In a recent case, the Orissa High Court directed the scrutiny committee to review matter regarding the claim of exemption to Micro, Small, and Medium Enterprises ( MSME ) Unit  to file an audit report under section  44 AD of Income Tax Act, 1961. Focal Hub, the Petitioner prayed for a direction to empanel it as an Agency for production of audio-visual contents. Mr. Panda, counsel for the Petitioner submitted that pursuant to the invitation to submit Request for Proposal (RFP), the Petitioner submitted its proposal to be empanelled as an agency in the Information and Public Relations Department, Government of Odisha, Bhubaneswar for production of audio-visual contents.  Pursuant to the proposal received, the Information and Public Relations Department prepared a list of empanelled Houses/Agencies on 25th January, 2024, in which the name of the Petitioner does not find place.

Know Practical Aspects of Tax Planning, Click Here The Petitioner is a MSME Unit having its Registration No.OD07E0001354.  Thus, it is entitled to the benefits of exemption/relaxation in terms of the letter issued by the MSME Department, which should have been taken into consideration.  In the said letter, MSME Units are granted with certain exemption/relaxations.  Thus, the Petitioner should have got relaxation from annual turn-over criteria and prior experience criteria.  Be that as it may, the Petitioner had submitted the documents in support its experience of doing live streaming and preparation of audio visual contents.  The same was not given proper weightage while preparing the list of empanelled Houses/Agencies.    In view of Section 44 AD of Income Tax Act, 1961, the Petitioner is exempted from furnishing the audit report of the Chattered Accountant as required under Clause-5 of the Eligibility Criteria of Information to the Bidders as stipulated.  Had these materials been taken into consideration, the name of the Petitioner would have been empanelled.  Hence, he prays for re-consideration of its case for being empanelled in Information and Public Relations Department, Government of Odisha as an agency for production of audio visual contents.

Know Practical Aspects of Tax Planning, Click Here Mr. Mishra, Additional Government Advocate vehemently objected that the experience certificate submitted by the Petitioner, which was granted by Central Project Co-ordinator (CPC), High Court of Orissa is doubtful, as the letter number has not been given therein.  It was not also issued in the letter head of Central Project Coordinator (CPC), High Court of Orissa, who allegedly issued such experience certificate. It was argued that the Petitioner was not empanelled referring to the income tax returns of the Petitioner annexed to the writ petition, submitted that the Petitioner had turn-over of more than 10 lakh for last three years before submission of RFP. Thus, there is an error apparent on the face of the record in rejecting the RFP of the Petitioner.  He further submitted that the policy of the State Government with regard to MSME Unit and the notification and Office Memorandum are binding on the Government of Odisha, which were apparently ignored by the Scrutiny Committee.  A single bench of Justice K.R. Mohapatra found that the Petitioner being a MSME Unit is entitled for certain exemptions/relaxations as per the letter and notification as well as Memorandum.

The plea taken by the State of Odisha-Opposite Party Nos.1 & 2 that the case of the Petitioner could not have been considered, as the notification was issued on the date of sitting of the Scrutiny Committee is not sustainable.  Know Practical Aspects of Tax Planning, Click Here From the counter affidavit, it was evident that the Scrutiny Committee was convened on 27th December, 2023 and subsequently on 28th December, 2023. Admittedly, notification of MSME Department was issued on 27th December, 2023. Thus, it could have been considered by the Scrutiny Committee on 28th December, 2023.  Further the Petitioner claimed that in view of Section 44 AD of the Act, it is not required to submit the audit report of the Chartered Accountant, which needs a fresh consideration by the Scrutiny Committee. It was found that the Scrutiny Committee failed to take into consideration the instruction and policy decision of the Government.

The Court disposed of the writ petition with a direction that” the Scrutiny Committee shall review the case of the Petitioner giving its representative an opportunity of being heard and to produce documents in support of its case. The Petitioner shall be intimated about the date of consideration of its case by the Scrutiny Committee and entire exercise shall be completed as expeditiously as possible preferably within a period of three months from the date of production of certified copy of this order before the Director, Department of Information and Public Relations, Government of Odisha, Bhubaneswar-Opposite Party No.2.”  Subscribe Taxscan Premium to view the Judgment