TMI Blog2019 (4) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the definition of “State” as per Article 12 of the Constitution of India. The exemption in the CBDT notification dated 29.03.2016 is valid for Financial Year 2015-16 to 2018-19. Admittedly no return of income was filed by the assessee for the assessment year under consideration. The ld. AR initially argued that under bonafide mistaken belief that the assessee is being instrument of state is exempted from filing return of income, the assessee has not file return of income for the assessment year under consideration. Considering the facts that the assessee Board is under complete superintendence, and control of the State Government financially as well as administratively falls under the definition of “State” as per Article 12 of the Constitution of India. And in our view is entitled for immunity from the taxation of its income under the provisions of Income-tax Act. our view is further got the support that CBDT vide its notification date 29.03.2016 has granted exemption of taxation to the assessee board. - Decided in favour of assessee. - ITA No.2203/Mum/2016 And ITA No.6248/Mum/2016 - - - Dated:- 28-2-2019 - SHRI G.S. PANNU, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or taxation merely because tax has been deducted by the payer of professional receipts by the appellant when infact the deduction of tax is not a determinative factor to determine the whether the appellant is liable for taxation or not. 9. The Learned Commissioner of Income-tax (Appeals) and the Assessing Officer have erred in holding that the appellant is liable for taxation and that it does not exist for public purpose on the ground that the appellant is earning surplus from its activities. 10. The Learned Commissioner of Income-tax (Appeals) has erred in upholding that the provisions of section 10(46) of the Income-tax Act prospectively when infact, the absence of the provision during the year under consideration would not make the appellant herein liable for taxation. 11. Without prejudice to the above grounds, the Learned Commissioner of Income-tax (Appeals) has erred in upholding the disallowance under section 40(a)(ia) of the Income-tax Act. 2. Brief facts of the case are that the assessee is established by the Act of Maharashtra Legislature/ Government by enacting Maharashtra State Board of Technical Education Act 1997. The Act provides for establishm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed for the year under consideration. The assessee furnished the details of the Governing Council of the assessee board. The assessing officer also asked the assessee to provide if the assessee has obtained any notification of Central Government under section 10(46) of the Income tax Act. The assessee filed its reply on 20th March 2014 and reiterated the earlier submission and assessee also contended that the objection of the assessee has not been rejected expressly. The assessing officer communicated to the assessee that the objection filed by the assessee has been disposed of 24 March 2014. 4. The assessing officer took the view that the assessee is having surplus of ₹ 22,70,58,574/- and fixed deposits of ₹ 96,30,23,412/-. The assessee has received very meager grant from Government and the majority of the receipt is collected from students and other as fees and other charges. The surplus is not utilized for the purpose of benefits of general public and is lying either in fixed deposits or other asset. The assessing officer also noted that the assessee board has paid salary and wages of ₹ 6,16,34,690/-, security expenses ₹ 19,50,733/- and Profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee board /Maharashtra State Board of Technical Education (MSBTE) is set up by Maharashtra State Government under the Maharashtra State Board of Technical Education Act, 1997, hereinafter referred as State Act the copy of the Act is filed on record. The State Government board of technical education is similar to many other Government Departments. The ld. AR for the assessee also has taken us through various sections of the State Act. As per section 5, the Board consists of the Director, Technical Education, Maharashtra State as the Chairman; the Director Maharashtra State Board of Technical Education as the Member Secretary and the other members, namely Ex-officio Members consisting of (i) The Chairman of the Maharashtra State Board of Secondary and Higher Secondary Education or his nominee not below the rank of the Chairman of the Divisional Board; (ii) The Director of Industries, Maharashtra State or his nominee not below the rank of Joint Director; (iii) One representative of the State Nodal Centre of National Technical Manpower information System; (iv) The Regional Officer (Western Region) of All India Council of Technical Education, New Delhi; (v) The Director, Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labi for Diploma Level Technical Education, for all categories, such as, regular, sandwich, Part-time. Correspondence course, yearly, semester pattern and the like; (c) . (d) To prescribe and develop any book as text book and reference book or to prepare or cause to be prepared any book and print or non-print material or to publish directly or in collaboration with any other agency. Any kind of learning material for Diploma level courses. (e) To prescribe the general conditions governing admission of regular candidates and ex-candidates to the examinations and to specify the conditions relating to eligibility, attendance, term-work and character, on the fulfillment of which a candidate shall have a right to be admitted to and to appear at any such examination; (f) .. (g) .. (h) To call for special reports and information from the Director of Technical Education or from officers of the Technical Education Department of the Government, and to call for any information from any Diploma Level Institution, recognized by the. Board to ensure maintenance and improvement