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All Angels Education... v. The Chief Commissio...

Madras High Court
Jul 28, 2016
Judgment
Subsequent
References
CaseIQ
Case Information
CITATION CODES
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CASE NO.

W.P. No. 4969 of 2014

Attorney(S)

For the Petitioner: R. Venkata Narayanan, M/s. Subbaraya Aiyar, Padmanabhan, Ramamani, Advocates. For the Respondent: J. Narayanasamy, Advocate, S. Rajesh, Standing Counsel for Income Tax Department

JUDGES

Hon'ble Thiru.Justice T.S. Sivagnanam

ACTS

provisions of Section 10(23C)(vi) override the provisions of the Limitation Act.

INCOME TAX ACT

ARTICLE 226 CONSTITUTION OF INDIA

SOCIETIES REGISTRATION ACT

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Summary of the Legal Opinion

Factual and Procedural Background

The petitioner is a Society registered under the Societies Registration Act that runs "All Angels Matriculation Higher Secondary School" and was registered under Section 12A(a) of the Income Tax Act on 30.07.1990. For the assessment year 2012-2013 the petitioner filed Form No.56D on 22.11.2012 seeking exemption under Section 10(23C)(vi) of the Income Tax Act. The respondent issued a show cause notice dated 21.10.2013 giving two reasons for possible rejection: (a) that the application was not filed within the time prescribed by the 14th Proviso to Section 10(23C)(vi) (i.e., on or before 30 September of the relevant assessment year), and (b) that the Society did not exist solely for educational purposes because its objects included other charitable clauses.

The petitioner filed responses on 29.10.2013, 07.11.2013 and 11.11.2013. By the impugned order dated 13.11.2013 the respondent rejected the application both as barred by time and on merits under Section 10(23C)(vi). The petitioner challenged that order under Article 226 seeking quashing of the impugned order and a direction to grant registration under Section 10(23C)(vi). The petitioner also amended the objects of the Society by amendment dated 10.03.2014 and said it would resubmit the application with amended objects if necessary.

Legal Issues Presented

  1. Whether the respondent, having chosen to reject the application as time‑barred under the 14th Proviso to Section 10(23C)(vi), could nonetheless proceed to decide the merits of the application.
  2. Whether the respondent has statutory power to condone the delay in filing an application under Section 10(23C)(vi) of the Income Tax Act.
  3. Whether, in the circumstances, the petitioner’s application could be treated as an application for the subsequent assessment year (2013-2014) and be considered in accordance with law.

Arguments of the Parties

Petitioner's Arguments

  • The petitioner argued that if the respondent rejected the application on the ground of delay, the respondent ought not to have proceeded to consider and decide the merits of the application.
  • The petitioner relied on this Court's decisions in Shri Anand Rishi Jain Society v. Chief Commissioner of Income Tax-IV (W.P.No.33485 of 2012) and the subsequent Division Bench appeal (W.A.No.31 of 2015), and on Centre for Individual & Corporate Action v. Income Tax (T.C.A.No.283 to 288 of 2014) for the proposition that an authority which declines to condone delay should not unilaterally decide merits without giving proper opportunity.
  • The petitioner contended that it had amended its objects (10.03.2014) and therefore could resubmit or have the application considered for a subsequent assessment year with the amended objects.
  • The petitioner explained the delay in finalising accounts for 2012-13 by reference to having been entrusted with organizing a large government-directed sports event in July 2012; documents were placed on record to support the explanation and the petitioner averred the delay was neither wilful nor wanton.

