9911796707
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Issues Involved:
1. Retrospective cancellation of exemption orders under Section 10(15)(iv)(c) of the Income Tax Act, 1961. 2. Refusal to accord approval of the rate of interest on long-term loans for the purchase of structural steel and additional spares and accessories. Detailed Analysis: 1. Retrospective Cancellation of Exemption Orders The petitioner sought the quashing of two orders dated September 11, 1969, by the Government of India, Ministry of Finance. The first order directed the retrospective cancellation of the approval of long-term loans bearing interest at 6% per annum for purchasing plant and machinery, previously granted under Section 10(15)(iv)(c) of the Income Tax Act, 1961. The second order refused approval of the rate of interest on long-term loans for purchasing structural steel and additional spares and accessories. The court examined the facts, noting that the petitioner had entered into an agreement with International General Electric Company (IGE) to supply a thermal power plant, with an interest rate of 6.5% per annum, reduced to 6% if tax exemption was granted. The petitioner applied for approval of the import of capital goods and heavy electrical plant, and the Government of India, Ministry of Industry, approved the proposals, including the interest rate of 6.5% per annum, with IGE responsible for Indian income tax on the interest. The petitioner later sought approval for the rate of interest under Section 10(15)(iv)(c) of the Income Tax Act, which was granted at 6% per annum by the Ministry of Finance on September 3, 1965, and June 7, 1967. However, the Ministry of Finance retrospectively canceled these approvals, stating that the original terms approved by the Ministry of Industry were not considered. The court found that all relevant documents, including the agreement and the Ministry of Industry's approval letter, were placed before the Ministry of Finance when the applications were made. The court observed that the Ministry of Finance had considered the terms and approved the rate of interest at 6% per annum after a complete appraisal of all relevant facts. The retrospective cancellation was based on a re-examination that found the Ministry of Industry had approved an interest rate of 6.5% per annum with IGE responsible for Indian income tax. However, the court held that this was not a valid reason for cancellation as the terms were already considered by the Ministry of Finance. The court concluded that the retrospective cancellation was unjustified and quashed the first impugned order on the grounds that the foundation of the order was non-existent on the material on the record. 2. Refusal to Accord Approval of the Rate of Interest The second impugned order dated September 11, 1969, refused to grant approval under Section 10(15)(iv)(c) for the rate of interest on long-term loans for purchasing structural steel and additional spares and accessories. The petitioner contended that the question regarding the fixation of the rate of tax-free interest had to be separately decided by the Ministry of Finance, not the Ministry of Industry. The court examined the relevant provisions of Section 10(15)(iv)(c) of the Income Tax Act, which grants exemption to interest subject to the rate approved by the Central Government. The court noted that the Ministry of Industry's approval was for the establishment of a thermal power plant and import of capital goods, not for tax exemption purposes. The Ministry of Finance was the competent authority to decide the extent of interest exemption. The court held that the Ministry of Finance had correctly understood its role and directed the petitioner to apply for exemption in the prescribed form. The Ministry of Finance had previously fixed the rate of interest at 6% per annum in the exemption orders dated September 3, 1965, and June 7, 1967. The court quashed the second impugned order and directed the Ministry of Finance to reconsider the petitioner's application dated July 24, 1968, on merits for exemption under Section 10(15)(iv)(c) of the Income Tax Act. Conclusion The writ petition was allowed, and the two impugned orders dated September 11, 1969, were quashed. The Central Government in the Ministry of Finance was directed to reconsider the petitioner's application for exemption under Section 10(15)(iv)(c) of the Income Tax Act. No order as to costs was made.
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