in academic standard in Diploma Level Technical Education; (i) To appoint such Committees as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter giving it 8 reasonable opportunity of showing cause why such orders should not be-made; and (zl) To create, own, hold or hire any property or infrastructure required for- (i) Functioning of Board office, (ii) Functioning of regional offices, (iii) Providing residential accommodation to officers and staff of the Board; (zk) To plan and monitor academic performance; (zi) To propose the need-based courses, special courses for self-employment, courses for rural, deprived persons and women; (zm) To propose to confer autonomy for deserving institutions Section 36 of the State Act provides that all property, fund and other assets vesting in the Board shall be held and applied by it, subject to the provisions and for the purposes of this Act. 10. Section 40 of the State Act prescribed that the Board shall pay, from time to time, to each regional office such sums as the Board may determine, for enabling the regional offices to discharge the duties and functions imposed on them by the Board for completion of works or Development Scheme within its jurisdiction, which are not inconsistent with this Act. The ld AR for the assessee further submits that as per section 51 of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty, Contracts and Suits , Chapter I- Finance, Miscellaneous Financial provisions of the Constitution of India- states that Property an d Income of a State is Exempt from Union Taxation. The ld AR for the assessee also taken us through the Article 289, which is reproduced hereunder for reference: Article No. 289 (1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorizing the imposition of, any ax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for tl1e purposes of such trade or business, or any income accruing or arising in connection therewith. (3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental to the ordinary functions of Government. 13. The ld. Counsel for the assessee submits that Article 289 exempts state income or property from taxation. On plain reading of above Article it is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'State' thus includes executive as well as the legislative organs or the Authorities of the Union States. Further, it may be noted that according Webster s Dictionary Authority means a person or body exercising power to command. In the context of Article 12 the word authority means the power to make laws, orders, regulations, bye-laws, notification etc which have the force of la and power to enforce those laws. Further 'Local authorities' as defined in Sec ion 3 (31) of the General Clauses, Act refers to authorities like Municipalities, District Boards, Panchayats, Improvement Trust and Mining Settlement Boards. 17. In Article 12 the expression 'other authorities' is used after mentioning a few of them such as, the Government, Parliament of India, the Government and Legislature of each of the States and all local authorities. In Article 12 the bodies specifically named are the Government of the Union and the States, the Legislature of the Union and the states and local authorities. There is no common genus running through these named bodies nor can these bodies so placed in one single category on any rational basis. 18. The ld Counsel for asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -19 but that would not take away the status of assessee State within the meaning of Article-12 r.w. Article 289 of the Constitution of India. The CBDT has specifically exempted certain income by way of this notification. There is no change in the activities of the assessee since inception which establishes the fact that the assessee was never into the business of commercial activities. Once the CBDT found and exempted various stream of income as exempted in case of assessee, all such activities are covered by notification must be treated as exempted. The source of income of assessee consists of grant from State Government, fees collected from candidate to appear in various examinations, receipt from printed education material, receipt from other government bodies for conducting courses and exams like Common Entrance Test (CET) or interest on deposits. None of these items can be said to be carrying of any activities in the nature of trade, commerce or business. The assessee is not rendering any services in the nature of trade, commerce or business for a fees or any other consideration. The assessee engaged in regulation of educational activities. In support of his submission the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submission of the parties and have gone through the orders of authorities below. We have also deliberated on various case laws relied and referred by lower authorities in their orders. Ground Nos. 1 to 4 relates to re-opening, violation of natural justice, invalidity of notice under section 148. The ld. AR of the assessee has not made any submission against these grounds of appeal. Therefore, ground nos.1 to 4 are treated as not pressed and resultantly dismissed being not pressed. 23. Ground Nos.5 to 10 relates to if the assessee is not liable to tax being as State under Article 289 of the Constitution of India and engaged in public utility services. The Assessing Officer after re-opening of the assessment completed the assessment under section 144. The Assessing Officer took the view that assessee is a Body Corporate having perpetual successor and a common seal. The assessee is an artificial juridical person as defined in section 2(31). The assessee received his major portion of its income on account of MSIT exam fees, Engineering CET Project Fees and interest accrued on FD s and none of the receipt can be said to have any connection with imparting education or have intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.08.1997. 