Andhra Pradesh Pollution Control ... vs Central Board Of Direct Taxes And 2 ...
2021 Latest Caselaw 2199 Tel

     THE HIGH COURT OF JUDICDATURE FOR THE STATE OF
                 TELANGANA : HYDERABAD

                           ****

WRIT PETITION Nos.4834 and 15629 of 2020

W.P.No.4834 of 2020 Telangana State Pollution Control Board, Hyderabad, represented by its Member Secretary.

.. Petitioner Vs.

Central Board of Direct Taxes, North Block, New Delhi and others .. Respondents W.P.No.15629 of 2020 Andhra Pradesh Pollution Control Board, Hyderabad, represented by its Chairman .. Petitioner Vs.

Central Board of Direct Taxes, North Block, New Delhi and others .. Respondents

DATE OF THE JUDGMENT PRONOUNCED:26.07.2021

SUBMITTED FOR APPROVAL:

HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO AND HONOURABLE SRI JUSTICE T.VINOD KUMAR

1. Whether Reporters of Local newspapers Yes/No may be allowed to see the judgment?

2.          Whether the copies of judgment may be             Yes/No
              marked to Law Reporters/Journals


3.             Whether Their Lordships wish to                Yes/No
              see the fair copy of the judgment?




                                          ______________________
                                          M.S.RAMACHANDRA RAO, J



                                                   ________________
                                                    T.VINOD KUMAR, J

* HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO AND HONOURABLE SRI JUSTSICE T.VINOD KUMAR

+ WRIT PETITION Nos.4834 and 15629 of 2020

% DATED 26th DAY OF JULY, 2021

W.P.No.4834 of 2020 #Telangana State Pollution Control Board, Hyderabad, represented by its Member Secretary.

.. Petitioner Vs.

$Central Board of Direct Taxes, North Block, New Delhi and others .. Respondents W.P.No.15629 of 2020 #Andhra Pradesh Pollution Control Board, Hyderabad, represented by its Chairman.

.. Petitioner Vs.

$Central Board of Direct Taxes, North Block, New Delhi and others .. Respondents

<Gist:

>Head Note:

! Counsel for the Petitioner s        : Sri Y.Ratnakar


^Counsel for Respondents            : Sri K.Raji Reddy
                                      Senior Standing Counsel



? CASES REFERRED:

1 Advanced Law Lexicon by Sri. P. Ramanatha Aiyar, 3rd Edition, 2005. 2 (1998) 7 SCC 59 3 AIR 1958 AP 235,239 = 1957 SCC Online AP 242 4 (2010) 9 SCC 437 5 (1997) 11 SCC 318 6 (2001) 9 SCC 83

THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO AND THE HON'BLE SRI JUSTICE T.VINOD KUMAR

WRIT PETITION Nos.4834 and 15629 of 2020

COMMON ORDER:(per Hon'ble Sri Justice T.Vinod Kumar)

By these two separate writ petitions, the petitioners are questioning

the action of the respondents, in particular the 1st respondent, in not

notifying the petitioners under Section 10(46) of the Income Tax Act,

1961 (for short, ' the Act'). Hence, these writ petitions are being disposed

of by a common order.

2. The Telangana State Pollution Control Board (for short 'TSPCB') is

the petitioner in W.P.No.4834 of 2020, while Andhra Pradesh Pollution

Control Board (for short 'APPCB') is the petitioner in W.P.No.15629 of

2020.

3. Both the petitioners are constituted by the State Governments

under Section 4 of Water (Prevention and Control of Pollution) Act, 1974

and Section 5 of the Air (Prevention and Control of Pollution) Act, 1981

and are established for the purpose of administering and controlling

various steps relating to reduction of pollution and hazardous waste of all

kinds, as per the statutory provisions of the said statutes.

4. It is the case of the petitioner-TSPCB that on its application, the

prescribed authority viz., the 2nd respondent, granted approval under

Section 10(23C)(iv) of the Act with effect from the Assessment Year 2014-

15 onwards.

5. Similarly, it is the case of the petitioner-APPCB that the prescribed

authority granted approval to it under Section 10(23C)(iv) of the Act with

effect from the Assessment Year 2010-11 onwards.

