Orissa High Court
Orissa Trust Of Technical Education And ... vs Chief Commissioner, Income Tax And Ors. on 21 February, 2008
Equivalent citations: 106(2008)CLT299
Author: I. Mahanty
Bench: Chief Justice, I. Mahanty
JUDGMENT I. Mahanty, J.
1. The Orissa Trust of Technical Education and Training (hereinafter referred to as "Trust"), Petitioner herein, is an educational institution registered under the Indian Trusts Act, and in the present Writ Petition it seeks to challenge an Order Dated 2.2.2007 passed by the Chief Commissioner of Income Tax, Orissa, Bhubaneswar under Section 10(23C)(vi) of the Income Tax Act, 1961 rejecting the Petitioner's application seeking approval thereunder, copy of which has been annexed as Annexure-8 to the Writ Petition.
2. Dr. D. Pal, Learned senior Counsel appearing for the Petitioner-Orissa Trust of Technical Education submits that the Petitioner-Trust had made applications for approval under Section 10(23C)(vi) of the Income Tax Act, 1961 in Form No. 56 D on the following dates pertaining to the following financial years 1998-1999 to 2005-2006.
Date of application Financial year Total receipt
(i) 31.03.2000 1998-1999 Rs. 11,43,86,923-00
(ii) 31.10.2000 1999-2000 Rs. 1,49,45,503-00
(iii) 31.10.2001 2000-2001 Rs. 1,35,72,044-00
(iv) 31.10.2002 2001-2002 Rs. 1,10,07,97800
(v) 31.10.2003 2002-2003 Rs. 1,11,08,775-00
(vi) 01.11.2004 2003-2004 Rs. 73,35,846-00
(vii) 31.10.2005 2004-2005 Rs. 75,10,332-00
(viii) 31.10.2006 2005-2006 Rs. 90,70,887-00
It is submitted that for each of the years, the Petitioner-Trust made separate application for seeking approval, as required under Rule 2(C)A read with Form 56 D However, the aforesaid applications were not disposed of and remained pending consideration for a fairly long period of time and were ultimately disposed of by a common Order Dated 2.2.2007 by the Chief Commissioner of Income Tax under Annexure-8, which is impugned in the present writ application.
3. It is asserted by the Petitioner-Trust that the trust was created by a registered deed of trust under the Indian Trust Act on 22.6.1993 and the objects of the trust are the relief of poverty, advancement of education, research and development projects of national priority as evolved by high-level body concerned with overall planning for science and technology and to establish engineering institute, colleges for diploma, certificate, degree courses in various fields of science and engineering and to organize computer program (software) and allied training for better management (industrial personnel). It is further submitted that the trust has set up two educational institutions namely, Indian Institute of Science & Information Technology (in short "IISIT") and Bhubaneswar Institute of Managament & Information Technology (in short "BIMIT") as well as a research and development division namely, the Indian Institute for Consulting, Research Development and Computing (in short "ICRC"). In this respect it is further submitted that the trust has been granted approval by the All India Council for Technical Education (hereinafter referred to as "AICTE") and the State Government have also recognized the aforesaid institutions. It is asserted that admission to those programs are made out of selected list of candidates of the Joint Entrance Examination (JEE) held by a Committee set up by the Government of Orissa as well as through Management Aptitude Test (MAT) conducted by AIMACME and Utkal University respectively. It is submitted that only those students are admitted who are recommended by the Joint Entrance Committee, although as per the decision of the AICTE and Government of Orissa. 5% seats are reserved for management quota in selection and admission of whom the trust has control but the trust has not realized any donations from any of the students for the management quota. It is further submitted that the Chairman of the trust is Hon'ble Mr. Justice P.N. Bhagawati, the former Chief Justice of India.
4. Dr. Pal, submitted that the trust has been allowed exemption under Section 10(22) of the Act for the year 1993 to 1998 and for the sake of reference, the same is quoted hereunder:
10. Incomes not included in total income In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--
XX XX XX XX XX (22) any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit.
