2007 (3) TMI 815 - HC - Income Tax

Summary

Issues involved:
The issue involves the denial of exemption u/s 11(4A) of the Income Tax Act, 1961 to a Trust for the Assessment Year 1989-90 to 1991-92, leading to a demand being raised on the entire income. The Trust challenged the assessment orders, which were initially quashed by the High Court, but later reinstated by the Supreme Court. The Trust sought a waiver of interest u/s 234-D based on a notification issued by the Central Board of Direct Taxes.

Judgment Details:

Denial of Exemption and Fresh Assessment Orders:
The High Court initially allowed the Trust's writ petitions and declared the Trust as not assessable for the mentioned assessment years. However, the Supreme Court later set aside this decision, leading to fresh assessment orders and the raising of fresh demands by the Income Tax Department.

Waiver of Interest and Notification:
The Trust sought a waiver of interest under Section 234-D, citing a notification by the Central Board of Direct Taxes. The Trust argued that there was no willful default on their part and that the liability to pay tax only arose after the Supreme Court's decision, making them eligible for the waiver.

Rejection of Waiver and Judicial Review:
The first respondent rejected the Trust's plea for waiver, leading to the Trust filing a writ petition. The Trust contended that the fresh assessment orders post the High Court's decision did not amount to restoring the original order, and therefore, the benefit of the notification should apply for the waiver.

Consideration of Notification and Bona Fides:
The Trust argued that the first respondent erred in not considering the notification and the facts properly, and wrongly denied the benefit of the waiver on extraneous reasons. The Trust emphasized that they acted based on the High Court's decision and that the first respondent's view on bona fides was unsustainable.

Judicial Review and Remand:
After considering the arguments, the High Court set aside the first respondent's order and directed a fresh consideration of the Trust's case for the waiver of interest in accordance with the law and the relevant Board's circular. The writ petition was allowed, remanding the matter back to the first respondent for further review without any order as to costs.