1989 (1) TMI 102 - HC - Income Tax

Summary

Issues:
Interpretation of approval granted by the Government of India under section 10(23) of the Income-tax Act for the assessment years 1965-66 and 1966-67.

Detailed Analysis:

The judgment pertains to a tax reference involving a society registered under the Societies Registration Act, formed to promote polo, horse-riding, and horse-breeding. The society is structured to prohibit dividends to members and transfer surplus funds to charitable institutions. The society sought approval from the Government of India under section 10(23) of the Income-tax Act for the assessment years 1965-66 and 1966-67. The Income-tax Officer initially denied the exemption, leading to assessments on the society's income. Appeals to the Appellate Assistant Commissioner upheld the decisions, prompting the society to appeal to the Tribunal.

Subsequently, the Government of India approved the society under section 10(23) of the Act, effective from April 1, 1965. The society argued that the approval applied to the assessment years 1965-66 and 1966-67, while the Revenue contended it was only effective from April 1, 1965, onwards. The Tribunal reasoned that the approval covered both assessment years, emphasizing the clarity of the approval date to avoid confusion between assessment and previous years. The Tribunal found in favor of the society, directing the Income-tax Officer to grant exemption after verifying compliance with specified conditions.

The Revenue sought a reference under section 256(1) of the Act, questioning the availability of the Government's approval for the two assessment years. The Revenue argued that the society could not fulfill conditions under the Act, but the Tribunal's direction to verify compliance rendered this argument irrelevant. The Revenue also contended that exemption applied only from April 1, 1965, onwards, creating a tax anomaly for the society's income preceding this date. The judgment rejected this argument, emphasizing the approval's clarity and the society's timely petition for approval before the due date, affirming entitlement to exemption for the assessment years in question.

In conclusion, the judgment affirmed the Tribunal's interpretation of the Government's approval orders, granting the society exemption for the assessment years 1965-66 and 1966-67. The court ruled in favor of the society, dismissing the Revenue's contentions and awarding costs to the society.