5. Dr. Pal, Learned Counsel on behalf of the Petitioner submitted that on a reading of the aforesaid provision, it would be clear that exemption can be allowed only when a trust exists solely for educational purposes and not for the purpose of profit and the Petitioner trust has been allowed exemption for the years 1993 to 1998. It is further submitted that Section 10(22) remained in force till 31.3.1999 where after Section 10(23C)(vi) was introduced and since then a trust could claim exemption under the said provision in terms thereof. Section 10(23C)(vi) of the Act, is quoted here for reference:
10. Incomes not included in total income In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--
XX XX XX XX XX XX (23C) any income received by any person on behalf of. XX XX XX XX XX
(vi) any university or other educational institution existing solely for educational purpose and not for purposes of profit, other than those mentioned in Sub-clause (iiiab) or Sub-clause (iiiad) and which may be approved by the prescribed authority.
6. It is submitted that on a reading of the aforesaid provision it is clear that income of any university or other educational institution, which exists solely for educational purpose and not for purpose of profit continues to be entitled to exemption, other than those mentioned in Sub-clause (iiiab) or Sub-clause (iiiad). the further requirement is that the trust must have obtained the necessary "approval from the prescribed authority" and only to such amount the income shall stand exempted and shall not be included in the total income of the recipient.
7. Dr. Pal further submitted that although exemption from income was allowable, both under Sections 10(22) as well as 10(23C)(vi) and both stipulate, the same conditions but, the change which was brought by introducing Section 10(23C)(vi) of the Income Tax Act, with effect from 1.4.1999 required that such exemption could only be allowed to the institution, if such institution is "approved by the prescribed authority."
8. The "prescribed authority" for granting approval for the period 1.4.1999 to 3.4.2001 is the Central Board of Direct Taxes (hereinafter referred to as "CBDT") under Rule 2CA(1A) of the Income Tax Rules, 1962 and since the aforesaid rule was amended on 3.4.2001 and the prescribed authority for granting was changed to the Chief Commissioner of Income Tax (herein after referred to as "CCIT") from the financial year 2002 onwards.
Dr. Pal further submitted that although Petitioner-Trust had made applications right from 31.3.2000 till 31.10.2006 pertaining to the financial years 1998-1999 till 2005-2006, the said applications were kept pending consideration and were ultimately disposed of by a common Order Dated 2.2.2007 passed by the Chief Commissioner of Income Tax, which is impugned in this Writ Petition.
9. Dr. Pal, while advancing contention on behalf of the Petitioner-Trust at the out set before advancing his arguments on the merits, contended that the order impugned under Annexure-8 dated 2.2.2007 suffers from lack of competency and lack of jurisdiction on the part of the Chief Commissioner of Income Tax. So far as the period from 1999 to 2001 is concerned the Central Board of Direct Taxes alone had the necessary authority for considering the grant of approval and therefore, he asserts the Chief Commissioner of Income Tax did not have any authority in law nor was he the prescribe authority for the period, i.e., 1999-2001 and therefore, the order impugned is patently illegal, invalid and without jurisdiction and authority of law.
10. It is further submitted by Dr. Pal that after introducing Section 10(23)(vi) of the Income Tax Act, the requirement of granting approval by the prescribed authority could only be applicable if the case of the assessee does not fall under Sub-clause (iiiab) or Sub-clause (iiiad) of Section 10(23C). Sub-clause (iiiad) of Section 10(23C) provides that an approval is not necessary if the aggregate annual receipts of such university or educational institution does not exceed the amount of annual receipts as may be prescribed. The amount of annual receipt which has been prescribed and approved under Rule 2BC of the Income Tax Rules, 1962, is Rupees one crore, being the aggregate receipt for that year. In other words, it is submitted that Section. 10(23C)(vi) of the Act provides, that any university or other educational institution existing solely for educational purposes and not for the purpose of profit, other than those mentioned in Sub-clause (iiiab) or Sub-clause (iiiad) requires approval of the prescribed authority only, if its aggregate receipt for the year exceeds Rupees one crore.
11. Dr. Pal asserted that the Petitioner-Trust did not require approval for the years 2003-2004, 2004-2005 and 2005-2006 in view of the fact that the aggregate receipt of the Petitioner trust during these years was below the prescribed amount of Rupees one crore as prescribed under Rule 2BC of the Income Tax Rules, 1962. In this respect, Dr. Pal submitted that since the annual receipt for the financial year 2003-2004, 2004-2005 and 2005-2006 does not exceed rupees one crore, no approval in terms of the statute is necessary.
