IN AN unprecedented move, the Income Tax Department has served recovery notices for Rs 2.13 cr on the Lucknow Development Authority (LDA), Mandi Parishad and the Samaj Kalyan Nirman Nigam (SKNN).
The SKNN had appealed to the Income Tax Tribunal against the recovery notice but lost there also as the tribunal upheld the plea taken by the department and directed the SKNN to deposit Rs 20 lakh of the total recovery amount of Rs 73 lakh with the Income Tax Department immediately.
The LDA has an income tax liability of Rs 80 lakh followed by the SKNN (Rs 73 lakh) and the Mandi Parishad (Rs 60 lakh). It has been asked to deposit the amount at the earliest to avoid further penalties.
Earlier, the LDA and other similar government development bodies were exempted from the income tax on the grounds that they were ‘no profit-no loss’ organisations in the service sector but the Central Government amended the Income Tax Act and brought these organisations under the ambit of income tax in the 2004 Union Budget.
However, the LDA did not bother to file the mandatory income tax return in the financial year 2004-05 and did not even respond to the notices served on it in this connection, the IT sources said.
Ultimately, the Income Tax Department has served recovery notices for Rs 80 lakh on the LDA for the financial year 2005-06. However, the LDA has moved the appellant tribunal against the recovery notices and the case is presently pending there.
The LDA has also not been complying with other mandatory provisions of the Income Tax Act like an additional (other than the routine one) audit of the accounts by a charted accountant followed by submission of the 3 CA form with the Income Tax Department. Separate notices are being issued to the LDA for violation of various other provisions of the law.
Similarly, the Income Tax Department has rejected the Mandi Parishad’s plea that it is a cooperative society and as such interest earned on its bank fixed deposits (FDs) worth over Rs 100 cr should be exempted from the income tax saying that earning interests worth crores of rupees could not be termed as ‘cooperative activity’ and as such the tax was payable on it. The SKNN had also taken a similar plea saying that it was working in the field of social welfare/charity and, therefore, its ‘income’ be exempted from the income tax.
However, the income tax sleuths said that the ‘charitable and social activities’ did not include ‘earning’ from any source but only ‘expenditure’ while the SKNN was ‘earning’ from different sources, including long-term FDs etc., giving it a colour of social service.
The SKNN had also gone to the tribunal against the income tax notice but in vain as the tribunal upheld the plea of the Income Tax Department and directed the SKNN to deposit Rs 20 lakh immediately to avoid further penalty.
On being contacted LDA vice-chairman BB Singh, however, said that the LDA had moved the income tax tribunal against the ‘old’ notices and won as the tribunal said that the authority was a ‘no profit no loss’ organisation and as such was not liable to the income tax.
However, the department had now moved the High Court against this judgment where the case was pending, Singh claimed. Singh pleaded ignorance about the recovery notices but said that IT returns had already been filed and replies to various queries raised by the department on the same were being given.