Wp(C)/11421/2008 Of Marthoma Medical Mission Thiruvalla v. The Chief Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR TUESDAY, THE 9TH DAY OF DECEMBER 2014/18TH AGRAHAYANA, 1936 WP(C).No. 11421 of 2008 (I) ---------------------------- PETITIONER(S): --------------- MARTHOMA MEDICAL MISSION, MARTHOMA SABHA OFFICE, SCS COMPOUND THIRUVALLA - 689 101, REPRESENTED BY ITS SECRETARY REV.JOHN MATHEW. BY ADVS.SRI.CHACKO GEORGE (SR.) SRI.H.RAMANAN SRI.ALEX N.MATHEW (KOLLAM) SRI.JAMES JOSE RESPONDENT(S): -------------- THE CHIEF COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT BY ADV.SRI.JOSE JOSEPH,SC., THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 09-12-2014,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 11421 of 2008 (I) APPENDIX PETITIONER'S EXHIBITS: EXT.P1: CBDT'S ORDER OF EXEMPTION (TRUE COPY) DATED 30.0103 EXT.P2: PETITIONER'S EXEMPTION APPLICATION FOR ASSESSMENT YEARS 02-03,03-04,AND 04-05 TOGETHER WITH FORWARDING LETTER (TRUE COPY) DATED27.11.03 EXT.P3:PETITIONERS APPLICATION FOR EXTENSION OF EXMPTION FOR ASSESSMENT YEARS 05-06, 06-07 AND 07-08 TO RESPONENT-1(TRUE COPY) DATED27.12.06 EXT.P4:RESPONDENT-1'S ORDER REJECTING EXT.P3 APPLICATION (TRUE COPY)DATED 23.01.08 RESPONDENTS' EXHIBITS: EXT.R1(a): TRUE COPY OF THE LETTER DATED 27.12.2006 //TRUE COPY// P A TO JUDGE A.K.JAYASANKARAN NAMBIAR, J. ......................................................W.P.(C).No.11421 of 2008 ........................................................Dated this the 9[th] day of December, 2014 J U D G M E N T The petitioner is a charitable Society running three hospitals.It had claimed the benefit of Section 10 (23-C) (via) of the IncomeTax Act for the period commencing from 1999-2000. Ext.P1 is theorder passed by the Central Board of Direct Taxes approving theapplication of the petitioner, for the grant of benefit under Section10 (23-C) (via) for the assessment years 1999-2000 to 2001-2002,subject to compliance with the conditions stipulated therein. Forthe period from 2002-2003 to 2004-2005, the petitioner hadsubmitted Ext.P2 application before the Chief Commissioner ofIncome Tax, the respondent herein, and the said application isstated to be pending before the respondent even now. While so,the petitioner on 01.01.2007, preferred Ext.P3 application forcontinuing the benefit granted to it by Ext.P1 order, for theassessment years from 2005-2006 to 2007-2008. By that time,however, the provisions of Section 10 (23-C) (via) had beenamended by Finance Act, 2006 by adding Proviso 14 therein whichread as follows: “Provided also that in case the fund or trust orinstitution or any university or othereducational institution or any hospital or othermedical institution referred to in the firstproviso makes an application on or after the1[st] day of June, 2006 for the purposes of grantof exemption or continuance thereof, suchapplication shall be made at any time duringthe financial year immediately preceding theassessment year from which the exemption issought.” “Provided also that in case the fund or trust orinstitution or any university or othereducational institution or any hospital or othermedical institution referred to in the firstproviso makes an application on or after the1[st] day of June, 2006 for the purposes of grantof exemption or continuance thereof, suchapplication shall be made at any time duringthe financial year immediately preceding theassessment year from which the exemption issought.” The respondent, while considering Ext.P3 application of thepetitioner, found that in respect of the claim for assessment years2005-2006 and 2006-2007, the application preferred by thepetitioner would be hit by the Proviso aforementioned, inasmuch asthe petitioner had not preferred the application in respect of thesaid assessment years during the financial year immediatelypreceding the assessment year for which the benefit was sought.On this premise, he found the application preferred by thepetitioner for the said assessment years as belated. As regards theassessment year 2007-2008, the respondent found that since therewas no order passed on Ext.P2 application filed by the petitionerfor the period from 2002-2003 to 2004-2005, and consequently nobenefit granted to the assessee in the said years, there was noquestion of considering an application for the assessment years2007-2008 seeking a continuation of the benefit granted inprevious years. On that premise, he rejected the application for the assessment year 2007-2008 as well. Ext.P4 dated 23.01.2008 is theorder of the respondent rejecting the claim of the petitioner for theassessment years 2005-2006, 2006-2007 and 2007-2008. In thewrit petition, Ext.P4 order of the respondent is impugned, interalia, on the ground that the 14[th] Proviso to Section10 (23-C) (via)could not have had any application to the assessment years 2005-2006 and 2006-2007 and, further, that the reasoning of therespondent with regard to assessment year 2007-2008 was faultysince the respondent could not take advantage of his own inaction,in not passing any orders on Ext.P2 application that was pendingbefore him. 2. A counter affidavit has been filed on behalf of therespondent wherein Ext.P4 order is sought to be justified byplacing reliance on the 14[th] Proviso to Section 10 (23-C) (via), thatwas inserted by the Finance Act, 2006 with effect from 01.06.2006.It is further pointed out that the claim for extension of the benefitgranted in earlier years, for the assessment year 2007-2008, alsocould not be entertained since the petitioner had not shown that hehad been granted the exemption in the earlier years. 3. I have heard the learned Senior counsel Sri.Chacko George appearing on behalf of the petitioner and Sri.Jose Joseph, thelearned Standing counsel for the Income Tax Department for therespondent. 