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2018 Supreme(HP) 925
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
Surya Kant, Ajay Mohan Goel, JJ.
Pr. Commissioner of Income Tax, Shimla – Appellant
Versus
H.P. Excise & Taxation Technical Service Agency – Respondent
ITA Nos. 85, 86, 87, 91, 92 and 93 of 2018
Decided On : 07-12-2018
For the Appellant :Vinay Kuthiala, Sr. Advocate and Diwan Singh Negi, Advocate
For the Respondent:Vishal Mohan, Aditya Sood and Praveen Sharma, Advocates
Headnote:
Income Tax - Taxability of Assessee's income - Societies Registration Act, 1860, Himachal Pradesh VAT Act, 2005, Himachal Pradesh VAT Rules, 2005 - Section 34, Rules 61 and 62 - The judgment discusses the taxability of income derived by the respondent-Assessee, a society registered under the Societies Registration Act, 1860, from the collection of statutory levy under the Himachal Pradesh VAT Act, 2005. The court examines the nature of the income, the application of the IT Act, 1961, and the exemption under Section 12AA. It concludes that the surplus income over expenditure belongs to the State Government and is not taxable income of the respondent-Assessee.
Fact of the Case:
The respondent-Assessee, a society registered under the Societies Registration Act, 1860, collected statutory levy under the Himachal Pradesh VAT Act, 2005. The Assessing Officer issued notices for taxing the surplus income over expenditure shown in the respondent-Assessee's income and expenditure statements. The Commissioner, Income Tax (Appeals) held that 20% of the tax amount collected and paid to the State Government could not be treated as 'income' of the respondent-Assessee. The Tribunal concluded that the surplus of income over expenditure belonged to the State Government and was not taxable income of the respondent-Assessee.
Finding of the Court:
The court found that the surplus income over expenditure of the respondent-Assessee belonged to the State Government and was duly deposited in the public Exchequer, and therefore, did not constitute taxable income of the respondent-Assessee.
Issues: The issues revolved around the taxability of the surplus income over expenditure shown in the respondent-Assessee's income and expenditure statements, the application of the IT Act, 1961, and the exemption under Section 12AA.
Ratio Decidendi: The court held that the surplus income over expenditure of the respondent-Assessee belonged to the State Government and was not taxable income of the respondent-Assessee, as it did not constitute 'real income' in the hands of the respondent-Assessee for the purpose of the IT Act, 1961.
Final Decision: The substantial question of law was answered in negative against the appellant-Revenue and in favour of the respondent-Assessee. All the appeals were dismissed.
JUDGMENT :
Surya Kant, J.
1. This order shall dispose of the above captioned Appeals preferred by the Revenue, challenging a common order dated 30.11.2017, passed by the Income Tax Appellate Tribunal, Division Bench 'A' Chandigarh (hereinafter referred to as 'the Tribunal'), whereby the Tribunal has allowed the Assessee's appeals in part whereas Cross-Appeals filed by the Revenue have been dismissed in respect of the Assessment Years 2007-2008 to 2011-2012 and 2013-2014.
2. The substantial question of law sought to be raised in these Appeals is as follows:
"Whether on the facts and in the circumstances of the case, the ITAT is right in law in holding that the income of the assessee, which was paid to the Govt. as per the bye laws of the assessee society, is not taxable, inspite of the fact that the assessee had debited such payment to its P&L Account and had claimed it as a revenue expenditure though the assessee is not registered u/s. 12AA of the Act and nor its income is exempt under any of the provisions of the Act"
3. Before adverting to the question formulated above, it would be useful to give a brief synopsis of the facts. The Assessee-Society, hereinafter referred to as 'the respondent-Assessee', was registered under the Societies Registration Act, 1860 (hereinafter referred to as 'the 1860 Act') on 27.8.2002. The object of the Society as incorporated in its Memorandum of Association, inter alia, includes:
"To facilitate the general public dealers carrying goods and crossing the barriers established by the State Govt. and also to diffuse awareness amongst the general public/dealers about the sales tax laws.
To utilize the information technology for deeper systematic reforms in tax administration by creation of a separate entity properly geared to provide supportive role to the Department in creation of data bank (dealer wise/commodity wise, Circle wise and Barrier wise), in transmission of information and establishment of client server environment.
To back up the computerization requirement of the Department of Excise & Taxation Department and for this purpose develop infrastructure therefore both in terms of software as well as hardware.
To facilitate adoption of ST-XXVI-A form in a computer friendly format and generate funds by rendering this services to the dealers so as to make it a self sustaining activity.
To carry out all such activities as are envisaged in section 20 of the Society Registration Act 1860, which are in the interest of society.
To derive optimum benefits from fully networked computerization in terms of providing computerized functioning of Multi-purpose Barriers, issuance of computerized receipts, on line networking to facilitate sharing of data between all Offices/Assessing Authorities in the Department and develop other related infrastructures incidental thereto.
The Society shall for this purpose, generate receipts in lieu of providing these services at the Multi-purposes Barriers, and utilized the same to fulfill the objectives of the Society.
And in furtherance of the above objectives:
(i) Develop, create, manage and maintain infrastructure for providing such services."
4. The primary funds of the respondent-Assessee were to be augmented by collecting the statutory levy under Section 34 of the Himachal Pradesh VAT Act, 2005 (hereinafter referred to as 'the VAT Act, 2005'), whereunder the State Government was empowered to establish check-post(s) or erect barriers with a view to preventing or checking evasion of tax under the VAT Act, 2005. Sub-Section (2) of Section 34 of the Act requires the owner or person in-charge of a goods carriage or vessel to carry with him the goods carriage record, a trip sheet or a log-book and tax invoice diary as well as a delivery note containing such particulars as may be prescribed and to produce the same before the officer in-charge of a check-post or barrier and to submit in triplicate a 'Declaration' containing particulars of the goods in the prescribed form. Initially, the