6. It is the common case of the petitioners that though the petitioners

were approved by the 2nd respondent and granted exemption under

Section 10(23C) of the Act, the 3rd respondent denied the benefit of

exemption on its income under the Act, for one or other reason and the

matters are pending consideration in appeal before the appellate forum.

7. The petitioners contend that Parliament by the Finance Act, 2011,

inserted sub-section (46) to Section 10 of the Act, with effect from

01.06.2011; that the said provision being more apposite to the activities

carried on by the petitioners, the petitioners submitted applications

dt.07.03.2017 and 08.03.2017, respectively, for being notified under

Section 10(46) of the Act; that the petitioners satisfy the conditions

specified under Section 10(46) of the Act; that similarly placed Pollution

Control Boards of the other States, have been notified under Section

10(46) of the Act; and that despite the petitioners making applications

for issue of notification under Section 10(46) of the Act, which would

entail the petitioners to avail exemption on their income, the said request

of the petitioners is not being considered and the petitioners are not

notified under Section 10(46) of the Act.

8. Counter-affidavit on behalf of the respondents is filed opposing the

claim of the petitioners.

9. Heard Sri Y.Ratnakar, learned counsel for the petitioners, and

Sri K.Raji Reddy, learned Senior Standing Counsel appearing on behalf of

the respondents.

10. The fulcrum of the petitioners contention is that in view of insertion

of sub-section (46) to Section 10 of the Act with effect from 01.06.2011,

the petitioners being i) established under Central Act, ii) Constituted by

the State Government, iii) the activities carried on are for the benefit of

general public, and iv) not engaged in any commercial activity, are eligible

for being notified under Section 10(46) of the Act. The consequence of

being notified under Section 10(46) of the Act, would make the petitioners

entitled to claim exemption on its income under the Act.

11. It is also contended that the petitioners being instrumentality of

State constituted to implement and enforce the provisions of Central

enactment, they are entitled to immunity from Union taxation under

Article 289 of the Constitution of India. It is thus, claimed that the

petitioners having made applications to the 2nd respondent during the

financial year 2016-17, they are required to be notified under Section

10(46) of the Act from the Assessment Year 2016-17 and on being

notified, the petitioners would surrender the approval granted to them

earlier under Section 10(23C) of the Act.

12. Opposing the contentions urged by the petitioners, on behalf of the

respondents it is contended that the petitioners are not eligible to be

notified under Section 10(46) of the Act, since the petitioners were

already granted registration under Section 10(23C)(iv) of the Act, and the

said registration is still in force; and that in view of the 18th proviso to

Section 10(23C) inserted with effect from 01.04.2015, the benefit of

approval under Section 10(46) of the Act would not be available. It is also

contended that the claim of the petitioners with regard to the similarly

placed Boards of other States being notified under Section 10(46) of Act,

would attract the concept of "Zohnerism" (whatever that means), as

unlike other Pollution Control Boards, the petitioners are already

registered under Section 10(23C)(iv) of the Act.

13. On 16.02.2021, when the writ petitions were taken up for hearing

by this Court, the petitioners were granted time to file applications before

1st respondent seeking withdrawal of exemption granted under Section

10(23C) of the Act, and seeking for being notified under Section 10(46) of

the Act with effect from the Assessment Year 2016-17. This Court further

directed the 1st respondent to dispose of the said applications within a

period of two weeks from date of its receipt and communicate the

decision to the petitioners.

14. Pursuant thereto, the petitioners filed applications on 23.02.2021

seeking for withdrawal of exemption under Section 10(23C) of the Act

and sought for being notified for exemption under Section 10(46) of the

Act with effect from the Assessment Year 2016-17 onwards.

15. The said applications filed by the petitioners on 23.02.2021 were

disposed of by the 2nd respondent by order dt.02.03.2021. By order

dt.02.03.2021, the 2nd respondent, while holding that the approval

granted under Section 10(23C)(iv) of the Act is in perpetuity, by referring

to the clarification issued to 15th proviso to Section 10(23C)(iv), vide

Circular No.7/2010 dt.27.10.2010, rejected the applications filed by the

petitioners seeking withdrawal of approval granted to it under Section

10(23C)(iv) of the Act, on the ground that under the existing provisions

of the Act, there is no provision for surrendering the exemption, once, it

is granted.

