TMI Blog2007 (10) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... 23BBA) of the Income-tax Act, 1961, stands Ithdrawn with immediate effect. Apart from withdrawing the exemption, Lrious other notices were issued under section 142 of the Income-tax Act (hereinafter "the Act") and letters to the bankers and others were issued sections 201 and 201 (IA) of the Act and notices under section 221(1) of the Act have also been issued and have been impugned, in this petition. 2 Shri Jagannath Temple Managing Committee (hereinafter, the "said committee"), the petitioner herein, has been constituted by the State government under the provisions of the Shri Jagannath Temple Act, (Orissa Act II of 1955) (hereinafter, the "Act of 1955"). The Act of 1955 was assented to by the President of India on October 15, 1955. 3 From a perusal of the preamble of the Act of 1955, it is clear that the temple of Lord Jagannath of Puri, since its inception has been and still is an institution of unique national importance and attracts millions of Hindu devotees from all over the world. The temple stands as a symbol of Hindu religious traditions and an icon of faith, belief and worship for countless idu devotees all over the world. As such in order to properly organize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Finance Department or his nominee who shall not be below the rank of a joint secretary, the Collector of the District of Puri and the chief administrator of the temple who shall be the secretary. Under section 33 of the said Act, the Committee shall be entitled to take possession of all the movable and immovable properties including the Ratna Bhandar and funds and jewelleries records, documents and other assets belonging to the temple. 6 After pointing out the aforesaid features of the said Act, learned counsel for the petitioner submitted that keeping in view the said provision, exemption was allowed under section 10(23BBA) of the Income-tax Act which was introduced in the year 1979 by the Finance Act with retrospective effect from April 1, 1962. 7 Section 10 of the Income-tax Act provides that in computing the total income of a previous year of any person, any income indicated in any of the clauses in section 10 including clause (23BBA) shall not be included. 8 The purpose of introduction of the said provision is to unconditionally exempt the income of statutory bodies which are entrusted with the administration of public, religious or charitable institution and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome since its income is totally exempted and no proceeding for deducting tax at source can be initiated against any bank or institutions in which the funds of the Committee are deposited. Learned counsel for the petitioner further submitted that in the year 1995 a letter was given by the Assistant Commissioner of Income-tax, Circle-1, Bhubaneswar, to the administrator of the said temple to the effect that income of the Lord Shri Shri Jagannath Temple, Puri, Orissa, is exempted from income-tax under section 10(23BBA) of the Income-tax Act, 1961, with effect from April 1, 1962. The said letter dated August 17, 1995, has been disclosed as annexure 1 to the petition. 12 The petitioner's case is that under section 5 read with section 33 of the said Act all the endowments of Shri Jagannath Temple are vested in the petitioners, managing committee. Therefore, whether the endowments of the temple can be subjected to income-tax and, therefore, necessitating tax deduction at source (TDS) in view of the statutory exemption provided under section 10(23BBA) of the Act has to be examined in the light of section 5 of the said Act. 13 While annexure 1 remained in force, suddenly, opposite p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial Bank, being pro forma opposite parties Nos. 6 and 7 by orders dated November 23, 2006, and November 26, 2006, respectively. It also appears that the "interest" has also been levied upon such bankers under section 201(1A) of the Act and notice for "penalty" under section 221(1) has been served upon the said bankers by way of imposing penalty upon them for not paying the amount in respect of which they have been treated as assessees-in-default. 15 The stand of learned counsel for the Revenue-opposite parties is that, the temple administration by letter dated October 20, 2006, addressed to opposite party No. 2 informed the said opposite party that section 10(23BBA) is applicable retrospectively from 1962 as explained in the Central Board of Direct Taxes Circular No. 258, dated June 14, 1979, and no exemption was claimed by the temple administration. Therefore, it has been contended that if the same is the stand of the petitioner, then with wal of the letter dated August 17, 1995, issued by the Assistant commissioner of Income-tax, Bhubaneswar, by letter dated October 12, of the Income-tax Officer suffers from no legal infirmity. 16 It was also urged that the notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner but the petitioner did not co-operate with the Assessing Officer. As such this writ petition is not maintainable and is a premature one. It was also stated that no action has been taken against the petitioner by the Assessing Officer. It was also stated that against the steps which have been taken against the bankers, the bankers are free to challenge the same under section 246A of the Income-tax Act, 1961. The said action against the bankers cannot be impugned in the instant writ petition which is wholly premature and a misconceived one. 17 These are the rival contention. 