TMI Blog2020 (3) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... with law after giving the assessee proper and sufficient opportunity of being heard. - I.T.A. Nos. 1726 & 1727/Kol/2018 And S.A. Nos. 18 & 19/Kol/2020 (Arising out of ITA Nos. 1726 & 1727/Kol/2019) - - - Dated:- 20-3-2020 - Shri P.M. Jagtap, Vice President (KZ) And Shri A.T. Varkey, JM For the Assessee : Shri Miraj D. Shah, AR appearing For the Revenue : Shri I, Jamir, CIT, DR appearing ORDER PER P.M. JAGTAP, VICE-PRESIDENT (KZ) These two appeals filed by the assessee against two separate orders both dated 14.05.2019 passed by the Ld. CIT(A) 25, Kolkata for Assessment Year 2014-15 2015-16 involve common issues and the same, therefore, are being disposed of by a single consolidated order along with the corresponding stay applications filed by the assessee being S.A. Nos. 18 19/Kol/2020. 2. Although as many as 15 identical grounds are raised in these two appeals by the assessee, the learned counsel for the assessee has pressed and argued Ground Nos. 4, 5 10 which read as under: 4. For that the lower authorities failed to consider that the grant given by the Government were for specific purposes and it could not be treated income of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, the issues raised in Ground Nos. 4, 5 10 in the present appeals were also raised by the assessee by way of specific grounds raised in the appeals filed before the Ld. CIT(A). He has also submitted that a detailed submission was made on behalf of the assessee in support of its case on these issues and the same as extracted by the Ld. CIT(A) at page no. 32 to 41 of his impugned orders was as under: 39. Ground No. 4, 5 5: The assessee was constituted u/s 4 of the Water (Prevention and Control of Pollution) Act, 1974 under the name West Bengal Pollution Control Board . The preamble of the Act reads as under: An Act to provide for the prevention and control of water pollution and the maintaining or restoring of wholesomeness of water, for the establishment, with a view to carrying out the purposes aforesaid, of Boards for the prevention and control of water pollution, for conferring on and assigning to such Boards powers and functions relating thereto and for matters connected therewith. WHEREAS it is expedient to provide for the prevention and control of water pollution and the maintaining or restoring of wholesomeness of water, for the establishment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appellant contends that the income derived by it, is the income of the State and is therefore not liable to tax under Article 289(1) of the Constitution of India. Without prejudice, it is contended that the activities of the appellant board constitute the functions incidental to the ordinary functions of the State and therefore, its income is immune from tax under Clause (3) to Article 289 of the Constitution of India. In fact the state cannot allow the functions to be discharged by any private entity. These functions can only be discharged by the state or any one appointed by it on its behalf to discharge the above state functions. 43. It is submitted that the functions performed by the appellant broadly fall under Article 48A of the Constitution of India which provides for protection and improvement of environment falling under the directive principles of State Policy in Part IV of the Constitution of India and accordingly, any income derived in the exercise of functions performed by the State or incidental to ordinary functions of the State is not liable to tax under Article 289(1) / 289(31of the Constitution of India. 40. Apart from the above, the distinguishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt from union taxation, clause (3) provides that nothing in clause (2) which talks about imposition of tax, shall apply to any trade or business, which parliament may by law declared to be incidental to the ordinary functions of government. Thus, a plain reading of the aforesaid clauses of Article 289 makes it clear that they are independent of each other and speaks of three different situations 43. Section 4 of the Water (prevention and control of Pollution) Act, 1974, empowers the state government to constitute a state pollution control board through a notification published in the official gazette for exercising such powers and functions as may be assigned to the board under the Act. Similarly, section 4 of The Air (prevention and control of pollution) Act, 1981, provides that state pollution control boards constituted under section 4 of The Water (prevention and control of pollution) Act, 7974 shall be deemed to be the state board for the prevention and control of air pollution. Further other provisions of both the aforesaid Acts, including assimilation of funds, preparation of budget, spending of money, borrowings for short term long term etc. leaves no room for doubt that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 48A Article 289 of the Constitution, the income / receipts of the assessee-board can be fairly interpreted to mean as the income / receipts of the state government and such income / receipt did not accrue / arise in the hands of the assessee-board. U/s 4 of the IT Act income tax is chargeable in respect of total income. When the income does not accrue / arise to the assessee, nothing is includible in the total income computed u/s 5 of the IT Act. Therefore, when the income / receipt accrues to the government and not to the assessee-board, is eligible to get immunity from taxation under article 289(1) of the Constitution of India. 47. Without prejudice we further submit that all the receipts made in various heads, are capital receipts and therefore not subjected to Income tax. The main receipts of the assessee-board are comprised of appropriation of funds by the state government from state consolidated fund as required u/s 35 of the Water (prevention and control of Pollution) Act, 7974 and by the central government from the consolidated funds of India u/s 8 of the Water (Prevention and Control of Pollution) Cess Act, 1977 from the proceeds collected under the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominion and right to use the said amount. When examining, the concept of income' one has to keep in mind, commercial reality, specialty of the situation rather thon pure theoretical or doctrine aspects. The business aspect of the matter has to be viewed as o whole but without disregarding the statutory language. Depending upon the nature and character of the deposits/payments, should be given to hold whether or not the amount received was income/profit. 49. In the case of Siddeshwar Sahakari Sakhar Karkhana Ltd. vs. CIT Ors., (2004) 270 ITR 1 (SC), the word 'income' or 'profit' was examined and interpreted. In the said case, issue arose whether deposits/payments made in different heads/parties was diversion of income at source or not and whether the deposits/funds have to be included in the income earned. The Supreme Court emphasized that the nature and character of the deposits/payments is determinative and relevant. 50. In the case of CIT vs. Bazpur Coop. Sugar Factory Ltd (1988) 172 ITR 321 (SC), the question arise as to whether the amounts credited to loss equalization and capital redemption reserve fund were held to be income/profit. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in dismissing the grounds as not pressed and urged that the matter may be sent back to the AO for deciding these issues as same were not even considered and decided by the Assessing Officer. Keeping in view all the facts of the case as borne out from the record, we are inclined to accept this contention of the learned counsel for the assessee. Even the ld. DR has not raised any objection for sending the matter back to the AO for adjudication of these vital issues relating to the assessment of the assessee for both the years under consideration after proper and necessary verification. We accordingly set aside the impugned orders of the ld. CIT(A) on these issues and restore the matter to the file of the AO for deciding the same on merit in accordance with law after giving the assessee proper and sufficient opportunity of being heard. 8. As a result of disposal of the corresponding appeals of the assessee for A.Y. 2014-15 and 2015-16 by us, the stay applications filed by the assessee being S.A. Nos. 18 19/Kol/2020 have become infructuous and the same are accordingly dismissed. 9. In the result, both the appeals of the assessee are treated as partly allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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