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2009 (7) TMI 360 - HC - Income TaxExemption for the income of an educational institution like the petitioner-trust approval of educational institution effect of rules only authority empowered to grant approval can do so power cannot be delegated - The prescribed authority for assessment years 1999-2000 and 2000-01 for granting approval was the Central Board of Direct Taxes (CBDT) Therefore cancellation of approval by Director General of income-tax is not valid - once a power is conferred by the Act and the Rules it is only that authority who has been conferred power under the Act and the Rules who alone can assume jurisdiction. Merely because in the reply to the show-cause notice an objection was not raised would not confer power on an authority which otherwise had no jurisdiction. Clearly therefore the order recalling or reviewing the earlier order dated February 8 2008 is beyond the jurisdiction and is liable to be set aside.
Issues Involved:
1. Jurisdiction of the prescribed authority to grant or rescind approval under Section 10(23C)(vi) of the Income-tax Act, 1961. 2. Validity of the order rescinding the approval granted to the petitioner-trust for the assessment years 1999-2000 to 2001-02. 3. Consideration of pending applications for renewal of approval for subsequent assessment years. Issue-wise Detailed Analysis: 1. Jurisdiction of the Prescribed Authority: The primary issue revolves around determining the correct prescribed authority for granting or rescinding approval under Section 10(23C)(vi) of the Income-tax Act, 1961. According to Rule 2CA of the Income-tax Rules, 1962, the prescribed authority for applications received prior to April 3, 2001, is the Central Board of Direct Taxes (CBDT). However, for applications received after this date, the prescribed authority is the Chief Commissioner or Director General. The court clarified that for the assessment years 1999-2000 to 2000-01, the CBDT is the prescribed authority, and any action to rescind or recall the approval for these years must be taken by the CBDT alone. The notification dated May 30, 2007, does not delegate this power to the Director General or Chief Commissioner for applications made before April 3, 2001. 2. Validity of the Order Rescinding Approval: The court examined the validity of the order dated February 8, 2008, by the Director General of Income-tax (Investigation), Pune, which rescinded the approval granted by the CBDT for the assessment years 1999-2000 to 2001-02. The court found that the Director General did not have jurisdiction to recall or review the approval granted by the CBDT. Consequently, the order rescinding the approval was deemed beyond jurisdiction and was set aside. The court emphasized that only the authority conferred with power under the Act and the Rules could assume jurisdiction, and merely not raising an objection in reply to the show-cause notice does not confer power on an authority lacking jurisdiction. 3. Consideration of Pending Applications for Renewal: The petitioner had pending applications for renewal of approval for the assessment years 2002-03 to 2004-05 and 2005-06 to 2007-08. The court directed the Director General of Income-tax (Investigation), Pune, to consider these pending applications. The court also clarified that for the assessment years 2002-03 onwards, the Director General of Income-tax (Investigation), Pune, would be the competent authority to grant or rescind approval in terms of the Rules. Conclusion: The court partially allowed the petition, setting aside the impugned order dated February 8, 2008, specifically paragraphs 10 and 11, and directed that the power to rescind or recall the approval for the years 1999-2000 and 2000-01 lies with the CBDT alone. The Director General of Income-tax (Investigation), Pune, was instructed to consider the pending applications for renewal for subsequent assessment years. The court also directed all parties, including the Commissioner of (Appeals), to act accordingly and dispose of pending appeals at the earliest. It was made clear that any adverse order would not be acted upon for eight weeks from the date of its communication. The court did not delve into the merits of the case, leaving all questions open for consideration by the prescribed authority. The request for a stay of the order was rejected, and the respondents were instructed not to make any recovery during the pendency of the appeals.
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