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12-10-2018, URBAN IMPROVEMENT TRUST, Section 148, 10(20), SUPREME COURT OF INDIA
2. These appeals have been filed by the Revenue challenging the Division Bench judgments of Rajasthan High Court dated 25.07.2017 as well as subsequent
judgment dated 23.10.2017 following earlier judgment. The High Court vide its above judgments has dismissed all the income tax appeals of the Revenue and allowed that of assesse – Urban Improvement Trust. The Division Bench accepted the claim of the assessee that it is local authority within the meaning of Clause (iii) of Explanation to Section 10(20) of the Income Tax Act, 1961 and hence it is entitled for exemption under Section 10(20) of the Act. The Revenue have been contending that Urban Improvement Trust, the assessee is not a local authority within the meaning of Explanation to Section 10(20), hence it is not entitled for exemption.
3. For deciding this batch of appeals, it shall be sufficient to notice the facts of Civil Appeal arising out of S.L.P. (C) No. 18067 of 2018 – The Income Tax Officer Vs. M/s. Urban Improvement Trust, Kota.
4. Section 10(20) has been amended by Finance Act, 2002 w.e.f. 01.04.2003. A Notice under Section 142(1) of the Income Tax Act, 1961 (hereinafter referred to as
“I.T. Act”) was issued dated 01.08.2005 requiring the assessee to file a return for the assessment year 2003- 2004. A reply was submitted on behalf of the assessee that Urban Improvement Trust – the assessee is a municipality within the meaning of Article 243P of the Constitution of India, hence it is not required to file an income tax return. Assessing Officer passed an assessment order dated 28.03.2006 rejecting the contention of the assessee that its income is exempted under Section 10(20). An appeal was filed by the assessee before the Commissioner (Appeals). Commissioner (Appeals) passed an order on 10.02.2010 holding that assessee is a local authority within the meaning of Section 10(20) of the I.T. Act. The Revenue filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as “ITAT”) challenging the appellate order. The ITAT accepted the Revenue’s claim that assessee is not covered within the definition of Clause (iii) of Explanation to Section 10(20). The Appellate Tribunal in Paragraph 2.6 allowed the appeal and restored back the matter to the Commissioner of Income Tax (Appeals). Para 2.6 of the Order of the ITAT is as follows:-
“2.6 Considering our decision in the case of Rajasthan Housing Board, we feel that the Ld. CIT (A) was not justified in holding that income of UTI is exempt u/s 10(20) of the Act. The Ld. CIT(A) has not decided other issues raised before him by the assessee because the Ld. CIT(A) was of the opinion that income of
the assessee was exempt u/s 10(20) of the Act. Since we are vacating the order of the Ld. CIT(A) on the issue of liability of exemption u/s 10(20) of the Act, therefore, other issues are required to be considered afresh by the Ld. CIT (A). Accordingly, the appeals are restored back on the file of the Ld. CIT(A).”
5. Both the assessee and Revenue aggrieved by the order of ITAT had filed appeals before the High Court under Section 260A of the I.T. Act. The High Court decided all the appeals vide its judgment dated 25.07.2017. High Court held the assessee to be local authority within the meaning of Section 10(20) Explanation. After answering the above issue in favour of the assessee, the High court held that other issues have become academic. Consequently, the appeals filed by the Revenue were dismissed and that of the assessee were allowed.
6. Another set of appeals have been filed by the Revenue questioning the subsequent judgment of the High Court dated 23.10.2017 deciding Income Tax Appeal No. 287 of 2016 and other appeals. The above appeals were filed by the assessee against the judgment of the ITAT dated 08.06.2017 wherein ITAT had set aside the order of the Assessing Officer and had directed the Assessing Officer to provide reasons for issuing Notice under Section 148 to the assessee in respect of assessment years 2005-2006 to 2009-2010. Assessee thereafter was allowed to file objection before the Assessing Officer and Assessing Officer was directed to pass a speaking order. Operative portion of the judgment of ITAT contained in Para 7 is to the following effect:-
“7. Since we have set aside the order passed in respect of the assessment year 2005-06 to 2009-10 as the Assessing Officer has not provided the reasons u/s 148 of the Act, therefore, the appeals of the revenue arising out of the order passed by the Ld CIT(A) in respect of the assessment year 2005-06 to 2009-10 are also set aside with the direction to the Assessing Officer to pass fresh order after providing the reasons to the assessee and after deciding the objections if any in terms of the judgment in the case of GKN DRIVESHAFTS (INDIA) LTD. VS. INCOME-TAX