State Innovations in Family Planning Services Project Agency vs Union of India

Rejoinder-affidavit filed today is admitted to record. Heard Sri S.M.K. Chaudhary, senior advocate, assisted by Sri Vaibhav Pandey, counsel for the petitioner, Sri D.D. Chopra, learned counsel for opposite parties Nos. 2 and 3 and Sri Adnan Ahmad, learned counsel for opposite party No. 1.

Through the instant writ petition under article 226 of the Constitution of India, the petitioner has assailed the order dated July 2, 2013, passed by the Chief Commissioner of income tax, Lucknow, contained in annexure 10 as well as the order dated July 27, 2012, passed by the Chief Commissioner, contained in annexure 11 to the writ petition.

The petitioner-State Innovations in Family Planning Services Project Agency (hereinafter referred to as "the SIFPSA"), which is a society registered under Societies Registration Act, 1860, has been engaged in implementation of innovation in family planning services projects to assist the State of Uttar Pradesh for reducing the rate of population growth to a level consistent with its social and economic objectives.

According to the petitioner, as the purpose of the SIFPSA has been solely charitable purpose as defined u/s 2(15) of the income tax Act, 1961 (hereinafter referred to as "the Act")/and as such, the Commissioner of income tax, Lucknow, issued a registration certificate dated July 18, 1996, u/s 12A of the Act to the SIFPSA According to him, initially the exemption was granted for the assessment years 1994-95 to 1996-97, vide Notification No. 11412 (F. No. 197/35/98-ITA-I, dated July 3, 2000) (see [2001] 248 ITR (St.) 267) published in Part II, section 3(ii) of the Gazette of India issued by the Central Board of Direct Taxes. Thereafter, vide Notification No. 252/2001 (F. No. 197/44/2001-ITA-I), dated August 30, 2001 (see [2002] 254 ITR (St.) 272), the Central Board of Direct Taxes granted exemption for the assessment years 1997-98 to 1999-2000. Later on the said exemption was extended, vide consolidated order No. CC/LKO/B/15/Vol.-XXVI/2007-08/2185, dated July 23, 2008, covering the assessment years 2000-01 to 2011-12. Thereafter, the SIFPSA filed an application in Form No. 56 for approval u/s 10(23C)(iv) of the Act for the assessment year 2012-13 on July 27, 2011.

Sri S.M.K. Chaudhary, senior advocate, appearing on behalf of the petitioner, submits that during the course of the proceedings initiated by the Chief Commissioner of income tax, Lucknow, on an application dated July 27, 2011, preferred by the petitioner, the petitioner has preferred an application, stating therein that the application for renewal of approval u/s 10(23C)(iv) of the Act filed on July 25, 2011, may not be proceeded with and the order dated July 23, 2008, be treated to be enforced for the assessment year 2012-13, on the grounds that Circular No. 7, dated October 27, 2010 (see [2010] 328 ITR (St.) 43), contained in annexure 7 clearly provided that once the approval has been granted under sub-clause (iv) of clause (23C) of section 10 of the Act, no subsequent approval would be needed unless the approval is withdrawn by the competent authority. Further, vide Circular dated October 27, 2010, it has been clarified that in all such cases where approval/renewal u/s 10(23C)(iv) is granted after July 13, 2006, it becomes one-time affair, and an assessee is not required to undergo the ritual of seeking "renewals" repeatedly for every "three year" period. But the Chief Commissioner of income tax did not accept the aforesaid contention and rejected the application, vide order dated July 27, 2012, which was filed on July 25, 2011, for the assessment year 2012-13 onwards by holding in substance that "accumulations right from the financial year 2003-04 has not been utilized till the financial year 2008-09 and owing to such failure, condition of the third proviso are not satisfied". Feeling aggrieved by the order dated July 27, 2012, the petitioner filed an application u/s 154 of the Act for rectification of the order dated July 27, 2012, which was rejected, vide order dated July 2, 2013. Hence, the instant writ petition.

Elaborating his submission, Sri Chaudhary has submitted that the petitioner has wrongly preferred an application for renewal of approval for the assessment year 2012-13 on July 25, 2011, and on knowing this fact, he preferred an application for withdrawal of the application dated July 25, 2011, but the Chief Commissioner proceeded with the matter and rejected the petitioner''s application dated July 25, 2011. Thereafter, the petitioner preferred an application for rectification, which too was rejected on the grounds that as accumulation of income in a particular year could not be utilized in the succeeding five years. The submission is that even assuming that the petitioner could not be utilized the accumulation of income in the particular year, the authorities ought to have proceeded against the petitioner in accordance with the Act and not otherwise. In the instant case, though, vide Circular dated October 27, 2010, it has been clarified that once the approval has been granted under sub-clause (iv) of clause (23C) of section 10 of the Act there is no necessity to accord subsequent approval unless the approval is withdrawn by the competent authority but the Chief Commissioner did not adhere to the provisions of the Circular dated October 27, 2010, and has wrongly proceeded with the application dated July 25, 2011, and rejected the same.

On the other hand, Sri D.D. Chopra, learned counsel for the opposite parties, has submitted that as the conditions for utilisation of accumulation as per the third proviso to section 10(23C) are not satisfied in this case and as such, the Chief Commissioner has rightly proceeded with the matter and passed the impugned orders. Therefore, there is no illegality and infirmity in the impugned orders.

Having heard learned counsel for the parties and perusing the records, we are of the view that the impugned orders passed by the Commissioner, on an application preferred by the petitioner dated July 25, 2011, regarding the renewal of approval for the assessment year 2012-13, is not in accordance with the Act as well as Circular No. 7, dated October 27, 2010, in so far as the circular dated October 27, 2010, clarified that once the approval has been granted under sub-clause (iv) of clause (23C) of section 10 of the Act, there is no necessity to accord subsequent approval unless the approval is withdrawn by the competent authority and further the petitioner has not been afforded opportunity of hearing and the same is violative of the principles of natural justice. Accordingly, the writ petition is allowed. The impugned orders dated July 2, 2013, and July 27, 2012, are hereby quashed. However, liberty is granted to the authorities to proceed in the matter as provided under law independently.