27. Section 5 of the State Act prescribed constitution of Board, which consist of the Director, Technical Education, Maharashtra State as the Chairman; the Director Maharashtra State Board of Technical Education as the Member Secretary and the other members, namely Ex-officio Members consisting of (i) The Chairman of the Maharashtra State Board of Secondary and Higher Secondary Education or his nominee not below the rank of the Chairman of the Divisional Board; (ii) The Director of Industries, Maharashtra State or his nominee not below the rank of Joint Director; (iii) One representative of the State Nodal Centre of National Technical Manpower information System; (iv) The Regional Officer (Western Region) of All India Council of Technical Education, New Delhi; (v) The Director, Board of Apprenticeship Training (Western Region), Government of India, Ministry of Human Resources Development,(vi) The Joint Secretary to Government, Higher and Technical Education Department or his nominee not below the rank of Deputy Secretary. Nominated Members (i) one senior most Principal from Government Engineering Colleges in the State to be nominated by the Government. (ii) Two memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls to take action. If the Board does not take action within a reasonable time to the satisfaction of the Government, the Government may after considering any explanation or representation of the Board in consistence with the provision of the Act and Board shall comply such direction. Further, the Government may, by order in writing specifying the reasons thereof, suspend the execution of any Resolution or order of Board and prohibit the action order to be purporting to be ordered to be done by the Board, if the Government is of opinion that such Resolution, order or Act, is a nexus of the power conferred by or under the Act upon the Board. In our view, as per section 24 of the State Act, the State Government have full control over the Board in its day to day affair in Regulation or business of the assessee s Board. 30. Sections 25 to 35 of the Act deals with the permission, affiliation, conference and autonomous status of the assessee. Further, sections 36 to 44 of the Act are prescribed about funds, finance, accounts and audit. The assessee s Board is under obligation to furnish the report and return and statement relating to any matter connected with its work as the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur view, none of these items can be said to be carrying of any activities in the nature of trade, commerce or business. Further, at the cost of repetition, we may conclude that the assessee is not rendering any services in the nature of trade, commerce or business for a fees or any other consideration, rather, the assessee engaged in regulation of educational activities as per the statutory obligation conferred on the assessee Board. Even otherwise as we have noted earlier every activities of the assessee Board is subject to superintendence, instruction and control of the State Government. In our view, the assessee Board is completely controlled financially as well as administratively by the Government, thus, falls under the definition of State as per Article 12 of the Constitution of India. 31. The co-ordinate bench of Tribunal in Smt. Sapna Sanjay Roisoni (supra) while considering the scope of Article 12 of the Constitution of India gave the following finding; 11. The definition of the State under Article 12 has come for the consideration on number of occasions before the Hon'ble Supreme Court. The State consists of three departments, the Legislature, the Executive a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussion. Accordingly, the relevant Grounds taken by the assessees in all these appeals are allowed for statistical purposes. Needless to say the CIT(A) is directed to give opportunity of being heard to the assessees as per the principles of natural justice.' 10. A bare perusal of Article 12 shows that the definition of the State given in Article is inclusive and not exhaustive. The State includes : ( a) the Government and Parliament of India; ( b) the Government and the Legislature of each of the States; ( c) all local and other authorities within the territory of India; and ( d) all local and other authorities under the control of the Government of India. 11. The expression other authorities used in Article 12 is neither defined in the Constitution of India nor in any other statute. Therefore, the Hon'ble Supreme Court of India and the Hon'ble High Court have interpreted this expression in various judgements. The Hon'ble Supreme Court of India while interpreting the expression other authorities in the case of Som Prakash Rekhi v. Union of India reported as AIR 1981 SC 212 have culled out certain tests to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an issue relating to payment of compensation to one of the employee of MSRTC has observed as under : The Petitioner employer is a body Corporate and is State within the meaning of Article 12 of the Constitution of India and therefore it has to act as a Model Employer. 14. Thus, in view of the facts of the case and in the light of observations of the Hon'ble Bombay High Court, we are of the considered opinion that the CIT(A) has erred in holding that MSRTC is not a State and cash payments made to MSRTC are hit by the provisions of section 40A(3) of the Act. 32. Similar view was taken by Kolkata Tribunal in Narayan Rice Mill (supra). 33. We have further noted that the assessee Board made an application under clause (46) of section 10 for exemption of specified income to the assessee and CBDT vide its notification dated 29.03.2016 exempted the income of assessee Board arising from: (a) fees, fines and penalties; (b) receipts from Printed Educational Material; (c) receipts from Scrap or Waste paper; (d) receipts from other Government Bodies; (e) interest income from surplus funds kept in bank accounts and fixed deposits; (f) rent rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
