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income-tax Officer Vs. Haryana Harijan Kalyan Nigam Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Judge
Reported in(1983)5ITD282(Chd.)
Appellantincome-tax Officer
RespondentHaryana Harijan Kalyan Nigam Ltd.
Excerpt:
.....ltd., registered under the companies act, 1956. it came into existence as a consequence of the haryana government decision dated 5-8-1970. the total paid up capital comprised of rs. 1,13,50,000 in equity shares numbering 11,350 of rs. 1,000 each and the said shares were held as under :1.commissioner and secretary to government, haryana 11,349 welfare of scheduled castes and backward classes department, chandigarh2.director, welfare of scheduled castes and backward 1 --------- classes department, haryana, chandigarh 117350 --------- the paid up capital of the assessee-company as on 30-6-1977 was rs. 1,13,50,000. as above said, the assessee's claim was that it was entitled to exemption under section 10(265b), which was not accepted by the ito in the assessment proceedings.3. when the.....
Judgment:
1. The sum and substance of all the grounds raised by the revenue in this appeal is to dispute the action of the Commissioner (Appeals) who accorded exemption to the assessee under Section 10(2(18) of the Income-tax Act, 1961 reversing the finding of the ITO that the assessee was not entitled to any exemption under Clause (26B) of said Section 2. In order to appreciate the issue, a brief resume of facts in the background shall be of immense help for adjudication of the issue under consideration. The assessment year involved is 1978-79. The assessee is the Haryana Harijan Kalyan Nigam Ltd., registered under the Companies Act, 1956. It came into existence as a consequence of the Haryana Government decision dated 5-8-1970. The total paid up capital comprised of Rs. 1,13,50,000 in equity shares numbering 11,350 of Rs. 1,000 each and the said shares were held as under :1.

Commissioner and Secretary to Government, Haryana 11,349 Welfare of Scheduled Castes and Backward Classes Department, Chandigarh2.

Director, Welfare of Scheduled Castes and Backward 1 --------- Classes Department, Haryana, Chandigarh 117350 --------- The paid up capital of the assessee-company as on 30-6-1977 was Rs. 1,13,50,000. As above said, the assessee's claim was that it was entitled to exemption under Section 10(265B), which was not accepted by the ITO in the assessment proceedings.

3. When the issue came before the Commissioner (Appeals), he accepted the said claim of the assessee and held that the entire income of the assessee is exempt from tax under the provisions of Section 10(26 B).

4. It is this action of the Commissioner (Appeals) which is disputed by the revenue before us. The learned senior departmental representative, Mr. R.K. Bali, beside relying on the order of the ITO, submitted that the assessee is not a company which is wholly financed by the Government. Therefore, even second part of the relevant provision, as observed by the Commissioner (Appeals) in para 2 of his order, does not apply. The learned counsel for the assessee Mr. P.C. Jain, on the other hand, beside relying on the order of the Commissioner (Appeals), placed on the assessee's compilation the photostat copy of the report in which establishment of the assessee-company was decided to be taken up. He also made available to us copy of memorandum and articles of association of the assessee-company and furnished copy of details of share capital and names of shareholders. He also made available to us copy of the balance sheet as on 30-6-1977 and drew our attention to the enclosures to the balance sheet as per which, he pointed out, even the loans were raised by the assessee from the Haryana Government and the assessee as such having been financed by the Government, exemption under Section 10(26B) was rightly allowed. He read out the relevant section being inserted from 1-4-1972-[1980] 123 ITR (St.) 9-and vehemently argued that on the basis of facts available on record, the assessee was entitled to exemption and the same was rightly granted by the Commissioner (Appeals).

5. After taking into consideration the rival submissions and looking to the facts on record, we are unable to interfere in the finding of the Commissioner (Appeals), Section 10(2(16), which was inserted by the Finance Act, 1980 with retrospective effect from 1-4-1972, which reads as under : (26B) any income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by Government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the members of either the Scheduled Castes or the Scheduled Tribes or of both.

Explanation-For the purposes of this clause, 'Scheduled Castes' and 'Scheduled Tribes' shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution ; [1980] 123 ITR (St.) 9.

(i) any income of a corporation established by a Central, State or Provincial Act ; or (ii) any income of any other body, institution or association wholly financed by the Government.

It is clear that the assessee falls in second category, looking to the facts that it was started as per decision of the Haryana Government, which would be clear from the following : ^^gfj;k.kk eaf=eaMy us 5&8&1970 dks gqbZ cSBd esa ;g fu.kZ; dj fy;k gS fd nks djksM+ :i;s dh vf/k iwath esa gfjtu dY;k.k fuxe dh] ,d pkjVMZ vdkmUVsUV }kjk eseksjs.Me rFkk vkjfVdYl vkQ ,lksfl,'ku cuokdj ,d dEiuh] dEiuh ,DV ds v/khu 'kh?kz jftLVMZ djokbZ tk;s A** Then with the memorandum and articles of association, there were only two signatories, i.e.. Commissioner and Secretary to the Government, Haryana, Welfare of Scheduled Castes and Backward Classes Department, Chandigarh and Director, Welfare of Scheduled Castes and Backward Classes Department, Haryana, Chandigarh, who acquired 11,349 and 1 shares respectively. The total number of equity shares of 11,350 of the value of Rs. 1,000 resulted in a paid up share capital of the company amounting to Rs. 1,13,50,000. This fact also stands confirmed by (he balance sheet and the annexures enclosed therewith. Annexure 'A' attached with the balance sheet confirms the fact that the entire capital belongs to the Haryana Government. Further perusal of Annexure 'C which is in respect of unsecured loans amounting to Rs. 38,60,000 also shows that the entire loan was from the Haryana Government. Under the circumstances, the assessee is a company which was established as per decision of the Haryana Government and is fully financed by the Government, for the benefit of Scheduled Castes, as mentioned in notes prefixed to the interpretation of Section 10(2(55) on the statute. On the basis of these facts and for the reasons given by the Commissioner (Appeals) in his order, his action is confirmed.

6. It may be only academic to adjudicate whether the assessee falls even under the first limb of Section 10(2(55) but, even as per that limb, income of a corporation established by a Central, State or Provincial Act is to be entitled to exemption. The assessee undoubtedly has not been established by an Act but it is as per decision taken by the Government initiated and incorporated by the Government and wholly financed by the Government and the intention of the Act can clearly be cleared that the bodies as of the assessee's type were to be exempt under Section 10(26 B).


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