The further contention of Dr. Pal is that the nature of approval required under Section 10(23C)(vi) of the Act, requires the prescribed auihority to determine entitlement for each assessment year individually and that the "law does not permit any consolidated order to be passed". In the present case, the Chief Commissioner of Income Tax having passed a consolidated order for the financial years 1998-1999 to 2005-2006, the same is without jurisdiction and authority of law. In this respect Dr. Pal placed reliance on a the decision of the Hon'ble Supreme Court in the case of Aditanar Educational Institution V. Additional Commissioner of Income Tax reported in 224 ITR 310 (SC) at page 318, which reads as follows:
We may state that the language of Section 10(22) of the Act is plain and clear and the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purpose of profit. After meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for educational purpose since the object is not one to make profit. The decisive or acid test is whether on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity.
12. Dr. Pal submitted that the provisions of Section 10(23C)(vi) of the Act are in pari materia with Section 10(22), except, to the extent of requiring approval from the prescribed authority. Therefore, a prescribed authority is required to evaluate for "each year" whether the institution exists solely for educational purposes and not for the purpose of profit. In this respect Dr. Pal submitted that for the financial years 1998-1999 to 2000-2001, the Central Board of Direct Taxes was the "prescribed authority" and the Chief Commissioner of Income Tax had no jurisdiction to deal with the applications for the years 1998-1999 to 2000-2001. It is only for the financial years 2001-2002 to 2005-2006 that the Chief Commissioner of Income Tax is the prescribed authority, but then, the Chief Commissioner in terms of the aforesaid provisions and the case laws cited above, was required to examine each years application, individually and then reach a conclusion as to whether the Petitioner's applications for the above financial years merited grant of approval of exemption or not. He further submitted that on a perusal of the impugned order, since the Chief Commissioner of Income Tax has passed a consolidated order for all the financial years, i.e. 1998-1999 to 2005-2006 the same is illegal, without jurisdiction and without any authority of law.
13. Mr. A.K. Mohapatra, Learned Standing Counsel for the Revenue vehemently opposed the contentions advanced on behalf of the Petitioner-Trust and submitted that, several applications were filed by the Petitioner-Trust for various financial years and the same were taken up for disposal together, after providing opportunity to the Petitioner trust to amend/rectify/modify its applications in Form No. 56 D. It is further submitted that in course of the proceeding before the Chief Commissioner of Income Tax, the applicant (Petitioner-Trust) did not raise the issue about the lack of jurisdiction, as the "prescribed authority" for the financial years 1998-1999 and 1999-2000 and without raising such objection the Petitioner trust participated in the proceeding. Therefore, he submitted that 'doctrine of acquiescence' and 'principles of estoppel' come into operation and therefore, the Petitioner-Trust is not to be permitted to raise such plea in the present Writ Petition.
14. Mr. Mohapatra further submitted that the plea raised by the Petitioner is an after thought and has been raised for the first time since the Petitioner-Trust found that the order of the Chief Commissioner of Income Tax was adverse to its interest. Learned standing Counsel further submitted that the activities of the Petitioner trust during the period covering different assessment years in respect of which the CCIT has authority after 3.4.2001 are identical and therefore, transaction for one year being akin to another were taken up together. It is submitted that Petitioner wanted a stamp of approval of its irregular transactions to secure an exemption for the financial years mentioned in respect of them come below Rupees one crore and therefore deliberately filed applications before the CCIT, even though no such application was maintainable. It further asserted that assessee deliberately filed applications before the CCIT instead of filing the same before the CBDT for approval of exemption and no explanation is forthcoming on record by the Petitioner why it opted to file applications before the CCIT instead of filing before the CBDT for the period from 1.4.1999 to 3.4.2001. He further submitted that since all the applications were pending before the CCIT, the same were taken up together and after giving adequate opportunity to the Petitioner-Trust, a common order was passed in view of the fact that of the case were identical for each year, except for a variation of income. Mr. Mohapatra vehemently submitted that it was the Petitioner, who had sought for the approval by making necessary applications to the CCIT, and had never raised any objection against passing of a 'common order' and therefore no objection can now be allowed to be entertained against the same.
