Society V. Chief Commissioner of Income Tax

WP/18902/2010

AI Insights

The case revolves around a writ petition filed by a society running an engineering college, seeking to declare the proceedings of the Chief Commissioner of Income Tax as illegal and arbitrary, and to obtain approval for tax exemption under Section 10(23C)(vi) of the Income Tax Act, 1961. The society argued that their application was a continuation of a previously filed application and thus should not be considered time-barred. However, the court found that the application was indeed filed beyond the statutory deadline established by the Finance Act, 2006, and amended by the Finance Act, 2009, which specifically set time limits for such applications without provisions for condoning delays.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 680226 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 23-11-2010
• Assessment Year: misc
• Other Referred Cases: Roland Educational and Charitable Trust v. Chief Commissioner, Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Application rejection; Educational institution; Income tax exemption; Statutory limitation
• Section: 10(23C)(vi)

Judgement Text

"THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN W.P.No.18902 OF 2010 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The relief sought for in this writ petition is to declare the proceedings of the 1st respondent – Chief Commissioner of Income Tax dated 27.11.2009 as illegal and arbitrary. A consequential direction is sought to the 1st respondent to grant approval to the petitioner under Section 10(23C)(vi) of the Income Tax Act, 1961 (hereinafter called the “Act”). The objects of the petitioner, a society registered under the Andhra Pradesh (Telangana Areas) Public Societies Registration Act, 1350 with registration No.6508 dated 8.8.2000, are as under: (i) to give the best possible technical education to the students; (ii) to train the younger generation so that they can stand on their own legs in their future life by making a respectable living without depending on others and to make their valuable contribution for the welfare of the society; (iii) to encourage youth of the day to cultivate a habit of independent thinking and judgment and to cherish higher values of life in conformity with the dignity of human aspiration (iv) to include such a discipline among the students to train them to understand and respect nature so that they can have peaceful and purposeful lives, useful to the society; (v) to organize short and cultural activities for the physical and mental development of the youth. The petitioner society is running an engineering college. They have been filing their income tax returns claiming exemption under the Act on the ground that they exist solely for educational purposes, and not for profit. The petitioner claims to have filed an application dated 6.4.2006 in Form No.56D seeking exemption for the assessment years 2004-05, 2005-06 and 2006-07. The said application is said to be pending consideration before the respondents. The petitioner filed another application in Form 56D on 21.11.2008 claiming exemption, under Section 10(23-C)(vi) of the Act, for the assessment years 2007-08 and 2008-09. The 2nd respondent issued notice dated 27.4.2009 calling upon the petitioner to furnish certain information and produce their books of accounts. Thereafter, the 1st respondent issued notice dated 11.11.2009 calling upon the petitioner to show cause why the application dated 21.11.2008 should not be rejected on the ground that it was filed beyond time. The petitioner filed their reply dated 26.11.2009. Thereafter the 1st respondent passed orders on 27.11.2009 refusing to entertain the application dated 21.11.2008 on the ground that it was filed beyond the time limit prescribed in the fourteenth proviso to Section 10(23C) of the Act. It is the petitioner’s case that they had filed an application as long back as on 6.4.2006 seeking approval under Section 10(23C)(vi) for the years 2004-05 onwards; as they did not receive any communication with regards the earlier application they had submitted another application dated 21.11.2008 for the years 2007- 08 and 2008-09; the application dated 21.11.2008 is merely in continuation of the earlier application dated 6.4.2006 and, therefore, no question of limitation arises; the 1st respondent failed to notice that while the amendment, prescribing limitation for making an application under Section 10(23C), came into force only with effect from 1.6.2006, as introduced by the Finance Act, 2006, the petitioner had submitted its application on 6.4.2006 prior thereto; the amendment has no application; and the 1st respondent could not have rejected the application. While the application said to have been submitted by the petitioner on 6.4.2006 relates to the assessment years 2004-05, 2005-06 and 2006-07, the subsequent application dated 21.11.2008 relates to the assessment years 2007-08 and 2008-09. In his proceedings dated 27.11.2009, the 1st respondent notes that, in view of the fourteenth proviso to Section 10(23C) of the Act as inserted by Finance Act 2006, the application made by the petitioner society on 21.11.2008, seeking approval under Section 10(23C)(vi) of the Act for the assessment years 2007-08 and 2008-09, was beyond time. The 1st respondent relied on Roland Educational and Charitable Trust v. Chief Commissioner, Income Tax[1] to hold that she did not have jurisdiction, in respect of an application filed under Section 10(23C)(vi) of the Act, beyond the statutory period of limitation and, in the absence of any provision to