Respondent's Arguments

  • The respondent's counsel contended there is no statutory power under Section 10(23C)(vi) to condone delay in filing Form No.56D and relied on the decision in Roland Educational and Charitable Trust v. Chief Commissioner of Income Tax (reported at 2009 309 ITR 50) which held that the provisions of Section 10(23C)(vi) override the Limitation Act and that the Chief Commissioner cannot travel beyond statutory provisions.
  • The respondent distinguished the Padmashree Krutarth Acharya Institute decision ([2009] 309 ITR 13) and submitted that the earlier decision in Padmashree was not applicable in view of the subsequent authority in Roland.
  • On merits, the respondent maintained the Society did not meet the requirements of Section 10(23C)(vi) because its objects were not solely educational; the respondent also relied upon a decision of this Court in B.S. Abdur Rahman Institute of Science and Technology v. Chief Commissioner (W.P.No.34102 of 2015) on the merits point.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Centre for Individual & Corporate Action v. Income Tax (T.C.A.No.283 to 288 of 2014, dated 23.09.2014) The appellate authority/tribunal, having decided not to proceed on account of delay, cannot unilaterally decide the appeal on merits especially where the assessee was not given proper opportunity to contest merits. The Court relied on this decision to conclude that the respondent ought not to have proceeded to examine merits after rejecting the petitioner's application as time-barred.
Roland Educational and Charitable Trust v. Chief Commissioner of Income Tax (2009 309 ITR 50) Held that provisions of Section 10(23C)(vi) override the Limitation Act and the Chief Commissioner has no power beyond statutory provisions to condone delay; court cannot derive jurisdiction apart from statute. The Court expressed respectful agreement with Roland and treated it as determinative that there is no statutory power to condone delay when considering applications under Section 10(23C)(vi).
Padmashree Krutharth Acharya Institute of Engineering and Technology v. Chief Commissioner of Income Tax ([2009] 309 ITR 13) Held that a delayed application for approval by an educational institution should be considered on merits; recognized quasi‑judicial function and incidental power to condone delay. The Court noted this authority but held it distinguished by the Division Bench in Roland and stated the petitioner could not rely on Padmashree in the present case.
Shri Anand Rishi Jain Society v. Chief Commissioner of Income Tax-IV, Chennai (W.P.No.33485 of 2012, dated 07.11.2014) and CCI & others v. Shri Anand Rishi Jain Society (W.A.No.31 of 2015, dated 03.02.2015) Applied on facts in which delay was condoned (noted in the petitioner's reliance). The Court observed these decisions but treated them in context, noting that the delay condoned there was minimal and that earlier decisions (Roland) were controlling for the statutory power question.
B.S. Abdur Rahman Institute of Science and Technology v. The Chief Commissioner of Income Tax – 3, Chennai (W.P.No.34102 of 2015, dated 11.03.2016) Addressed merits under Section 10(23C)(vi) (as relied upon by respondent). The respondent relied on this decision for support on merits; the Court noted the reliance but the opinion does not record further substantive application of that precedent to dispose of merits in this judgment.
United Commercial Bank Ltd. v. Workmen, AIR 1951 SC 230; Smt. Nai Bahu v. Lala Ramarayan, AIR 1978 SC 22; Natraj Studios P. Ltd. v. Navrang Studio, AIR 1981 SC 537; UOI v. Deoki Nandan Aggarwal, AIR 1992 SC 96; Karnal Improvement Trust v. Prakash Wanti [1995] 5 SCC 159; Collector of Central Excise v. Flock (India)(Pvt.) Ltd., AIR 2000 SC 2484 Principles that a court cannot derive jurisdiction apart from statute and cannot direct an authority to act contrary to the statute. These authorities were cited (in the Roland judgment excerpts) to support the principle that the Chief Commissioner cannot act beyond statutory powers; the Court accepted this line of principle in holding there is no power to condone delay under Section 10(23C)(vi).
State of U.P. v. Harish Chandra, AIR 1996 SC 2173; UOI v. Kirloskar Pneumatic Co. Ltd., AIR 1996 SC 3285; Vice‑Chancellor, University of Allahabad v. Dr. Anand Prakash Mishra [1997] 10 SCC 264 Authorities for the proposition that a court has no competence to issue a direction contrary to law or to direct an authority to act in contravention of statutory provisions. These cases were cited (via Roland excerpts) to underline that courts cannot compel statutory authorities to act beyond their legal power; the opinion adopts that restraint in declining to exercise Article 226 relief to condone the delay.
District Mining Officer v. Tata Iron and Steel Co. [2001] 7 SCC 358 That the function of the court is to expound the law and not to legislate. Cited in the Roland passage relied upon by the Court to reinforce the principle that courts should not direct authorities to act contrary to statutory provisions; the Court accepted this principle when refusing to condone delay in the exercise of Article 226 jurisdiction in this matter.