16. The petitioners contend that the power to withdraw conferred on

the proper authority is not only at the behest of the prescribed authority

who granted approval, but is also required to be exercised at the behest

of an applicant, like petitioners. It is also contended that in the absence

of any express restriction or prohibition imposed under the Act, for an

applicant to approach the prescribed authority seeking withdrawal of

approval granted, the claim of the 2nd respondent that exercise of such

power being conferred only on the authority and cannot be exercised at

the behest of the applicant, is discriminatory.

17. The petitioners further contend that the stand of the 2nd

respondent that the exemption granted under Section 10(23C)(iv) of the

Act, is in perpetuity, except for being withdrawn at the behest of the

authority, is contrary to the statutory mandate and also powers conferred

under Section 293C of the Act.

18. On the other hand, learned Senior Standing Counsel, while

reiterating the stand of the respondents on the basis of the counter

affidavit filed, would submit that as the grant of approval under Section

10(23C)(iv) of the Act, allows an assessee to avail exemption, being a

benevolent provision, and such approval having been granted at the

behest of the assessee, the petitioners/assessee cannot seek to surrender

the exemption, once it is granted under a particular provision of the Act,

and seek for grant of exemption under another provision of the Act,

merely because it is more beneficial to it.

19. We have considered the submissions made by the learned counsel

appearing for the parties.

20. Before adverting to the respective contentions advanced on behalf

of the parties, it is necessary to take note of the Scheme of the Act,

dealing with exemption under Section 10(23C)(iv) and 10(46) of Act.

21. Chapter-III of the Act deals with 'Incomes which do not form part

of Total Income'. Section 10 of the Act provides that in computing the

total income of a previous year of any person, any income falling within

the clauses mentioned therein shall not be included. Sub-clause (iv) of

Clause (23C) of Section 10 of the Act mentions that the income of any

fund or institution established for charitable purposes (which may be

approved by the prescribed authority) having regard to the objects and

importance either throughout India or State or States, shall not be

included in its total income. By Rule 2C of the Income Tax Rules (for

short 'Rules'), the prescribed authority is specified as Principal

Commissioner or Commissioner, whom the Central Board of Direct Taxes

may authorize. The form prescribed for making applications for according

approval under Section 10(23C)(iv) of the Act is in Form No. 56.

22. Firstly, it is to be noted that on grant of approval to an assessee

under Section 10(23C)(iv) of the Act by the prescribed authority, assessee

would be eligible to claim exemption in respect of certain incomes as not

forming part of its total income. Upon the assessee making a claim, grant

of exemption is not automatic or compulsory, but the same is subject to

scrutiny and grant by the assessing authority. Thus, according of

approval under Section 10(23C)(iv) of the Act by the prescribed authority,

would not confer any benefit by itself. Such approval granted is like

possessing an entry ticket for a circus show without a seat in first row.

23. Secondly, the stand of the respondents that the approval granted

under Section 10(23C) of the Act, is in perpetuity and cannot be

surrendered by the assessee, like the petitioners, also appears to be

without any basis. No provision of the Act has been shown to this Court,

expressly placing such a restriction on an assessee, from surrendering an

approval obtained, by approaching the prescribed authority, who

thereafter can exercise powers conferred on him to withdraw such

approval granted. In absence of any such provision in the Act, the

claim of the respondents, that the power to withdraw can only be

exercised by the prescribed authority in the circumstances specified,

cannot be accepted.

24. Further, the reliance placed by the respondents on 15th proviso to

Section 10(23C)(iv) of the Act, and the conditions specified therein to

claim that exemption can be withdrawn by the prescribed authority only,

is totally misplaced. Having regard to the usage of words namely

"Provided also" in conjunction, the power conferred on the prescribed

authority to withdraw the approval granted in the event of any one of

conditions specified getting attracted has to be considered as 'in addition

to', but not in a restrictive manner.

25. The word "Provided" has been defined as - "A clause beginning

with this word is usually termed a proviso. It may have various effects.

Sometimes it is to be taken for a condition, sometimes for an explanation,

sometimes for a covenant, sometimes for an exception, sometimes for a

reservation" 1. Similarly, the word "also" used in conjunction connotes a

meaning. In Samee Khan v. Bindu Khan2, the Hon'ble Supreme Court

by referring to Black's Law Dictionary held that the word 'also' has variety

of meanings like "Besides; as well; in addition; likewise; in like manner;

similarly; too; withal".

