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IN - Simplifying Tax Laws - 2023 TAXSCAN (HC) 148

IN THE HIGH COURT OF ORISSA AT CUTTACK

ITA No.48 of 2011

and
ITA No.89 of 2017

The Commissioner of Income Tax/ …. Appellants

Principal Commissioner of Income
Tax, Cuttack
Mr. Radheshyam Chimanka, Senior Standing Counsel along with
Mr. Avinash Kedia, Junior Standing Counsel
-versus-
Paradeep Port Trust …. Respondent
Mr. R. V. Easwar, Senior Advocate assisted by
Ms. Rubal Bansal, Ms. Ananya Rath and
Mr. Asutosh Mohanty, Advocates

CORAM:
THE CHIEF JUSTICE
JUSTICE M.S. RAMAN

ORDER
05.01.2023
Order No.
05. 1. These two appeals by the Revenue raise similar questions of law
for different assessment years (AYs) involving the same Assessee
and are accordingly disposed of by this common order.

2. ITA 48 of 2011 is directed against an order dated 20th May, 2011

passed by the Income Tax Appellate Tribunal, Cuttack Bench,
Cuttack (ITAT) in ITA No.99/CTK of 2011 and ITA No.114/CTK
of 2011 for the AY 2007-08 and ITA 89 of 2017 is directed against
an order dated 9th August, 2017 of the ITAT in ITA No.395/CTK of
2012 for the AY 2008-09.

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3. In both these appeals, common questions have been urged for

consideration by this Court by the Revenue. The first question
relates to the registration granted to the Assessee under Section 12A
of the Income Tax Act, 1961 (Act). The question urged is whether
such registration allows the Assessee automatic exemption from
income tax on all types of income?

4. It is pointed out by Mr. R. V. Easwar, learned Senior Counsel

appearing for the Assessee-Respondent, that the said question in
fact does not arise from the impugned orders of the ITAT at all
since for neither of the AYs did the Assessee actually claim
automatic exemption on the basis of the registration granted in its
favour under Section 12A of the Act.

5. Indeed, the Court finds that the Assessee filed returns for each of
the AYs in question and provided the justification for claiming
exemption on a case-to-case basis. In other words, there was no
claim for automatic exemption from income tax on the basis of the
registration under Section 12A of the Act. Consequently, the Court
declines to frame such a question for consideration.

6. The next issue raised is whether there ought to have been a valid
resolution of the Assessee Trust in terms of Rule 17 of the Income
Tax Rules, 1962 (Rules) read with Section 11 (2) of the Act? This
Court finds that in terms of Rule 17, the Assessee is required to
submit a statement in Form No.10 to the Assessing Officer (AO),
which contains the statement that “it has been decided by a
resolution passed by the trustees/governing body….” that “out of
the income of the trust/institution/association for the previous
year……per cent of the income of the trust/institution/association

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for the said previous year, shall be accumulated or set apart for
carrying out the purposes of the trust/association/institution.” The
statement then gives the details of the amounts so set apart.

7. Mr. Radheshayam Chimanka, learned Senior Standing Counsel

for the Revenue submits that inasmuch as a copy of the resolution
of the Assessee Trust was not furnished, the above statement
regarding amount being accumulated for charitable activities cannot
be acted upon.

8. A perusal of Form No.10 reveals that the requirement of the

resolution, referred to in the statement therein, having to be
enclosed with the said Form, has not been indicated. In other words,
there is nothing in either Section 11(2) of the Act or Rule 17(2) of
the Rules that mandates the furnishing of such resolution by the
Assessee in order for the statement in Form No.10 to be acted upon
by the AO. Consequently, the Revenue cannot insist on a copy of
the resolution being furnished. The Court therefore concurs with the
view expressed by the ITAT in the impugned order and declines to
frame the question in this regard.

9. The third issue sought to be urged is whether the declaration filed

by the Assessee regarding correctness of its accounts for the
purposes of claiming exemption under Section 11 of the Act ought
not to have been accepted in view of the accounting irregularities
pointed out by the CAG?

10. As pointed out by Mr. Easwar, the report of the CAG indicates
that the Assessee offered excess income for assessment for the AYs
in question and therefore no prejudice can be said to be caused to
the Revenue on this score. It is not as if the Assessee has gained an

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unfair advantage in the process. Consequently, the Court declines to

frame the question as urged.

11. It is then sought to be contended that the amendment to Section

2 (15) of the Act by the Finance Act, 2008 should be considered to
be retrospective.

12. The Court is unable to agree. The very text of the Finance Act,
2008 and in particular Section 3 thereof which inserts the amended
Section 2(15) clearly states that “the following clause shall be
substituted with effect from the 1st day of April, 2009.” Clearly,
therefore, the amendment is prospective. Consequently, the Court
declines to frame this question either.

13. On the issue whether the Assessee ought to have resorted to the
cash system of accounting and not the accrual basis, it has been
pointed out on behalf of the Assessee that it is bound by the
guidance note of the Ministry of Shipping and Transport,
Government of India and the requirement under the Companies Act
as regards maintaining its accounts on accrual basis. Consequently,
this Court finds no reason to take a view different from what the
ITAT has taken in the matter.

14. It is next sought to be urged that the Assessee had withdrawn

the ground urged by it before the Commissioner of Income Tax
(Appeals) [CIT(A)] regarding taxability of interest on two Funds. A
perusal of the order of the CIT(A) shows that in fact the Assessee
had maintained its contention against the additions made by the AO
in this regard and the CIT(A) upheld the additions. Therefore, the
question appears to be misconceived and the Court accordingly
declines to frame the question.

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15. In ITA No.89 of 2017, an additional question is sought to be

raised whether absolutely similar activities carried on by the
Assessee from 1963 considered as charitable till AY 2008-09 can
cease to be charitable from AY 2009-10 onwards?

16. As pointed out by the Assessee, the change occurred as a result

of the prospective amendment to Section 2(15) of the Act, the
validity of which obviously cannot be questioned by the Revenue.
Consequently, this question also does not arise for consideration.

17. For all of the aforementioned reasons, the Court declines to

frame any of the questions urged by the Revenue in these two
appeals. They are accordingly dismissed.

(Dr. S. Muralidhar)
Chief Justice

(M.S. Raman)
Judge
M. Panda

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