Court's Reasoning and Analysis

The Court framed the core issue as whether the respondent could proceed to decide the merits of the application after choosing to reject it on the ground of delay. The Court proceeded step‑by‑step as follows:

  1. The Court noted that the show cause notice gave two grounds for rejection: the application was filed after the time prescribed by the 14th Proviso to Section 10(23C)(vi), and the Society allegedly did not exist solely for educational purposes.
  2. The Court observed the established position in Centre for Individual & Corporate Action that an authority which decides not to proceed on account of delay should not then unilaterally decide the matter on merits without giving proper opportunity; applying that reasoning, the Court held that once the respondent decided to reject on limitation grounds, it was inappropriate to continue to examine merits.
  3. The Court examined the separate question whether the respondent had power to condone delay in filing applications under Section 10(23C)(vi). Relying on and adopting the reasoning in Roland Educational and Charitable Trust, the Court concluded that provisions of Section 10(23C)(vi) override the Limitation Act and there is no statutory power on the Chief Commissioner to condone delay; a court cannot direct an authority to act contrary to statutory provisions.
  4. The Court distinguished Padmashree (which had held that delayed applications could be considered on merits and allowed condonation) in view of the subsequent Division Bench reasoning in Roland and therefore declined the petitioner's reliance on Padmashree.
  5. The Court considered the petitioner’s explanation for delay (the sports event and consequential delay in finalising accounts) and acknowledged the factual material presented, but concluded that this did not justify exercising extraordinary writ jurisdiction under Article 226 to condone delay when there is no statutory power to do so under Section 10(23C)(vi).
  6. Balancing the procedural/technical prohibition on condoning delay with equitable considerations arising from the particular facts, the Court declined to condone the delay for the original assessment year (2012-2013) but exercised a remedial direction: it directed the respondent to consider the petitioner’s application as an application for the subsequent assessment year (2013-2014) in accordance with law, permitting consideration of amended objects.
  7. As a result, the Court affirmed the respondent’s finding that the application for 2012-2013 was time‑barred, set aside the respondent’s adverse finding on the Society’s objectives (because that merits analysis was not properly undertaken after deciding limitation), and remanded the matter for fresh consideration for AY 2013-2014.

Holding and Implications

WRIT PETITION PARTLY ALLOWED.

Holding:

  • The Court affirmed that the petitioner's application for assessment year 2012-2013 was time-barred and that the respondent correctly concluded it could not condone the delay in view of the statutory scheme as interpreted in Roland.
  • The Court held that the respondent should not have proceeded to examine and finally decide the merits (i.e., the question whether the Society exists solely for educational purposes) after rejecting the application on the ground of limitation; the respondent's merits finding on objectives was set aside to that extent.
  • The Court directed that the petitioner's application be considered afresh by the respondent as an application for the subsequent assessment year (2013-2014) in accordance with law, and the respondent may consider the amendments made to the Society's objectives.

Implications:

  • The immediate effect is that the petitioner's application for 2012-2013 remains rightly rejected as time-barred, but the petitioner receives an opportunity to have its application considered for the next assessment year (2013-2014) by the respondent afresh and in accordance with law.
  • The respondent is directed not to rely on the merits finding originally made after deciding limitation; it must re-examine any merits if and when it considers the application for AY 2013-2014, including any amended objects submitted by the petitioner.
  • The Court declined to exercise its extraordinary writ jurisdiction to condone delay under Article 226 given the absence of statutory power to condone delay under Section 10(23C)(vi), following the decision in Roland; the opinion does not purport to lay down a novel legal principle beyond applying the cited authorities to the facts at hand.

No costs were awarded and M.P. No. 1 of 2014 was closed.

Show all summary ...

