Kerala H.C : Fourteenth proviso to section 10(23C)(via) was not applicable to assessment years 2005-06 and 2006-07 where previous years relevant to said assessment years had already expired by 1-1-2006 before introduction of said proviso and, hence, assessee would be entitled for extension of benefit granted under section 10(23C)(via) for said years

High Court Of Kerala

Marthoma Medical Mission Vs. CCIT, Thiruvananthapuram

Assessment Years 2005-06 To 2007

Section 10(23C)(Via)

A.K. Jayasankaran Nambiar, J.

W.P. (C) No. 11421 Of 2008 (I)

December 9, 2014

JUDGMENT

1. The petitioner is a charitable Society running three hospitals. It had claimed the benefit of Section 10 (23-C) (via) of the Income Tax Act for the period commencing from 1999-2000. Ext.P1 is the order passed by the Central Board of Direct Taxes approving the application of the petitioner, for the grant of benefit under Section 10 (23-C) (via) for the assessment years 1999-2000 to 2001-2002, subject to compliance with the conditions stipulated therein. For the period from 2002-2003 to 2004-2005, the petitioner had submitted Ext.P2 application before the Chief Commissioner of Income Tax, the respondent herein, and the said application is stated to be pending before the respondent even now. While so, the petitioner on 01.01.2007, preferred Ext.P3 application for continuing the benefit granted to it by Ext.P1 order, for the assessment years from 2005-2006 to 2007-2008. By that time, however, the provisions of Section 10 (23-C) (via) had been amended by Finance Act, 2006 by adding Proviso 14 therein which read as follows:

“Provided also that in case the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in the first proviso makes an application on or after the 1st day of June, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be made at any time during the financial year immediately preceding the assessment year from which the exemption is sought.”

The respondent, while considering Ext.P3 application of the petitioner, found that in respect of the claim for assessment years 2005-2006 and 2006-2007, the application preferred by the petitioner would be hit by the Proviso aforementioned, inasmuch as the petitioner had not preferred the application in respect of the said assessment years during the financial year immediately preceding the assessment year for which the benefit was sought. On this premise, he found the application preferred by the petitioner for the said assessment years as belated. As regards the assessment year 2007-2008, the respondent found that since there was no order passed on Ext.P2 application filed by the petitioner for the period from 2002-2003 to 2004-2005, and consequently no benefit granted to the assessee in the said years, there was no question of considering an application for the assessment years 2007-2008 seeking a continuation of the benefit granted in previous years. On that premise, he rejected the application for the assessment year 2007-2008 as well. Ext.P4 dated 23.01.2008 is the order of the respondent rejecting the claim of the petitioner for the assessment years 2005-2006, 2006-2007 and 2007-2008. In the writ petition, Ext.P4 order of the respondent is impugned, inter alia, on the ground that the 14th 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 the respondent with regard to assessment year 2007-2008 was faulty since the respondent could not take advantage of his own inaction, in not passing any orders on Ext.P2 application that was pending before him.

2. A counter affidavit has been filed on behalf of the respondent wherein Ext.P4 order is sought to be justified by placing reliance on the 14th Proviso to Section 10 (23-C) (via), that was inserted by the Finance Act, 2006 with effect from 01.06.2006. It is further pointed out that the claim for extension of the benefit granted in earlier years, for the assessment year 2007-2008, also could not be entertained since the petitioner had not shown that he had 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, the learned Standing counsel for the Income Tax Department for the respondent.

4. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I am of the view that this is a case where admittedly Ext.P2 application that was preferred by the petitioner claiming the benefit under Section 10 (23-C) (via), for the assessment years 2002-2003, 2003-2004 and 2004-2005 are pending consideration before the respondent. Although, the said application is seen filed as early as on 27.11.2003, the respondent has not passed any orders thereon. It is against the backdrop of this inaction on the part of the respondent that the findings in Ext.P4 order passed by him, in respect of assessment years 2005-2006, 2006-2007 and 2007-2008, have to be examined. The petitioner is a person who had been granted the benefit under Section 10 (23-C) (via) for the period from 1999-2000 to 2001-2002 and, in the usual course and in the absence of any changed circumstances, he would be entitled to the benefit of the said provision for the subsequent years as well. Notwithstanding this, for reasons best known to the respondent no orders have been passed on Ext.P2 application for the last 10 years. Ext.P3 application dated 01.01.2007 was submitted by the petitioner for the assessment years 2005-2006, 2006-2007 and 2007-2008. When the said application came up for consideration before the respondent, the respondent relied on the provisions of the 14th Proviso to Section 10 (23-C) (via), that has been inserted with effect from 01.06.2006, to hold that the application submitted by the petitioner for the assessment years 2005-2006 and 2006- 2007 are belated. In my view, the said finding of the respondent in Ext.P4 order cannot be legally sustained insofar as it stems from an erroneous interpretation of the applicability of the said proviso. It will be seen from a reading of the Proviso, which is extracted above, that the Proviso is intended to ensure that any application preferred after 01.06.2006, for the purposes of grant of exemption or continuation thereof, has to be made during the financial year immediately preceding the assessment year from which the exemption is sought. This would mean that, in the case of an assessee choosing to claim the benefit under Section 10 (23-C) (via) for any assessment year after 1st June, 2006, the application for the said assessment year would necessarily have to be made during the previous year relevant to the said assessment year. The said proviso obviously cannot have any application to those cases where the previous year, relevant to an assessment year, had already expired before the introduction of the said proviso under Section 10 (23-C) (via). In the case of the petitioner, the previous years relevant to the assessment years 2005-006 and 2006-2007 had already expired by 01.01.2006, the date on which the new Proviso was introduced under Section 10 (23-C) (via). Thus the said Proviso could not have been cited as a reason for holding the application preferred by the petitioner for the assessment years 2005-2006 and 2006-2007 to be belated. As far as the assessment year 2007-2008 was concerned, the application of the petitioner having been filed on 01.01.2007, complied with the requirements of the newly inserted proviso to Section 10 (23-C) (via). The said application could therefore have been considered on merits by the respondent. The respondent, however, in Ext.P4 order, chose to deny the benefit of the provision to the petitioner on the ground that the application is one which sought a continuation of an exemption earlier granted to the petitioner, and since the petitioner had not shown that exemption was granted for the immediately preceding period, the benefit sought for could not be granted even for the assessment years 2007-2008. In my view, the findings in Ext.P4 relating to the assessment year 2007-2008 are also legally unsustainable since, even if the respondent was of the opinion that the benefit of Section 10 (23-C) (via) could not be continued for the said assessment year, nothing prevented him from treating the application as a fresh application for the grant of the benefit under Section 10 (23-C) (via) for the assessment year 2007-2008. Thus, the reasons given by the respondent, in support of his findings in Ext.P4 order, are not legally tenable and the order is hence liable to be quashed. I must hasten to add that there is yet another aspect of the matter that needs to be considered. It is trite that under the Income Tax Act, the law that governs the assessment of an assessee in any assessment year is the law prevailing as on 1st of April of the relevant assessment year. In the instant case, when it came to the assessment years 2005-2006 and 2006-2007, an amendment that was introduced through the Finance Act with effect from 01.06.2006 would have no application to the assessment of the petitioner for the said assessment years. The amendment would govern only the exemption that was to be granted with effect from the assessment year 2007-2008 onwards. Viewed from that angle also, therefore, the findings of the respondent in Ext.P4 order, in respect of the assessment years 2005-2006 and 2006-2007 cannot be legally sustained.

Resultantly, the writ petition is allowed by quashing Ext.P4 order of the respondent, and directing the respondent to consider the application preferred by the petitioner for the grant of benefit under Section 10 (23-C) (via) of the Income Tax Act, for the period from 2002-2003 to 2007-2008, on merits by taking into account Exts.P2 and P3 applications preferred by the petitioner. The respondent shall pass a composite order covering all the aforesaid assessment years, after affording the petitioner an opportunity of hearing. The respondent shall pass the order, as directed, within a period of four months from the date of receipt of a copy of this judgment.

[Citation : 370 ITR 418]