishment and maintenance cost should not form part of the valuation of the inventories. The AO without any basis increased the valuation of the stock by ₹ 6,57,52,952/- (3,52,24,706+3,05,25,156) on account of administrative and maintenance expenses. The valuation of the above closing stock is incorrect. (i) The valuation of the stock is governed by Accounting Standard provides the following basis for valuation of inventories:- Para 5 Inventories should be valued at the lower of cost and net realizable value. Para 6 The cost of inventories should comprise all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Para 13 In determining the cost of inventories in accordance with Para 6, it is appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of the property taxes levied by the said enactments. In other words, State property exempted under Clause (1) means such property as is used for the purpose of the Government and not for the purpose of trade or business. That was a case where the question arose in relation to the levy of property tax on lands and buildings owned by the State Governments which was property of the State Government . In the instant case, we are concerned with the income of the appellant/Authority and the same principles apply. The exemption can be claimed only if the income can be said to be the income of the State Government. In the facts of this case, it is not possible to hold that the income of the appellant/Authority is the income of the State Government. Learned counsel for the Union of India also relied upon two decisions reported in : AIR1999SC2573 Food Corporation of India v. Municipal Committee, Jalalabad and Anr. and MANU/SC/0416/1999 : AIR1999SC2552 Board of Trustees for the Visakhapatnam Port Trust v. State of A.P. and Ors. and submitted that this Court has consistently taken the view that a Corporation having the attributes of a Company must be held to be distinct from the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmu Development Authority. At the same time section 10(20A) which related to income of an Authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by clause (20A) on such an Authority was taken away. Thus, in view of the fact that section 10(20A) was omitted and an Explanation was added to section 10(20A) of the Act, enumerating the Local Authorities contemplated by section 10(20A), the assessee i.e. Jammu Development Authority could not claim any benefit under those provisions after April 1, 203. The benefit conferred by section 10(20A) of the Act on the assessee upto the A.Y. 2002-03 has been expressly taken away and the explanation added to section 10(20) enumerates the Local Authority which do not cover the Authority. The assessee i.e. Jammu Development Authority subsequently claimed that its objects falls under the provisions of section 2(15) of the Act and has complied with all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o help the assessee. 17. In that view of the matter, the reliance placed by counsel for the department regarding 10(20) and explanation A will not make any difference. Taking into consideration income of authority is under constitution of India vide order enacted either for the purpose of dealing with or setting up the housing scheme for the purpose of planning and development of the improvement of the cities, town and villages or both for which the authority are created to carry out the function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges. 18. In that view of the matter, deletion of 20A will not make difference in case of assessee. In our considered opinion, Clause-3 will come in the help of the assessee. In that view of the matter, we are considered opinion, that the authority assessee is a local authority for the purpose of carrying out of the improvement and development function of the State. 19. In that view of the matter, the issue is required to be answered in favour of the assessee against the department. In view of the answer, other issues are become academic, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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