PRAYER: Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of certiorarified mandamus to call for the records of the respondent and quash the impugned order in C.N.No.CCIT III/10(23C)(vi)/13-14, dated 13.11.2013 and direct the respondent to grant registration under Section 10(23C)(vi) of the Act.)

1. Heard Mr.R.Venkata Narayanan, learned counsel for the petitioner and Mr.J.Narayanasamy, learned counsel for the respondent and with their consent, the writ petition itself is taken up for disposal.

2. The petitioner is a Society registered under the Societies Registration Act, which has established and administering an Educational Institution under the name and style of “All Angels Matriculation Higher Secondary School”. The petitioner is registered under Section 12A(a) of the Income Tax Act (hereinafter “the Act”), vide proceedings dated 30.07.1990.

3. In the assessment year 2012-2013, the petitioner filed an application in Form No.56D on 22.11.2012 seeking exemption under Section 10(23C)(vi) of the Act. The respondent issued a show cause notice dated 21.10.2013 calling upon the petitioner to show cause as to why their application should not be rejected on two grounds; (a) it is not filed within the time period specified in the 14th Proviso to Section 10(23C)(vi), i.e. on or before 30th September of the relevant assessment year, from which the exemption is sought for; (b) the petitioner Society cannot be said to be existing solely for educational purpose, since the objects of the Society include other charitable object clauses. The petitioner Society submitted their objections on 29.10.2013, 07.11.2013 and 11.11.2013. The respondent, by the impugned order, rejected the petitioner's application on the ground that it is filed beyond the time prescribed under the 14th Proviso to Section 10(23C)(vi) of the Act and also on the ground that the petitioner Society does not fulfill the requirements of Section 10(23C)(vi). This order was challenged by the petitioner on the ground that if the respondent had chosen to reject the petitioner's application on the ground of delay, then the respondent could not have proceeded to consider the merits of the matter. On the merits of the matter, it is submitted that the petitioner has now amended the objects of the Trust by an amendment dated 10.03.2014 and the petitioner would be entitled to resubmit their application with the amended objects.

4. Learned counsel for the petitioner placed reliance on the decision of this Court in the case of Shri Anand Rishi Jain Society v. The Chief Commissioner of Income Tax-IV, Chennai and others (W.P.No.33485 of 2012, dated 07.11.2014) and the judgment of the Hon'ble Division Bench in an appeal filed against the said order in W.A.No.31 of 2015, dated 03.02.2015 (CCI and others v. Shri Anand Rishi Jain Society)

5. Learned counsel for the petitioner placed reliance on the decision of the Hon'ble Division Bench of this Court in the case of Centre for Individual and Centre For Individual & Corporate Action v. Income Tax (T.C.A.No.283 to 288 of 2014, dated 23.09.2014) to buttress the submission that when the respondent chose to reject the application as time barred should not have ventured to adjudicate the matter on merits.

6. Learned standing counsel for the respondent submitted that under the provisions of the Act, there is no power to condone the delay and this issue was considered by the Orissa High Court in2009 309 ITR 50 (Roland Educational and Charitable Trust v. Chief Commissioner, Income Tax), in which the Court distinguished the decision of the Orissa High Court in Padmashree Krutharth Acharya Institute of Engineering and Technology v. Chief Commissioner of Income Tax ([2009] 309 ITR 0013 (Orissa)). It is further submitted that these decisions were taken note of in Shri Anand Rish Jain Society's case (cited supra) and considering the peculiar facts of the said case, the delay therein was condoned as the delay was only one day. However, in the instant case, it is submitted that the order passed by the respondent is perfectly valid both on the ground of refusing to condone the delay and on the ground that the object of the petitioner Society does not fulfill the requirements under Section 10(23C)(vi). Learned counsel further submitted that on the merits of the case, the matter is covered by a decision of this Court in the case of B.S.Abdur Rahman Institute of Science and Technology v. The Chief Commissioner of Income Tax – 3, Chennai (W.P.No.34102 of 2015, dated 11.03.2016).

7. After hearing the learned counsel for the parties and perusing the materials placed on record, including the counter affidavit, the issue to be considered is whether the respondent could have proceeded to decide the merits of the matter when he chose to reject the application on the ground of delay.

