1971 (2) TMI 26 - HC - Income Tax

Issue of Tax Clearance Certificate - refusal to grant the tax clearance certificate - writ petition seeking directions to ITO to issue Tax Clearance Certificate - matter of issuing TCC is an executive matter so no legal obligation on the Income-tax Officer to issue such a certificate which could be enforced by a writ writ petition not entertainable so dismissed

Summary

Issues:
1. Refusal to grant tax clearance certificate by the Income-tax Officer.
2. Legal basis for the issuance of income-tax clearance certificate.
3. Petitioner's request for the certificate to facilitate business operations.
4. Justification for the refusal to issue the certificate.
5. Consideration of departmental procedure and legal obligations.
6. Court's decision on the petition for a writ directing the issuance of the certificate.

The judgment revolves around the petitioner, a private limited company engaged in non-scheduled air transport, seeking a tax clearance certificate to sell spare parts and accessories of aircraft. The petitioner's agreement with the Government of India for air dropping food in certain areas was not renewed, leading to financial constraints due to income tax dues. The petitioner's attempts to sell spare parts were hindered by the Income-tax Officer's refusal to issue the necessary clearance certificate. The petitioner argued that it was willing to settle outstanding payments before obtaining the certificate to continue its operations. The Income-tax Officer justified the refusal based on substantial tax liabilities pending due to court stays. The court examined the statutory provisions and the pilot scheme for income-tax verification and clearance certificates. The petitioner's plea for the certificate to renew its license was countered by the respondent's assertion that the certificate issuance was not legally mandated. The court dismissed the petition, stating that the Income-tax Officer was not obligated to issue the certificate, emphasizing that the petitioner's remedy lay with the Director-General of Civil Aviation for license matters, not the Income-tax Officer. The court found no basis for compelling the officer to grant the certificate and ruled in favor of the respondent, dismissing the petition without costs.

In analyzing the legal basis for the issuance of income-tax clearance certificates, the court highlighted Section 230 of the Income-tax Act, 1961, as the sole statutory provision governing such certificates. The court noted that the petitioner's request did not fall under this section, indicating that the petitioner lacked a statutory right to the certificate. The court also referenced the 1949 pilot scheme for income-tax verification and clearance certificates, emphasizing its purpose to prevent tax evasion and ensure taxation on government-related profits. The scheme's procedural requirements were outlined, underscoring the need for the Income-tax Officer to certify the applicant's tax compliance diligently. The court examined the petitioner's argument regarding settling outstanding payments before obtaining the certificate to continue its business operations, juxtaposing it with the respondent's stance on pending tax liabilities due to court stays.

The petitioner's plea for the tax clearance certificate to facilitate its business operations was rooted in the need to sell spare parts and accessories of aircraft. The petitioner sought the certificate to comply with the Director-General of Civil Aviation's requirements for license renewal. The petitioner expressed willingness to clear outstanding payments before securing the certificate to resume its activities. However, the Income-tax Officer's refusal to issue the certificate impeded the petitioner's ability to proceed with its intended sales and operational activities. The petitioner's contention centered on the necessity of the certificate to obtain the Director-General's approval for selling spare parts, crucial for sustaining its business operations.

The court deliberated on the justification provided by the Income-tax Officer for refusing to grant the tax clearance certificate. The officer cited substantial tax liabilities pending due to court stays, preventing enforcement of tax demands against the petitioner. The officer emphasized that issuing the certificate under the circumstances, where significant sums might be due post-resolution of pending assessments, was unwarranted. The officer underscored the absence of legal authorization for issuing the requested certificate, asserting that the petitioner's tax liabilities and compliance status did not align with the requisite criteria for certificate issuance.

The court considered the departmental procedure and legal obligations concerning the issuance of income-tax clearance certificates. It highlighted the procedural nature of granting such certificates under the pilot scheme, emphasizing the Income-tax Officer's role in certifying the applicant's tax payment diligence. The court juxtaposed the petitioner's plea for the certificate to facilitate business operations with the respondent's position on the lack of legal mandate for issuing the certificate. The court underscored that the petitioner's request for the certificate was not legally binding on the Income-tax Officer, emphasizing the discretionary nature of such certificates within the specified legal framework.

In the court's decision on the petition for a writ directing the issuance of the tax clearance certificate, the focus was on the petitioner's lack of legal grounds to compel the Income-tax Officer to grant the certificate. The court dismissed the petition, emphasizing that the officer had no legal obligation to issue the certificate. The court highlighted that the petitioner's recourse for license matters lay with the Director-General of Civil Aviation, not the Income-tax Officer. The court deemed the petition misconceived and ruled in favor of the respondent, leading to the dismissal of the petition without imposing any costs on either party.