1965 (12) TMI 4 - HC - Income Tax

Whether writ can be issued to the Central Government when an application had been made to the Central Board of Direct Taxes for exemption from super tax

Summary

Issues:
1. Petition for mandamus directing Union of India to issue recognition to petitioners as engaged in specified industry for tax exemption.
2. Interpretation of statutory provisions regarding exemption from super-tax.
3. Distinction between Central Board of Direct Taxes and Central Government in issuing certificates.
4. Whether court has power to direct Central Government to issue a certificate.

Analysis:
1. The petitioners sought a mandamus to direct the Union of India to recognize them as engaged in the manufacture of specified articles for tax exemption. They applied to the Central Board of Revenue for recognition as a company engaged in the manufacture of bonded abrasives, including grinding wheels. The Central Board of Revenue, through its communication, declined the request for exemption under the Fifth Schedule of the Income-tax Act, 1961. The petitioners approached the court seeking a direction in this regard.

2. The court examined the relevant statutory provisions, specifically Section 99(1)(iv) and Rule 1(a)(1) of the Fifth Schedule. The satisfaction required for exemption under the Fifth Schedule was to be determined by the Central Government. The court emphasized that the application for a certificate was not made to the Central Government but to the Central Board of Revenue. As per the provisions, the satisfaction of the Central Government was a prerequisite for tax exemption, and since no application was made to the Central Government, the court could not issue a rule in this matter.

3. The court distinguished between the Central Board of Direct Taxes and the Central Government in the context of issuing certificates for tax exemption. The petitioner argued that the Central Board of Direct Taxes should be considered as the Central Government, but the court rejected this contention. The hierarchy of officers under the Income-tax Act indicated that the Central Government was the authority to be satisfied for issuing a certificate, not any other authority.

4. The court clarified that its power under Article 226 of the Constitution did not extend to directing the Central Government to issue a certificate. It stated that the court's role was to call upon the authority vested with a power to exercise it properly and decide on the merits. The court suggested that any future application by the petitioners to the Central Government should be disposed of within two months of receipt.

In conclusion, the court dismissed the petition, noting that the application was not made to the Central Government as required by the statutory provisions. The court clarified the limitations of its power in directing the Central Government and suggested a timeline for the Central Government to decide on any future application from the petitioners.