8. Identical issue was considered by the Hon'ble Division Bench of this Court in the case of Centre for Individual and Centre For Individual & Corporate Action v. Income Tax (T.C.A.No.283 to 288 of 2014, dated 23.09.2014) and it was held that the appellate Tribunal (in that case) adopted a procedure which is highly prejudicial to the assessee inasmuch as it having decided not to proceed with the matter on the ground of delay, cannot unilaterally decide the appeal on merits, moreso when the assessee was not given proper opportunity to contest the matter in the main appeal on merits.

9. It may be true that the show cause notice issued by the respondent dated 21.10.2013 pointed out two grounds; (i) the application was filed beyond the time limit specified under the 14th Proviso to Section 10(23C)(vi) of the Act and (ii) the petitioner Society did not exist solely for educational purpose. In my view, when the authority takes a decision to reject the application on the ground of limitation, it is but proper for the authority to refrain from rendering finding on the merits of the matter. However, in the impugned order, the respondent has proceeded on both grounds, which cannot be approved by this Court.

10. On the question of delay, the contention of the revenue is that there is no power conferred on the respondent to condone the delay. Nevertheless, this Court, while exercising jurisdiction under Article 226 of the Constitution of India, had examined the facts and circumstances of each case and when it is convinced that the peculiar facts called for exercise of discretion, the delay was condoned. At this stage, it is beneficial to refer to the decision in Roland Educational and Charitable Trust (supra), the relevant paragraphs of the judgment are extracted below:

“14. Hence, the provisions of Section 10(23C)(vi) override the provisions of the Limitation Act. Therefore, it will not be appropriate/permissible to rely on the provisions of any other statute including the Limitation Act for the purpose of considering the matter relating to condonation of delay.

15. The Chief Commissioner of Income-tax being a creature of the statute cannot travel beyond the statutory provisions. Law is well settled that court cannot derive jurisdiction apart from the statute (vide United Commercial Bank Ltd. v. Workmen, AIR 1951 SC 230; Smt. Nai Bahu v. Lala Ramarayan, AIR 1978 SC 22; Natraj Studios P.Ltd. v. Navrang Studio, AIR 1981 SC 537, UOI v. Deoki Nandan Aggarwal, AIR 1992 SC 96, Karnal Improvement Trust v. Prakash Wanti [1995] 5 SCC 159 and Collector of Central Excise v. Flock (India)(Pvt.) Ltd., AIR 2000 SC 2484.

16..................... in Padmashree Krutarth Acharya Institute of Engineering and Technology v. Chief CIT [2009] 309 ITR 13 wherein this Court held that though the application for grant of approval for exemption had been filed by an educational institution belatedly, it should have been considered on the merits. This Court further held that in deciding such questions the Commissioner decides the rights of the parties and, therefore, has to act in a quasi-judicial capacity. He has to decide rights of the parties after a hearing. Any authority exercising such quasi-judicial function should also have the incidental power of condoning delay if there is justifiable ground for such condonation. There is no clear statutory bar preventing such condonation.

However, law as has been laid down by the Hon'ble Supreme Court, the court has no competence to issue a direction contrary to law. Nor the court can direct an authority to act in contravention of the statutory provisions. (vide State of U.P. v. Harish Chandra, AIR 1996 SC 2173, UOI v. Kirloskar Pneumatic Co. Ltd., AIR 1996 SC 3285 and Vic-Chancellor, University of Allahabad v. Dr.Anand Prakash Mishra [1997] 10 SCC 264)

While passing the order dated May 15, 2008, in W.P.(C) No.4514 of 2008 (Padmashree Krutarth Acharya Institute of Engineering and Technology v. Chief CIT [2009] 309 ITR 13) the ratio of the decisions of the Hon'ble Supreme Court which are applied in this judgment were not brought to the notice of this Court. Hence, the order of this Court dated May 15, 2008, in W.P.(C) No.4514 of 2008 has no application to the present case.

