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2017 Supreme(Raj) 2783
RAJASTHAN HIGH COURT (JAIPUR BENCH)
K.S. Jhaveri, Vijay Kumar Vyas, JJ.
Urban Improvement Trust, Kota - Appellant
Versus
Income Tax Officer - Respondent
Income Tax Appeal Nos. 285, 286, 287 and 289 of 2016
Decided On : 23-10-2017
Mr. Sanjay Jhanwar with Mr. Prakul Khurana & Ms. Archana, Advocates, for Appellants; Mr. Sameer Jain with Mr. Daksh Pareek, Advocates, for Respondents
The definition of "local authority" in Section 10(20) of the Income Tax Act, 1961 is broad enough to include an authority that carries out functions similar to those of a municipality or district board.
Headnote:
INCOME TAX - Local Authority - Definition - Whether the assessee, a local authority, is entitled to exemption under Section 10(20) of the Income Tax Act, 1961.
Fact of the Case:
The assessee, a local authority, claimed exemption from income tax under Section 10(20) of the Income Tax Act, 1961. The Assessing Officer (AO) denied the exemption, holding that the assessee was not a local authority as defined in the Act. The Commissioner (Appeals) (CIT(A)) upheld the AO's order. The assessee appealed to the Tribunal, which allowed the appeal and held that the assessee was a local authority entitled to exemption under Section 10(20). The department appealed to the High Court.
Finding of the Court:
The High Court held that the assessee was a local authority entitled to exemption under Section 10(20) of the Income Tax Act, 1961. The Court held that the definition of "local authority" in the Act was broad enough to include the assessee, and that the assessee's functions were similar to those of a municipality or district board. The Court also held that the amendment to Section 10(20) in 2003, which excluded certain authorities from the definition of "local authority," did not apply to the assessee.
Issues: Whether the assessee is a local authority entitled to exemption under Section 10(20) of the Income Tax Act, 1961.
Ratio Decidendi: The Court held that the assessee was a local authority entitled to exemption under Section 10(20) of the Income Tax Act, 1961. The Court held that the definition of "local authority" in the Act was broad enough to include the assessee, and that the assessee's functions were similar to those of a municipality or district board. The Court also held that the amendment to Section 10(20) in 2003, which excluded certain authorities from the definition of "local authority," did not apply to the assessee.
Final Decision: The Court allowed the assessee's appeal and dismissed the department's appeal.
JUDGMENT
ORDER
K.S. Jhaveri, J. - By way of these appeals, the appellants have challenged the judgement 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 ITA s No.285/2016, 286/2016, 287/2016, 288/2016 and 289/2016 on 25.04.2017 framed following substantial question of law in each of the appeals:-
"Whether under the facts and circumstances of the case the ld. Tribunal was justified in not declaring the reassessment proceedings and the consequential assessment order passed thereto as nullity?"
3. However, in view of the decision of this Court in the case of D.B. Income Tax Appeal No.643/2008 dated 25.07.2017 which is binding to both the parties wherein assessee has upheld to be local authority under the Act, reads as under:
" In all these appeals common questions of law and facts are involved, hence, they are decided by this common judgement.
1. By way of these appeals, the assessee as well as the department have assailed the judgement and order of the Tribunal whereby the Tribunal has allowed the appeal preferred by the department reversing the view taken by the CIT(A) and in some appeals the appeal of the department was dismissed.
2. This Court while admitting the matter has framed the following questions of law:-
"D.B. ITA No. 643/2008
(i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in holding that the expenditure of Rs. 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 Rs. 18,31,68,938/- made in the value of closing stock was reduced arbitrarily to Rs. 10,87,50,513/-thereby granting a whopping relied Rs. 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. 73/2011
"Whether on the facts and circumstances of the case and in law, the Ld. ITAT was right in holding that the appellant is not a ''local authority'' as contemplated under section 10(20) of the Income Tax Act, 1961 and therefore, it was not exempt from income tax?"
D.B. ITA No. 706/2008
(1) Whether under the facts and circumstances of the case and in law the Tribunal was justified in holding that the expenditure of Rs. 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 Rs. 18,31,68,938/- made in the value of closing stock was reduced arbitrarily to Rs. 10,87,50,513/-thereby granting a whopping relied Rs. 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. 294/2009
"Whether on the facts and circumstances of the case and in law, the Ld. ITAT was right in holding that the appellant is not a ''local authority'' as contemplated under section 10(20) of the Income Tax Act, 1961
