While dismissing the appeal of revenue Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that Kolkata port trust cannot be assessed in the status of ‘company’ for Income Tax purpose and it should be assessed as a ‘local authority’.
Assessee in the instant case is a trust named as Kolkata Port Trust. The main issue in this case is whether the assessee Port Trust can be assessed in the status of “Local Authority” or in the status of “Company”.
Revenue contended that the Kolkata Port Trust works as a company and major criteria as given in Companies Act, 1956 is satisfied in its form, structure and functioning. Further submitted that the assessee follows accrual system of accounting and the identification of revenue and expenditure is based on the principles of the Companies Act and also used the financial statements prescribed by the Indian Companies Act 1956 for developing the accounting formats. Revenue also stated that when read with the section 2 (26) (ia) which states that ‘Indian Company” means a company forms and registered under the Companies Act,1956 and includes a corporation established by or under a central, State or Provincial Act”.
After hearing submissions of both the parties the tribunal bench comprising of Judicial Member Aby. T. Varkey and Accountant Member J. Sudhakar Reddy have objected the arguments of the revenue. While perusing the material facts the bench also noted that the Assessing officer (AO) has accepted the status of the assesee port trust as a local authority in the recently concluded scrutiny assessment under section 143(3) of the Income Tax Act 1961 for the relevant assessment year.
The division bench further declared that all the port trusts including Kolkata port trust are being assessed to income tax as “Local Authority.”
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