M/S Ajanta Educational Centre v. Chief Commissioner Of Income Tax And Another

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No. 21542 of 2008 Date of Decision: August 4, 2009 M/s Ajanta Educational Centre …Petitioner Versus Chief Commissioner of Income Tax and another …Respondents CORAM:HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present:Mr. V.K. Jain, Senior Advocate, with Mr. J.L. Malhotra, Advocate,for the petitioner. Ms. Naveender P.K. Singh, Advocate,for the respondents. 1.Whether Reporters of local papers may be Yes allowed to see the judgment? 2.To be referred to the Reporters or not?Yes3.Whether the judgment should be reported inYes the Digest? M.M. KUMAR, J. Challenge in this petition filed under Article 226 of the Constitution is to the notice dated 22.10.2008 (P-4) issued by theChief Commissioner of Income Tax, Amritsar-respondent No. 1. Afurther prayer has been made for directing the respondents to grantbenefit of exemption to the petitioner Society under Section 10(23C)of the Income-tax Act, 1961 (for brevity, ‘the Act’) in respect ofFinancial Years 2004-05, 2005-06 and 2006-07. 2.Brief facts of the case are that the petitioner is a Society registered under the Societies Registration Act (XXI) of 1860. It isclaimed that the aim and the objects of the petitioner Society is toprovide intellectual, moral and physical education on national leveland as such it is entitled for exemption under clause 23C of Section10 of the Act. It had been claiming and granted exemption underSection 10(23C) of the Act prior to assessment year 2004-05. In thatregard the petitioner Society has placed on record two orders passedby the Chief Commissioner of Income-tax-respondent No. 1. Inrespect of assessment years 1999-2000 to 2001-02 exemption hasbeen granted vide order dated 12.12.2005 (P-1) and for thesubsequent assessment years from 2002-03 to 2004-05 exemption hasbeen granted vide order dated 30.3.2006 (P-2). 3.On 5.12.2007, the petitioner Society filed Form 56Dclaiming exemption under Section 10(23C) of the Act in respect ofthe Financial Years 2004-05, 2005-06 and 2006-07 (P-3). Thepetitioner Society also filed an application for exemption in terms ofRule 2CA of the Income-tax Rules, 1962, in respect of previous threefinancial years prior to Financial Year 2004-05, which is stated to bedisposed off by the revenue authorities. 4.An amendment was carried out in the Finance Act, 2006w.e.f. 1.6.2006 whereby XIVth proviso was added to Section 10(23C)of the Act. The assent of the President to the said amendment wasgranted on 13.7.2006. As per the amendment, the assessee wasrequired to file the application at any time during the financial yearimmediately preceding the assessment year for which the exemptionwas to be sought. On 17.12.2007, an application was filed by the petitioner Society under Section 10(23C)(vi) and (via) of the Act.On 22.10.2008, the Chief Commissioner of Income-tax, Amritsar-respondent No. 1 passed an order rejecting the claim of the petitionerSociety for grant of exemption under Section 10(23C) of the Act inrespect of Financial Years 2004-05, 2005-06 and 2006-07, holdingthat if approval is granted then XIVth proviso to Section 10(23C) ofthe Act would become redundant (P-4). The observations made bythe Commissioner of Income-tax reads thus:- “4.I have considered the aforesaid contention madeon behalf of the assessee. If the said contention isaccepted, then the 14[th] proviso to clauses (vi) and (via) ofSection 10(23C) of the Income-Tax Act becomesredundant. However, it can never be the intention of thelegislation to make any of its provisions redundant byanother provision. In fact, the 9[th] proviso to clauses (vi)and (via) of Section 10(23C) of the Act only ensures thatthe applications received as per the provisions of the 14[th]proviso to these clauses are disposed of within a periodof 12 months from the end of the month in which theapplications are received. “4.I have considered the aforesaid contention madeon behalf of the assessee. If the said contention isaccepted, then the 14[th] proviso to clauses (vi) and (via) ofSection 10(23C) of the Income-Tax Act becomesredundant. However, it can never be the intention of thelegislation to make any of its provisions redundant byanother provision. In fact, the 9[th] proviso to clauses (vi)and (via) of Section 10(23C) of the Act only ensures thatthe applications received as per the provisions of the 14[th]proviso to these clauses are disposed of within a periodof 12 months from the end of the month in which theapplications are received. 