18 Coming to the order dated October 12, 2006, which was issued by the Revenue purporting to withdraw the exemption which was granted to the petitioner, it is clear that the said order was passed without recording any reason, without giving any prior hearing and the said order was passed in a peremptory manner and was given immediate effect. Along with the said order dated October 12, 2006, several other orders were passed on the different banks on the very same day directing them to deduct the tax on interest and impose TDS in so far as the petitioner is concerned. Therefore, those conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 9, the learned judges after noting the decision in the case of K. I. Shephard v. Union of India reported in [1988] 63 Comp Cas 244 (SC) also the decision of the Supreme Court in the case of V. C. Banaras Hindu University v. Shrikant, reported in [2006] 11 SCC 42 held that a post-decisional hearing in a situation where the authorities have made up their mind is illusory. Similar principles have been reiterated in the case of Shekhar Ghosh v. Union of India reported in [2007]1 SCC 331. 23 In the instant case, this court finds that the post-decisional hearing which has been sought to be given by the Revenue is more or less in the form of an idle ceremony, since the authorities had already issued the impugned order withdrawing exemption, coupled with an attempt to implement the same immediately. This makes it very clear that they are determined to implement the order of withdrawing the exemption. Therefore, the impugned order having been passed without giving the petitioner an opportunity of hearing, is violative of the basic tenets of natural justice and cannot be sustained and the same is liable to be quashed. 24 Learned counsel for the opposite party very much relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed under any enactment. But such exemption would not apply to the income of such trust, endowment or society which are obviously not created under any enactment. Therefore, under clause (23BBA) of section 10 of the Act exemption is only granted to the bodies which are created under an Act passed by the State Government, Central Government or Provincial Government. But such exemption is not extended to any trust, endowment or the society which are created by parties. 26 It is not in dispute that in the instant case the petitioner is a body corporate with perpetual succession and a common seal and is created by section 5 of the said Act (Orissa Act 11 of 1955) and which has received the assent of the President on October 15, 1955. Therefore, the proviso to section 10(23BBA) does not apply to the petitioner and the exemption which has been granted to the petitioner under section 10(23BBA) is a total unconditional exemption. 27 It is not in dispute that the temple and all its endowment have vested in the petitioner, namely, the Committee which was set up under section 5 read with section 6 of the said Act. Section 10 (23BBA) of the Income-tax Act mandates that any income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted to be issued under section 142(1) for submission of return by the petitioner is contrary to the mandate of the said circular. Equally the direction to deduct tax at source under section 194A in respect of income of the petitioner which is totally exempted under section 10(23BBA) is not authorized under law. It has been held by the Supreme Court in the case reported in [1999] 237 ITR 889 (UCO Bank v. CIT) that the circulars of the Central Board of Direct Taxes are legally intended to ensure proper administration of the statute. The status of such circular has been very succinctly laid down in page 896 of the report as follows :- "The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act." 30 In coming to the aforesaid conclusion the learned judges also relied on the five-judge Bench decision in the case of Navnit Lai (C.) Javeri v. K. K. Sen. AAC reported in [1965] 56 ITR 198 (SC). 31 In so far as the Revenue's direction for deduction of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner is entitled to enjoy the total statutory protection under section 10(23BBA), no part of its income can be deducted by way of payment of tax and if it is so deducted, it amounts to unauthorized deduction of its income and against such deduction the petitioner has the locus standi to maintain this writ petition. Therefore, the aforesaid argument does not hold good. 34 In fact learned counsel for the Revenue apart from raising some unsustainable technical pleas has not been able to meet the case made out by the petitioner on the merits. 35 For the reasons aforesaid, this court, is constrained to quash the letter dated October 12, 2006, issued by opposite party No. 2 inasmuch as the same is not legally sustainable and the various directions which have been issued consequent upon the said letter on the bank for deduction of tax (TDS) are also set aside. This court holds that the petitioner is not required to file any return under section 142(1) of the Income-tax Act and the direction given by the Revenue to that effect are unauthorized and of no legal effect. 36 The writ petition, therefore, succeeds. But there shall be no order as to costs. 37 I. MAHANTY J.—I ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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