condone the delay in presenting the application, she could not exercise the power to entertain the application; and the application filed on 21.11.2008, seeking approval under Section 10(23C)(vi) of the Act for the assessment years 2007-08 and 2008-09, was belated and could not be acted upon. The impugned order dated 27.11.2009 rejecting the petitioner’s application dated 21.11.2008, seeking approval under Section 10(23C)(vi) of the Income Tax Act, is for the assessment years 2007-08 and 2008-09. The petitioner’s earlier application said to have been filed on 6.4.2006 does not relate to the assessment years 2007-08 and 2008-09 which is the subject matter of the impugned order and, as such, has no relevance to the facts of the present case. The petitioner’s application seeking exemption for the assessment years 2007-08 and 2008-09 was, admittedly, filed only on 21.11.2008. Under the first proviso to Section 10(23C)(vi) of the Act, educational institutions are required to make an application, in the prescribed form and manner, to the prescribed authority for the purpose of grant of exemption or continuance thereof. The second proviso enables the prescribed authority, before approving any educational institution under sub-clause (vi), to call for such documents including audited annual accounts or information from the educational institution, as it thinks necessary, in order to satisfy itself about the genuineness of the activities of such educational institution. The second proviso also enables the prescribed authority to make such enquiries as it deems necessary. The fourteenth proviso to Section 10(23C) of the Act, in its entirety, was inserted by the Finance Act, 2006 with effect from 1.6.2006 and, prior to its amendment by Finance Act, 2009, required an educational institution which makes an application, on or after the first day of June, 2006, for the purpose of grant of exemption or continuance thereof, to make an application at any time during the financial year immediately preceding the assessment year. After its amendment by Finance Act, 2009, with retrospective effect from 1.4.2009, the fourteenth proviso to Section 10(23C) stipulates that where an educational institution, referred to in the first proviso, makes an application, on or after the first day of June, 2006, for the purpose of grant of exemption or continuance thereof, such application shall be made on or before the 30th day of September of the relevant assessment year for which the exemption is sought. The application for the assessment year 2007-08 ought to have been made prior to 1.4.2007, and the application for the assessment year 2008-09 ought to have been made before 1.4.2008 since the amendment to the fourteenth proviso by Finance Act, 2009 came into force only with effect from 1.4.2009 and, prior thereto, an application for the purpose of exemption had to be made during the financial year immediately preceding the assessment year. No power is vested with the Chief CIT to entertain an application, filed under Section 10(23C)(vi), beyond the statutory period by condoning the delay in presenting the application. The Notes on Clauses to the Finance Bill, 2006 read thus:- Providing a time-limit for application for grant of exemption or continuance of exemption for certain charitable and religions trusts and institutions and certain educational and medical institutions. Under the existing provisions contained in Sub-clauses (iv), (v), (vi) and (via) of Clause (23C) of Section 10, there is no time-limit for any university or other educational institution or any hospital or other institutions, or any fund or trust or institution specified therein to make an application for issue or notification/grant of approval or continuance thereof. It is proposed to insert a new proviso in Clause (23C), so as to provide a time-limit for the purposes of making an application under the said sub-clause. Such application for grant of exemption or continuance thereof under any of these sub-clauses shall have to be filed at any time during the financial year immediately preceding the assessment year from which such exemption is sought. Such application cannot be made for any earlier period. The proposed amendment shall apply only in respect of applications which are made on or after 1st June, 2006. This amendment will take effect from 1st June, 2006. The fourteenth proviso to Section 10(23C), has been inserted by the Finance Act 2006, inter alia, to provide for a period of limitation for entertaining an application, under Section 10(23C) (vi), for grant of exemption, on or after the 1st June, 2006. The legislature has, however, not made any provision for condonation of the delay in presenting such an application. The Chief CIT, being a creature of the statute, cannot travel beyond the statutory provisions, and does not have jurisdiction to entertain an application filed under Section 10(23C)(vi) beyond the statutory period of limitation. (Roland Educational and Charitable Trust1) The petitioner’s application dated 21.11.2008 is beyond the time limit stipulated in the fourteenth proviso to Section 10(23C) of the Act. In the absence of any power being conferred on the 1st respondent, under the fourteenth proviso to Section 10(23C) of the Act, to condone the delay in filing the application, the order of the 1st respondent, in rejecting the petitioner’s application on this score, cannot be faulted. The writ petition fails and is, accordingly, dismissed. However, in the circumstances, without costs. _____________ V.V.S.RAO, J ___________________________ RAMESH RANGANATHAN, J 23.11.2010 ASP [1] (2009) 309 ITR 50 "