5.In view of the above, the application made by theassessee on 17[th] December, 2007 for approval underclauses (vi) and (via) of Section 10(23C) of the IncomeTax Act for financial years 2004-05 to 2006-07 cannotbe acted upon.” 5.It has been asserted by the petitioner Society that on28.12.2006, the Central Board of Direct Taxes (CBDT) issued Circular No. 14 of 2006 clarifying that the aforementionedamendment would be applicable from the assessment year 2007-08and onwards (P-5). Thus, it has been contended that the amendmentin question cannot be made applicable retrospectively. 6.In the reply filed on behalf of the respondents the standtaken is that the application dated 17.12.2007 has been rejectedsummarily without examining the same on merits. It has beensubmitted that a consolidated application for exemption in respect ofAssessment Years 2005-06, 2006-07 and 2007-08 was filed by thepetitioner Society and it was not possible to segregate the same intoparts as it had to be decided as a whole. If the application is allowedit would amount to granting approval from the Assessment Year2005-06 onwards including Assessment Year 2007-08, for which theapplication under Section 10(23C)(vi) was beyond the period oflimitation. It has also been pointed out that on 26.11.2008, thepetitioner Society has also filed an application before the CBDT forcondonation of delay in filing the application dated 17.12.2007 (R-2).7.In the replication the petitioner Society has pleaded thatdue to ignorance of new amendment, it could not file application forexemption under Section 10(23C) in time in respect of assessmentyear 2007-08. It has been claimed that it has never filed anyapplication for condonation of delay as has been portrayed by therespondents and as a matter of fact document Annexure R-2 is aforged document. 8.We have heard learned counsel for the parties andperused the paper book with their able assistance. It would be firstprofitable to refer to the relevant provisions of the Act. The petitioner Society has claimed that exemption was granted to it undersub-clause (vi) & (via) of clause 23C of Section 10 of the Act. In theFinance Act, 2006, proviso was added to Section 10(23C) of the Actw.e.f. 1.6.2006 and the assessee was required to move an applicationat any time during the financial year immediately preceding theassessment year from which the exemption was sought. Theassessee-petitioner Society had claimed that its case is covered byproviso IX appended to sub-clause (vi) and (via) of Section 10(23C)of the Act. The relevant proviso of sub-clause (vi) and (via) of clause(23C) of Section 10 of the Act are reproduced as under:- Proviso I “Provided that the fund or trust or institution orany university or other educational institution orany hospital or other medical institution referred toin sub-clause (iv) or sub-clause (v) or sub-clause(vi)) or sub-clause (via) shall make an applicationin the prescribed form and manner to theprescribed authority for the purpose of grant of theexemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) orsub-clause (via).” Proviso IX Proviso I “Provided that the fund or trust or institution orany university or other educational institution orany hospital or other medical institution referred toin sub-clause (iv) or sub-clause (v) or sub-clause(vi)) or sub-clause (via) shall make an applicationin the prescribed form and manner to theprescribed authority for the purpose of grant of theexemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) orsub-clause (via).” Proviso IX “Provided also that where an application under thefirst proviso is made on or after the day on whichthe Taxation Laws (Amendment) Bill, 2006receives assent of the President, every notification under the sub clause (iv) or sub clause (v) or subclause (vi) or sub clause (via) shall be passedwithin the period of twelve months from the end ofthe month in which the application was received.” Proviso XIV “Provided also that in case the fund or institutionor any university or other educational institution orany hospital or other medical institution referred toin the first proviso makes an application on or afterthe 1[st] Day of June, 2006 for the purposes of grantof exemption or continuance thereof, suchapplication shall be made at any time during thefinancial year immediately preceding theassessment year from which the exemption issought.” 