15. Mr. Mohapatra has also referred to the Judgment of the Apex Court in the case of Aditanar Educational Institution v. Addl. Commissioner of Income Tax (supra) relied upon by the Petitioner trust and submitted that the Hon'ble Supreme Court has not held that a statutory authority cannot pass a common order covering different financial/assessment years. He further submitted that even after disposal of cases pertaining to different assessment years, by passing a consolidated order there is no findings by the Hon'ble Supreme Court that a statutory authority cannot pass a common order for various assessment years. The impugned order clearly indicates due and necessary application of judicial mind by the CCIT and he has exhaustively dealt with the issues involved in each year and has passed appropriate orders in accordance with law and there is no legal infirmity in the order impugned herein under Annexure-8 to the Writ Petition.
16. On a consideration of the rival contentions advanced by the Learned Counsel for both the parties, it is necessary to first take note of the various statutory provisions involved in the lis. Section 10(22) of the Act, 1961 contained in Chapter-Ill, stipulates "incomes which do not form part of total income" and while computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included.
Under Section 10(22) of the Income Tax Act as it stood till 31.3.1999 any income of a university or other educational institution existing solely for educational purpose and not for the purpose of profit is entitled to for exclusion in computation of the total income. It is a fact that the Petitioner trust has been given the benefit under Section 10(22) of the Act from 1993 till 1999 by the Income Tax Authorities, as would be evident from the assessment orders passed for the said period.
In the year 1999 Section 10(23C) was introduced and Sub-clause (vi) which was similar to the earlier Section 10(22) contemplated grant of exemption of income to any university or educational institutions, which existed solely for educational purpose and not for the purpose of profit but an additional stipulation was made requiring the approval of the "prescribed authority" if the aggregate income in any year exceeded Rupees one crore. The Petitioner-Trust is admittedly not a trust covered under Clause (iiiab) and though Clause (iiiab) is attracted to the present case, yet, the same provisions would only apply to an institution if the aggregate annual receipt exceeds the amount only as may be "prescribed". The "prescribed limit" under Sub-clause (iiiad) is found in Rule 2 B of the Income Tax Rule, 1962 and is Rupees One crore. Therefore on a conjoint reading of the aforesaid provisions, it would be clear that till the introduction of Section 10 (23C)(vi) of the Act, the original Section 10(22) did not mandate nor did it require any approval of a prescribed authority and was being dealt with and considered by an assessing authority at the time of assessment. After Section 10(23C)(vi) of the Act was introduced in the year 1999 all Educational Institutions claiming exemption thereunder, were thereafter required to obtain the necessary "approval" from the prescribed authority, but the same was required only by those institutions whose aggregate annual income was more than Rupees One crore.
17. Apart from the aforesaid provisions, it would be relevant to also note that the "prescribed authority" for the year 1999-2001 was the CBDT and thereafter such power of approval came to be vested in the Chief Commissioner of Income Tax. Although it is asserted by the Learned Counsel for the Revenue that the Petitioner-Trust ought not to have made application before the CCIT for the period 1999-2001, and should have been made it to the CBDT, this fact of making such applications by itself cannot and does not vest any authority of law with the CCIT to deal with such application. It is a well settled principle of law, that it is only the statute which can vest jurisdiction in a statutory authority and the conduct of the assessee in making of an application before an authority, who otherwise lacks jurisdiction cannot in law amount to vesting such an authority, with jurisdiction to deal with the same. In term of Rule 2 BC of the Income Tax Rules, 1962 it is the "prescribed authority" alone which could deal with the application for approval and no other.
18. Now it is essential to deal with the further contention raised by the Revenue to the effect that the present writ application ought to be rejected by applying the "doctrine of acquiescence" and the principles of estoppel since the Petitioner-Trust had never raised issue of jurisdiction in course of the proceeding before the Chief Commissioner of Income Tax (CCIT) giving rise to the impugned order.
It has been settled by the Apex Court in the case of A.C. Jose v. Sivan Pillai , that there can be no plea of estoppel against a statute and where the statute does not countenance a particular procedure or method, a party's failure to raise objection at the time of applying that procedure or method would not estop him from challenging the same later before the Court.
