2013 (9) TMI 767 - HC - Income Tax

Application for renewal of registration of society registered under Societies Registration Act, 1860 Society has been engaged in implementation of innovation in Family Planning Services Projects - Circular No. 7 of 2010 dated 27.10.2010 Submission is that even assuming that the petitioner could not utilized the accumulation of income in the particular year, the authorities ought to have proceeded against the petitioner in accordance with Act and not otherwise. - Held that - Renewal of approval for the Assessment Year 2012-2013, is not in accordance with Act as well as Circular No. 7 of 2010 dated 27.10.2010 insofar as circular dated 27.10.2010 clarified that once the approval has been granted under sub-clause 4 of Clause 23-C of Section 10 of the Act, there is no necessity to accord subsequent approval unless the approval is withdrawn by the competent authority and further petitioner has not been afforded opportunity of hearing and the same is violative of principles of natural justice.

Summary

Issues:
Challenge to orders dated 2.7.2013 and 27.7.2012 passed by the Chief Commissioner of Income Tax, Lucknow regarding renewal of approval under Section 10 (23C) (iv) of the Income Tax Act, 1961.

Analysis:
The petitioner, a society registered under the Societies Registration Act, 1860, engaged in Family Planning Services Projects, challenged the orders dated 2.7.2013 and 27.7.2012 passed by the Chief Commissioner of Income Tax, Lucknow. The petitioner contended that it had been granted exemptions under the Income Tax Act for various assessment years. It argued that subsequent approvals were not required post the initial approval unless withdrawn by the competent authority, as per Circular No. 7/2010 dated 27.10.2010. The Chief Commissioner rejected the petitioner's application for renewal of approval for the Assessment Year 2012-2013, citing non-utilization of accumulations from previous years. The petitioner filed for rectification, which was also denied.

The Senior Advocate for the petitioner argued that the Chief Commissioner erred in rejecting the application for renewal, as per the Circular dated 27.10.2010. The petitioner had applied for withdrawal of the initial renewal application upon realizing the error, but the Chief Commissioner proceeded with rejection. It was contended that the authorities should have followed the provisions of the Act and Circular, rather than rejecting the application.

On the contrary, the Counsel for the opposite parties argued that the conditions for utilization of accumulation as per the 3rd proviso to Section 10 (23C) were not met, justifying the Chief Commissioner's actions. However, the High Court found that the impugned orders were not in accordance with the Act and Circular No. 7 of 2010. The Court held that the petitioner was not given a hearing, violating principles of natural justice.

Consequently, the High Court allowed the writ petition, quashing the orders dated 2.7.2013 and 27.7.2012. The authorities were granted liberty to proceed in the matter as per the law independently, emphasizing adherence to procedural fairness and legal requirements.