9.A careful reading of the aforesaid proviso shows that thesame cannot have any application in respect of the assessment years2005-06 and 2006-07 because those financial years had already goneby. This position is also evident from Circular No. 14 of 2006, dated28.12.2006 (P-5) issued by the CBDT and the relevant portion of thesame is extracted as under:- “6.Providing a time limit for grant/continuance ofexemption for certain charitable and religioustrusts and institutions and certain educational andmedical institutions.exemption for certain charitable and religioustrusts and institutions and certain educational andmedical institutions. 6.1Section 10(23C)(iv), (v), (vi) and (via), a fund, trust or institution or university or othereducational institution or hospital or other medicalinstitution is required to make an application forgrant of exemption under the said clauses to theprescribed authority. 6.2 A new proviso has been inserted in Section 10(23C) to provide that such application made on orafter June 1, 2006 shall be made at any time duringthe financial year immediately preceding theassessment year from which the exemption issought. 6.3Applicability – Assessment year 2007-08onwards.” (emphasis added) 10.It is well settled enunciation of law that the circularsissued by the CBDT are binding on the revenue authorities. In thatregard reliance is placed on the judgments of Hon’ble the SupremeCourt rendered in the cases ofP.R. Prabhakarv. Commissioner ofIncome Tax, Coimbatore, [2006] 284 ITR 548;Union of Indiav.Azadi Bachao Andolan, (2004) 10 SCC 1; andCommissioner ofCustoms, Calcuttav. Indian Oil Corporation Ltd., (2004) 3 SCC488. 11.The stand of the respondents is that since a consolidatedapplication for exemption in respect of assessment years 2005-06,2006-07 and 2007-08 was filed it could not be segregated into parts.It is claimed that it was required to be dealt with and decided as a 6.3Applicability – Assessment year 2007-08onwards.” (emphasis added) 10.It is well settled enunciation of law that the circularsissued by the CBDT are binding on the revenue authorities. In thatregard reliance is placed on the judgments of Hon’ble the SupremeCourt rendered in the cases ofP.R. Prabhakarv. Commissioner ofIncome Tax, Coimbatore, [2006] 284 ITR 548;Union of Indiav.Azadi Bachao Andolan, (2004) 10 SCC 1; andCommissioner ofCustoms, Calcuttav. Indian Oil Corporation Ltd., (2004) 3 SCC488. 11.The stand of the respondents is that since a consolidatedapplication for exemption in respect of assessment years 2005-06,2006-07 and 2007-08 was filed it could not be segregated into parts.It is claimed that it was required to be dealt with and decided as a whole. It is conceded position that the petitioner Society neverclaimed any exemption in respect of assessment year 2007-08.Moreover, no bar has ever been created either by the statute or by theinstruction/circulars that such type of consolidated applications couldnot have been dealt with in parts in respect of each assessmentyear/financial year while adjudicating. A perusal of Rule 2CAprovides for detailed guidelines. According to Rule 2CA, anapplication for approval has to be made in Form 56D by anyuniversity or educational institution. The approval of the ChiefCommissioner granted before 1.12.2006 shall at any one time haveeffect for a period not exceeding three Assessment Years. Themaximum limit of three years is fixed. The stand of the respondentsin the face of Rule 2CA is wholly unwarranted. 12.The Chief Commissioner-respondent No. 1 has passedthe impugned order dated 22.10.2008 (P-4) in a mechanical mannerand without application of judicious mind which is expected from aquasi judicial authority. Accordingly, we have no hesitation to quashthe impugned order dated 22.10.2008. 13.As a sequel to the above discussion, the instant petitionis allowed. Impugned order dated 22.10.2008 (P-4) passed by theChief Commissioner-respondent No. 1 is quashed. The ChiefCommissioner-respondent No. 1 is directed to consider the case of thepetitioner Society on merit for grant of exemption under Section 10(23C)(vi) and (via) of the Act in respect of assessment years 2005-06and 2006-07 afresh. August 4, 2009 Pkapoor (JASWANT SINGH) JUDGE