26. Applying the meaning as ascribed to the above two words, used as

opening words of 15th proviso to Section 10(23C)(iv) of the Act, it can be

1 Advanced Law Lexicon by Sri. P. Ramanatha Aiyar, 3rd Edition, 2005. 2 (1998) 7 SCC 59

inferred that the conditions specified therein relate to restriction imposed

on the prescribed authority for exercising powers on his own. In Re

Chervirala Narayan3 a Division Bench of this Court speaking through

Hon'ble Sri Justice K. Subba Rao, C.J. (as his Lordship then was), while

interpreting the provisions of Section 207-A(4) of Cr.P.C., had held that -

" In our view, the word 'also' denotes the extent of power of the

Magistrate rather than its limitation".

27. Further, the term 'withdraw' as used in Section 10(23C)(iv) 15th

proviso and also in Section 293C of the Act has a wider connotation and

cannot be construed in a restrictive manner as sought to be projected by

the respondents. In Kalabharati Advertising v. Hemant Vimalnath

Narichania and Others4, the Supreme Court held that the term

"withdrawal" means 'to go away or retire from the field of battle or any

contest." Thus, the word "withdrawal' is indicative of the voluntary and

conscious decision of a person.'

28. Applying the principles deduced from the above, to the facts of the

case, it is to be held that the power to 'withdraw' is the prerogative of the

respondent, and the assessee cannot seek to surrender the approval

granted to it under 10(23C)(iv) of Act, would amount to giving a

restrictive meaning to the word 'withdrawal', to say, only at the behest of

the prescribed authority. This, in our considered view, would run contrary

to the harmonious interpretation of the provision required to be

undertaken.

29. On the other hand, if the stand of the respondents that once the

exemption is granted, the same can only be withdrawn by the authority

3 AIR 1958 AP 235,239 = 1957 SCC Online AP 242 4 (2010) 9 SCC 437

granting exemption and such withdrawal cannot be sought by the

assessee, is accepted, it might result in an assessee, who in a given

situation having sought for grant of approval under Section 10(23C)(iv) of

the Act, continuing to retain such approval, even though he is not

complying with the provisions of the Act for availing exemption.

30. It is understandable, that in normal circumstances, as it is the

assessee who would seek for grant of approval in order to avail

exemption, may not by itself seek for 'withdrawal'. But, in a given

circumstance where an assessee decides not to avail exemption and

chooses to surrender the approval obtained by approaching the prescribed

authority, it cannot be said that the Act does not provide for surrender,

and also that the prescribed authority lacks power to accept surrender and

exercise the power of withdrawal conferred on him. This interpretation

results in the assessee being compelled to continue with such approval

obtained.

31. It is to be seen that no assessee can be compelled to continue any

exemption, if it intends not to avail the same. It is always open for an

assessee to arrange its affairs in a manner which it feels it would be

beneficial, and it cannot be compelled to continue its operations/activities

in a particular manner which would be prejudicial to its interest. If the said

stand of the respondent is accepted, it would lead to an anomalous

situation and results in "Incentive to be Dishonest" rather than

"Rewarding the Honest".

32. In juxtaposition, Section 10(46) of the Act confers powers on the

Central Government to notify in the official gazette any specified income

of a body or authority or Board or Trust or Commission, not being

included in its total income, subject to complying with the conditions

specified therein. Thus, once a notification is issued by Central

Government in official gazette, specifying the income of an assessee not

forming part of total income, the assessee would be entitled to claim

exemption on that specified income and no discretion would vest with the

assessing authority to examine the eligibility of the assessee to claim

exemption thereon.

33. Thus, the basic difference between the two provisions of the Act

viz., 10(23C)(iv) and 10(46) of the Act, is that, while under the first

provision, it is only a grant of an approval making an assessee eligible to

claim exemption without any certainty of exemption being allowed on any

income, since it is subject to scrutiny, the latter provision confers benefit

of automatic exemption in respect of the specified income of the assessee

as notified by the Central Government in the gazette. Thus, under Section

10(46) of the Act, there is a certainty with regard to claim of exemption.

34. The Supreme Court in CCE v. Indian Petro Chemicals5, held

that - "if two exemption notifications are applicable in a given case, the

assessee may claim benefit of the more beneficial one".

