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Judgment
Veeraswami, J.—This petition is for a rule of mandamus directing the respondent, Union of India, represented by the Ministry of Finance, to
issue a recognition that the Central Government is satisfied that the petitioners are engaged in the manufacture of one or more of the articles
specified in Part A of the Fifth Schedule to the Income Tax Act, 1961. The petitioners are a public limited company incorporated in 1954, and are
said to be engaged during the relevant time in the manufacture of grinding wheels and abrasives, being the industrial machinery specified in sub-
clause (iii) of clause C of Part A of the Fifth Schedule to the Income Tax Act. The petitioners, as they aver, are assessed to Income Tax by the
First Income Tax Officer City Circle for 1960-61 and 1961-62, and in the course of these assessments they claimed that their profits in the
manufacture of grinding wheels were exempt from Income Tax under S. 15-C of the Indian Income Tax Act 1922. This contention, according to
the petitioners, was accepted, and exemption granted under that provision. After the coming into force of the new Act with effect from 1-4-1962,
which would have effect on the petitioners'' assessments for 1962-63, the petitioners claimed that the profits in the manufacture of grinding wheels
satisfied the conditions prescribed in the Fifth Schedule to the Act and therefore any dividend distributed by petitioners to its corporate
shareholders would be exempt from super tax in the assessments of the corporate shareholders under clause (iv) of sub-section (1) of S. 99 of the
Income Tax Act 1961.
Under the relevant statutory provisions a pre-requisite for exemption of such super-tax would be the satisfaction of the Central Government that
the petitioners are wholly or mainly engaged in an industry for the manufacture or production of one or more of the articles specified in any of the
items in Part A of the Fifth Schedule. They, therefore, made an application on 18-4-1963 to the Central Board of Revenue, for recognition as a
company engaged in the manufacture of bonded abrasives, which, we are told, is a comprehensive expression to include grinding wheels and other
articles of a similar nature produced by the same process. After prolonged delay and calling for particulars more than once at various levels, the
Under-Secretary to the Central Board of Direct taxes, by a communication dated 4-3-1964, intimated the petitioners with reference to their
application that the Board of Revenue had considered the matter, but it regretted that the request regarding exemption contemplated under the
Fifth Schedule read with S. 99(1)(iv) of the Income Tax Act 1961, could not be acceded to. There was a further communication on 14-5-1964
from the Secretary to the Central Board of Direct taxes to the petitioners to the effect that if the other condition in sub-clause 2 of rule 1 of the
Fifth Schedule was not fulfilled, which would disentitle the shareholders to the claim for exemption on that ground alone, the question of the Central
Government satisfying itself about the condition in sub-clause (1) of the rule did not arise. It is in these circumstances the petitioners have
approached this court for a direction as aforesaid.
On the view we take, we think it unnecessary to go into the merits of the petitioners'' claim for a certificate from the Central Government. The
application of the petitioners for a certificate was made not to the Central Government, but to the Central Board of Revenue as it figured then.
Section 99(1)(iv) of the Income Tax Act 1961 reads:
(1) Supertax shall not be payable by an assessee in respect of the following amounts which are included in his total income........ (iv) if the assessee
is a company, any dividend received by it from an Indian Company, subject to the provisions contained in the Fifth Schedule.
Rule 1, Clause (a)(1) of the Fifth Schedule provides that supertax shall not be payable in respect of any dividend which is assessable for the
assessment year commencing on 1st April 1962, and for the subsequent assessment yeas and which is declared by an Indian Company formed
and registered after 31-3-1952 and before 1-4-1957 where the Central Government is satisfied that the Indian Company is wholly or mainly
engaged in an industry for the manufacture or production of any one or more of the articles specified in any of the items in Part A of this schedule.
In Part A, S. 6-C item (iii) relates to grinding wheels and abrasives. It may be clear from these provisions that the satisfaction contemplated by
Rule 1(a)(i) of this Schedule is that of the Central government. But no application was made to the Central Government for a certificate under that
provision. When a power is entrusted by a statute to a named authority and the exercise of it is invoked by a person concerned and there is an
improper refusal to exercise the power, then, of course, in such premises, a mandamus may well issue under Art. 226 of the Constitution directing
the authority to exercise the power. But, for doing it, it is a requisite that the applicant must in the first instance approach the authority with a
request to invoke the power, and without that, there would be no occasion for this court to consider that the authority has refused to exercise or
exercised the power improperly, which is vested in it. Admittedly, here, there was no application to the Central Government making such a
request.
Mr. Venkatraman for the petitioners, however, contends that the Central Board of Revenue which was reconstituted as the Central Board of
Direct taxes under the Central Board of Revenue Act, 1963 is but an arm of the Government and it would be proper to say that it is the Central
Government itself. He relies on the fact that the Board is manned by some of the officials who belong to the Ministry of Finance. We have no
hesitation in rejecting this contention. The Central Board of Revenue Act itself makes a distinction between the Central Government and the
Central Board of Direct taxes. For instance, Section 3 says that the Board shall, subject to the control of the Central Government, exercise its
powers and duties entrusted to it by the Central Government or by or under any law. The Income Tax Act itself clearly indicates the framework of
the hierarchy of officers with the Income Tax officer at the bottom and the Central Board of Revenue and now the Central Board of Direct Taxes
at the top. The Fifth Schedule which we referred to clearly mentions the Central Government as the authority to be satisfied in the matter of issuing
a certificate and not any other authority. In such circumstances, we are unable to accept the petitioners'' contention that the Central Board of Direct
Taxes should for purposes of the Fifth Schedule be considered as the Central Government.
It may be that when an application was made under the Schedule to the Central Board of Revenue as it stood then, they could well have
transmitted it to the proper authority for disposal, though they might not be obliged to do so. That would have tended to the convenience of
everybody and would have saved a lot of time and perhaps needles expenditure and futile effort. But the point remains that so long as the
application was not made to the Central Government, we would not be justified in issuing a rule to the Central Government.
From what we have said so far, it is obvious that we have not dealt with the merits on which the Central Government would have to be satisfied.
The form in which the prayer is couched in the petition presupposes that this court under Art. 226 of the Constitution will itself have the power to
direct the Central Government to issue a certificate. Though it is not necessary to consider this point, at this stage, we may indicate that the power
of this court will not extend that far. All that this court can do is, as we indicated at the outset, where the authority vested with a power, improperly
refused to exercise it, to call upon that authority by a rule of mandamus to exercise that power and decide according to the merits. It is represented
to us for the petitioners that in view of the considerable lapse of time and the urgency of the matter, any application to the Central Government is
likely to be delayed in its disposal. We think it proper, in the circumstances of this case, to suggest that if and when an application is made by the
petitioners, the Central government may dispose it of on its merits within at least two months of its receipt.
The petition is dismissed; but in the circumstances with no costs.
EJ/D.R.R.
Petition dismissed.