2014 (12) TMI 976 - HC - Income Tax

Benefit of section 10(23C)(via) Applicability of 14th Proviso to Section10 (23-C)(via) to AYs 2005-2006 and 2006-2007 - Assessee contended that revenue could not take advantage of his own inaction, in not passing any orders on application that was pending before him Held that - Revenue was of the view that the assessee had not preferred the application in respect of the AYs during the financial year immediately preceding the AY for which the benefit was sought - the finding of the revenue cannot be legally sustained insofar as it stems from an erroneous interpretation of the applicability of the proviso - the Proviso is intended to ensure that any application preferred after 01.06.2006, for the purposes of grant of exemption or continuation thereof, has to be made during the financial year immediately preceding the AY from which the exemption is sought. The Proviso could not have been cited as a reason for holding the application preferred by the petitioner for the assessment years 2005-2006 and 2006-2007 to be belated - the findings relating to the AY 2007-2008 are also legally unsustainable since, even if the revenue was of the opinion that the benefit of Section 10 (23-C) (via) could not be continued for the AY, nothing prevented him from treating the application as a fresh application for the grant of the benefit u/s 10(23-C)(via) for the AY 2007-2008 - the law that governs the assessment of an assessee in any AY is the law prevailing as on 1st of April of the relevant AY - the amendment would govern only the exemption that was to be granted with effect from the AY 2007-2008 onwards thus, the order of revenue is set aside and the revenue is directed to consider the application and grant the benefit u/s 10 (23-C) (via) for the period from 2002-2003 to 2007-2008 Decided in favour of assessee.

Issues:
1. Interpretation of Proviso 14 to Section 10 (23-C) (via) of the Income Tax Act.
2. Consideration of pending application for benefit under Section 10 (23-C) (via) for assessment years 2002-2003 to 2004-2005.
3. Legality of rejecting application for assessment years 2005-2006, 2006-2007, and 2007-2008.
4. Applicability of law prevailing as on 1st of April of the relevant assessment year.

Interpretation of Proviso 14 to Section 10 (23-C) (via):
The judgment addressed the issue of interpreting Proviso 14 to Section 10 (23-C) (via) of the Income Tax Act. The respondent rejected the petitioner's application for the assessment years 2005-2006 and 2006-2007, citing the Proviso as the application was not made during the financial year immediately preceding the assessment year. The court held that the Proviso could not apply to cases where the relevant previous year had expired before the introduction of the Proviso. Therefore, the rejection based on the Proviso was deemed legally unsustainable for those assessment years.

Consideration of pending application for benefit under Section 10 (23-C) (via) for assessment years 2002-2003 to 2004-2005:
The judgment highlighted the petitioner's pending application for the benefit under Section 10 (23-C) (via) for assessment years 2002-2003 to 2004-2005. Despite the application being filed in 2003, the respondent did not pass any orders. The court noted the inaction of the respondent and emphasized that the petitioner, having previously received the benefit, should be entitled to it for subsequent years as well. The court directed the respondent to consider the application on merits.

Legality of rejecting application for assessment years 2005-2006, 2006-2007, and 2007-2008:
The judgment addressed the legality of the respondent's rejection of the petitioner's application for assessment years 2005-2006, 2006-2007, and 2007-2008. The court found the rejection based on the Proviso and the lack of shown exemption in the preceding period to be legally unsustainable. It emphasized that the respondent could have treated the application as a fresh one for the grant of benefit under Section 10 (23-C) (via) for the assessment year 2007-2008. The court quashed the rejection order and directed the respondent to reconsider the application.

Applicability of law prevailing as on 1st of April of the relevant assessment year:
The judgment discussed the principle that the law governing the assessment of an assessee in any assessment year is the law prevailing as of April 1 of the relevant assessment year. It clarified that an amendment introduced through the Finance Act with effect from June 1, 2006, would not apply to assessment years 2005-2006 and 2006-2007. Therefore, the court deemed the respondent's findings for those years to be legally unsustainable. The court allowed the writ petition, quashed the rejection order, and directed the respondent to consider the application comprehensively.

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