35. In H.C.L. Limited v. Collector of Customs6, the Hon'ble

Supreme Court relying on the judgement in Indian Petro Chemicals

(supra), held that - "where there are two exemption notifications that

cover the goods in question, the assessee is entitled to the benefit of that

exemption notification which gives him greater relief, regardless of the

fact that the notification is general in its terms and the other notification is

more specific to the goods".

5 (1997) 11 SCC 318 6 (2001) 9 SCC 83

36. In the facts of the present case, though there are two different

provisions of the Act under which the petitioners can claim the benefit,

mere fact of petitioners being granted approval under one particular

provision of the Act, namely Section 10(23C)(iv) of the Act, in our

opinion, would not disentitle the petitioners/ assessees to seek for being

notified under a different provision, as it is for the assessees/petitioners to

choose as to which of the provisions would be more beneficial.

37. Further, it is also to taken note that the petitioners, while applying

for exemption and seeking for being notified under Section 10(46) of the

Act, also offered to surrender the approval obtained by it under Section

10(23C)(iv) of the Act on being notified. The respondents for the reasons

best known did not take any action on the applications filed by each of the

petitioners for being notified under Section 10(46) of the Act, nor

communicated the reason for not considering the applications, for nearly

three years, till the petitioners approached this Court by the present writ

petitions. Thus, the action of the respondents in not processing the case

of the petitioners and maintaining static silence, cannot be countenanced.

38. We may also refer to Section 293C of the Income Tax Act, 1961,

which states:

"Where the Central Government or the Board or an income-tax authority, who has been conferred upon the power under any provision of this Act to grant any approval to any assessee, the Central Government or the Board or such authority may, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision, withdraw such approval at any time:

Provided that the Central Government or Board or income-tax authority shall, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the assessee concerned,

at any time, withdraw the approval after recording the reasons for doing so."

39. In our view, the reason assigned by the 2nd respondent in its

communication dt.02.03.2021 to reject the request of the petitioners

seeking withdrawal of the approval granted under Section 10(23C) of the

Act, is also overlooking the power conferred on the said authority under

Section 293C of the Act, even if it is construed that the 15th proviso

confers power on the authority to withdraw only on the conditions

stipulated therein. The understanding of the 2nd respondent that the

power to withdraw conferred under Section 293C or Section 10(23C)(iv) of

the Act, to be undertaken only at the behest of the respondents and not

at the request of the petitioners, does not appeal to this Court, as a

correct understanding. As detailed herein above, the word 'withdraw' as

used in both the Sections 10(23C)(iv) and 293C of the Act, encompasses

in itself the exercise of power even at the behest of the

assessee/petitioners, and the contrary view of the respondents is liable to

be rejected.

40. It is also to be seen that the petitioners have not sought for grant

of exemption under Section 10(46) of the Act either from the day the said

provision was introduced or from the date of their initial grant of approval

under Section 10(23C) of the Act. The petitioners sought for being notified

under Section 10(46) of the Act only from the relevant previous year,

having regard to the fact that the benefit of exemption under Section

10(23C) of the Act, was being denied regularly, and they felt that the

provisions of Section 10(46) of the Act are more beneficial and are

applicable more aptly.

41. In view of the conclusions arrived at by us as above, the petitioners

are liable to succeed in these writ petitions.

42. Accordingly, the writ petitions are allowed; the 2nd respondent is

directed to withdraw the approval granted to the petitioners under Section

10(23C) of the Act with effect from the date of applications made by the

petitioners for being notified under Section 10(46) of the Act; and process

the petitioners' applications dt. 07.03.2017 and 08.03.2017 filed for being

notified under Section 10(46) of Act in accordance with the provisions of

the Act, from the previous year relevant to the date of applications, filed.

43. Pending miscellaneous petitions, if any, shall stand closed. No order

as to costs.

___________________________ JUSTICE M.S.RAMACHANDRA RAO

_____________________ JUSTICE T.VINOD KUMAR Date: 26.07.2021

Note:

L.R. Copy to be marked.

(B/o) GJ

THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO AND THE HON'BLE SRI JUSTICE T.VINOD KUMAR

WRIT PETITION Nos.4834 and 15629 of 2020 (common order of the Bench delivered by the Hon'ble Sri Justice T.Vinod Kumar)

Dated:26 .07.2021

GJ