1990 (5) TMI 11 - HC - Income Tax

Summary

Issues:
1. Entitlement of the petitioner-Board to tax exemption under exhibit P-3 notification.
2. Power of the Central Board of Revenue to modify or vary exhibit P-3 notification.
3. Legality of exhibit P-15 notice requiring the petitioner-Board to file income-tax returns.

Analysis:
The judgment involves a dispute concerning the tax exemption status of the petitioner-Board under exhibit P-3 notification. The Central Government had initially granted the petitioner-Board tax exemption from the assessment year 1972-73 onwards through exhibit P-3. However, the Central Board of Direct Taxes later limited the validity of the exemption to the assessment year 1984-85 via exhibit P-4 and declared the petitioner-Board ineligible for tax exemption under exhibit P-14. The main issue revolves around whether the petitioner-Board can claim tax exemption beyond 1984-85 based on exhibit P-3, despite the actions of the Central Board of Direct Taxes.

The judgment delves into the interpretation of clause (v) of sub-section (23C) of section 10 of the Income-tax Act, 1961, which governs the tax exemption for institutions like the petitioner-Board. It is highlighted that the power to issue, modify, or cancel notifications under this clause lies solely with the Central Government, as per the provisions of section 21 of the General Clauses Act. The judgment emphasizes that the Central Board of Revenue, being a statutory creation, lacks the authority to alter or revoke notifications issued by the Central Government under the relevant sub-clause. Consequently, the actions taken by the Central Board of Direct Taxes through exhibit P-4 and P-14 to curtail the tax exemption of the petitioner-Board are deemed legally unsustainable.

Furthermore, the judgment addresses the legality of exhibit P-15 notice, which directed the petitioner-Board to file income-tax returns for specific assessment years. Given the findings regarding the impermissible actions of the Central Board of Revenue in limiting the tax exemption, the court rules that the exhibit P-15 notice demanding income-tax returns from the petitioner-Board is not legally tenable. Consequently, the court allows the original petition and quashes exhibits P-4, P-14, and P-15, thereby upholding the tax exemption status of the petitioner-Board as per exhibit P-3 without the need for filing income-tax returns for the mentioned assessment years.