4. On a consideration of the facts and circumstances of thecase as also the submissions made across the Bar, I am of the viewthat this is a case where admittedly Ext.P2 application that waspreferred by the petitioner claiming the benefit under Section 10(23-C) (via), for the assessment years 2002-2003, 2003-2004 and2004-2005 are pending consideration before the respondent.Although, the said application is seen filed as early as on27.11.2003, the respondent has not passed any orders thereon. Itis against the backdrop of this inaction on the part of therespondent that the findings in Ext.P4 order passed by him, inrespect of assessment years 2005-2006, 2006-2007 and 2007-2008,have to be examined. The petitioner is a person who had beengranted the benefit under Section 10 (23-C) (via) for the periodfrom 1999-2000 to 2001-2002 and, in the usual course and in theabsence of any changed circumstances, he would be entitled to thebenefit of the said provision for the subsequent years as well.Notwithstanding this, for reasons best known to the respondent noorders have been passed on Ext.P2 application for the last 10 years. Ext.P3 application dated 01.01.2007 was submitted by thepetitioner for the assessment years 2005-2006, 2006-2007 and2007-2008. When the said application came up for considerationbefore the respondent, the respondent relied on the provisions ofthe 14[th] Proviso to Section 10 (23-C) (via), that has been insertedwith effect from 01.06.2006, to hold that the application submittedby the petitioner for the assessment years 2005-2006 and 2006-2007 are belated. In my view, the said finding of the respondent inExt.P4 order cannot be legally sustained insofar as it stems from anerroneous interpretation of the applicability of the said proviso. Itwill be seen from a reading of the Proviso, which is extractedabove, that the Proviso is intended to ensure that any applicationpreferred after 01.06.2006, for the purposes of grant of exemptionor continuation thereof, has to be made during the financial yearimmediately preceding the assessment year from which theexemption is sought. This would mean that, in the case of anassessee choosing to claim the benefit under Section 10 (23-C) (via)for any assessment year after 1[st] June, 2006, the application for thesaid assessment year would necessarily have to be made during theprevious year relevant to the said assessment year. The saidproviso obviously cannot have any application to those cases wherethe previous year, relevant to an assessment year, had already expired before the introduction of the said proviso under Section10 (23-C) (via). In the case of the petitioner, the previous yearsrelevant to the assessment years 2005-006 and 2006-2007 hadalready expired by 01.01.2006, the date on which the new Provisowas introduced under Section 10 (23-C) (via). Thus the said Provisocould not have been cited as a reason for holding the applicationpreferred by the petitioner for the assessment years 2005-2006 and2006-2007 to be belated. As far as the assessment year 2007-2008was concerned, the application of the petitioner having been filedon 01.01.2007, complied with the requirements of the newlyinserted proviso to Section 10 (23-C) (via). The said applicationcould therefore have been considered on merits by the respondent.The respondent, however, in Ext.P4 order, chose to deny thebenefit of the provision to the petitioner on the ground that theapplication is one which sought a continuation of an exemptionearlier granted to the petitioner, and since the petitioner had notshown that exemption was granted for the immediately precedingperiod, the benefit sought for could not be granted even for theassessment years 2007-2008. In my view, the findings in Ext.P4relating to the assessment year 2007-2008 are also legallyunsustainable since, even if the respondent was of the opinion thatthe benefit of Section 10 (23-C) (via) could not be continuedfor the said assessment year, nothing prevented him from treating theapplication as a fresh application for the grant of the benefit underSection 10 (23-C) (via) for the assessment year 2007-2008. Thus,the reasons given by the respondent, in support of his findings inExt.P4 order, are not legally tenable and the order is hence liableto be quashed. I must hasten to add that there is yet anotheraspect of the matter that needs to be considered. It is trite thatunder the Income Tax Act, the law that governs the assessment ofan assessee in any assessment year is the law prevailing as on 1[st] ofApril of the relevant assessment year. In the instant case, when itcame to the assessment years 2005-2006 and 2006-2007, anamendment that was introduced through the Finance Act witheffect from 01.06.2006 would have no application to theassessment of the petitioner for the said assessment years. Theamendment would govern only the exemption that was to begranted with effect from the assessment year 2007-2008 onwards.Viewed from that angle also, therefore, the findings of therespondent in Ext.P4 order, in respect of the assessment years2005-2006 and 2006-2007 cannot be legally sustained. Resultantly, the writ petition is allowed by quashing Ext.P4order of the respondent, and directing the respondent to consider the application preferred by the petitioner for the grant of benefitunder Section 10 (23-C) (via) of the Income Tax Act, for the periodfrom 2002-2003 to 2007-2008, on merits by taking into accountExts.P2 and P3 applications preferred by the petitioner. Therespondent shall pass a composite order covering all the aforesaidassessment years, after affording the petitioner an opportunity ofhearing. The respondent shall pass the order, as directed, within aperiod of four months from the date of receipt of a copy of thisjudgment. A.K.JAYASANKARAN NAMBIAR JUDGE mns/