It is settled legal proposition that function of the Court is only to expound the law and not to legislate. (See District Mining Officer v. Tata Iron and Steel Co. [2001] 7 SCC 358)

27. Be that as it may, we are here concerned whether in the absence of any statutory provision to condone the delay in presenting the application under Section 10(23C)(vi), the Chief Commissioner of Income-tax can exercise any such power.

28. For the reasons stated above, the answer is certainly in the negative.”

11. The petitioner had placed reliance on the decision of Padmashree Krutharth Acharya Institute of Engineering and Technology (supra) which has been distinguished by the Division Bench in the subsequent decision in Roland Educational and Charitable Trust (supra). I am in respectful agreement with the decision in Roland (supra) and the petitioner cannot rest their case on the decision in Padmashree (supra).

12. Coming back to the facts, on receipt of show cause notice dated 21.10.2013, the petitioner submitted their first reply on 29.10.2013, wherein they have pointed out that they could not finalise the accounts for the year 2012-2013 earlier and could do it only by the end of September, 2012, as they were entrusted with huge responsibility of organizing and conducting a sports event by the Education Department of the Government of Tamil Nadu in July, 2012, and it was the first time, the institution was entrusted with such a task. After enclosing the relevant Government Orders in that regard, the petitioner pointed out that the event comprised of conducting team sport events and field events for both boys and girls of 28 schools in South Chennai District and the entire staff of the school and the society members had worked hard from July'2012 and completed the sports meet on 04.09.2012. To support such contentions, documents were also enclosed. Therefore, the petitioner stated that due to the maiden responsibility entrusted to their institution by the Education Department, it had taken some time for them to finalise the accounts. Therefore, the delay, they pleaded, neither willful nor wanton and assured that henceforth they would file returns on time without fail.

13. Subsequently, by another representation dated 07.11.2013, the petitioner stated that in event the respondent does not condone the delay in filing the application, they requested the respondent to consider the application for approval under Section 10(23C)(vi) of the Act for the subsequent assessment year, namely, 2013-2014.

14. After receipt of the reply and written submission and after affording an opportunity of personal hearing, the respondent pointed out that there is no power for condoning the delay in filing the application in Form No.56D and with regard to alternative prayer, the same was also rejected stating that the assessment year is defined under Section 2(9) to mean the period of 12 months commencing on the 1st April of every year and therefore, the application cannot be treated as application for the assessment year 2013-2014. Ultimately, in paragraph 4.4 of the impugned order, the application was rejected as out of time. However, without stopping there, the respondent thereafter, proceeded to analyze the objective of the Society, which, in my view, was an exercise not called for. Having rejected the application on the ground of limitation, the question of examining the merits of the matter would not arise and it is a superseded exercise. Therefore, to that extent, this Court is inclined to accept the submissions of the learned counsel for the petitioner and taking note of the decision of the Hon'ble Division Bench of this Court in Centre for Individual and Corporate Action (CICA) (cited supra).

15. However, considering the legal position that there is no power to condone the delay in filing an application under Section 10(23C) of the Act, this Court is not inclined to exercise its extraordinary jurisdiction to condone the delay. However, this Court is inclined to give appropriate direction to the respondent to consider the petitioner's application as an application for the subsequent assessment year, namely, 2013-2014 in accordance with law. Such direction is issued considering the peculiar facts and circumstances of the case and that the petitioner could not have made an application for the subsequent assessment year 2013-2014, since their application for assessment year 2012-2013 was still pending consideration and the impugned order came to be passed only on 13.11.2013. The respondent is at liberty to consider the amended objectives of the petitioner Trust.

16. Accordingly, the writ petition is partly allowed and the finding rendered by the respondent that the petitioner's application cannot be considered as the same is time barred is affirmed and the finding with regard to objectives of the Society by respondent holding that the Society cannot be said to be solely for education purpose is set aside. Consequently, the matter is remanded back to the respondent for fresh consideration and the petitioner's application is directed to be considered for the assessment year 2013-2014 in accordance with law and while doing so, may consider the amendments made to the objectives of the petitioner Trust. No Costs. M.P.No.1 of 2014 is closed.

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