Apart from the above, it is also further laid down by the Supreme Court in the case of Vithalbhai (P) Ltd. v. Union Bank of India , that no amount of waiver or consent can confer jurisdiction on a Court which it inherently lacks or where none exists. Lack of jurisdiction strikes at the very root of exercise of statutory powers and vitiates the proceeding themselves.
In so far as the principle of estoppel is concerned, the Hon'ble Supreme Court has dealt with this issue on several occasions and in the case of Mahindra and Mahindra Ltd. v. Union of India , it has been laid down by the Supreme Court that the principle of estoppel can only arise if a party to a proceeding has altered his position on the faith of a representation or promise made by another the present case there is nothing to show that the CCIT had in any manner altered his position on the basis of the Petitioner participating in the proceeding before him. On the contrary, it was the lawful duty of the Petitioner-Trust to appear before the CCIT once a notice was issued to him and therefore, the fact of appearance and participation by the Petitioner before the CCIT does not bring either the "doctrine of acquiescence" or the "principle of estoppel" into operation and the objection raised by the Revenue to this effect is rejected.
19. It is further clear from a reading of the Judgment in the case of Aditanar Educational Institution (supra), that the nature of approval contemplated both under Section 10(22) and Section 10 (23C)(vi) required approval from the "prescribed authority" for each year. Since the purpose of such approval by the prescribed authority is to evaluate in each year and to reach a conclusion at whether the applicant institution existed during the relevant year for the purpose of education alone and not for the purpose of profit, this is the statutory obligation which is required to be performed on an annual basis and each application is required to be dealt with individually.
20. In the present case, it is apparent that a common order has been sought to be passed by the CCIT for all the financial years in question i.e., 1998-1999 to 2005-2006. This clearly infracts the requirement of law for consideration of an application for approval, individually for each year in question.
21. The next contention of the Petitioner was to the defect that the CCIT had no jurisdiction to deal with the applications for the financial year 1998-1999 to 2000-2001. Although all applications were made to the CCIT, yet the applications for the period 1998-2001 ought to have been transmitted to the approved authority, i.e., CBDT. The CBDT alone was vested with the authority to grant approval during the said period, i.e., 1999-2001.
Further contention of the Petitioner-Trust is that no approval for the financial years 2003-2004, 2004-2005 and 2005-2006 was not necessary since its aggregate income for those years was below rupees One crore. It is apparent from the impugned order itself that the annual gross receipt for these three years was below the prescribed limit of Rupees one crore as referred to in Para- 2 above. Therefore, in terms of Section 10(23C) of the Income Tax Act no necessity of any approval for those years does arise.
22. For the reasons noted hereinabove the Writ Petition is allowed and the impugned Order Dated 2.2.2007 passed by the Chief Commissioner of Income Tax under Annexure-8 is quashed. The matter is remitted back to the Chief Commissioner of Income Tax. The Chief Commissioner of Income Tax is directed to send the Petitioner's applications for approval for the financial years 1998-1999 and 1999-2000 to the Central Board of Director Taxes for their necessary action. In so far as applications for the years 2001-2002 and 2002-2003, the CCIT is directed to deal with the same in accordance with law. So far as the applications for approval for the financial years 2001-2004, 2004-2005 and 2005-2006 are concerned, for the reasons noted hereinabove, no action need be taken on the same, since no approval for the said period is required under the provisions of the Income Tax Act and the entitlement of such claims of the Petitioner shall be considered in course of his assessment under the Income Tax Act, 1961.
It is made clear that on remand the matter shall be dealt with in accordance with law and it is open for the Petitioners to raise any issue on the merits of their case. We have refrained from making any observation on the merits of the rival claims/stand, in view of our direction to remit the matter for reconsideration only by deciding the issue of jurisdiction/maintainability. Anything stated in this Judgment shall not be construed as any expression of opinion on the merits of the respective claim/stand.
23. On a consideration of the facts enumerated and the case laws referred to hereinabove, the writ application is allowed to the extent indicated above. There shall be no order as to costs.
A.K. Ganguly, C.J.
24. I agree.