TMI Blog2017 (9) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... e desired to withdraw such deduction. Any expenditure after such date would no longer be an eligible deduction. The provision applies prospectively. The Union legislature was competent to introduce such amendment. We do not find merits in the petition. - Special Civil Application No. 7558 of 2017 - - - Dated:- 14-9-2017 - MR. AKIL KURESHI, MR. BIREN VAISHNAV, JJ. For The Petitioner : BHARGAV KARIA ASSO, ADVOCATE For The Respondent : MR DEVANG VYAS, ADVOCATE, And MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT ( PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged the vires of sub-section (7) of Section 35AC of the Income Tax Act, 1961 ('the Act' for short) introduced by the Finance Act 2016 with effect from 01.04.2017. According to the petitioner, such provision is ultra vires of the Constitution. 2. The petition arises in the following background: 2.1 Petitioner is a public charitable trust registered under the Bombay Public Trust Act. The trust was constituted with the object of establishing an institution for rendering medical services to the poor and needy persons irrespective of caste, creed or colour and for undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the withdrawal of the deduction under section 35AC of the Act to any donations made to the petitioner trust and other institutions after 01.04.2017 would virtually dry off all the donations to the trust leaving the entire project in jeopardy. According to the petitioner, the deduction which was granted way back in the year 1992 could not have been abruptly withdrawn adversely affecting the pipeline projects. The case of the petitioner projected before us, therefore, was that though the legislature would have the competence to withdraw a deduction already granted, the same cannot have adverse effect on pending projects. The provision therefore should be read down as not applicable to the projects which are already approved by the authority under sub-section (1) of Section 35AC of the Act. 3. Mr. Bhargav Karia, learned counsel for the petitioner drew our attention to the Notes on clauses for introduction of the said new provision by the Finance Act 2 of 1991 to highlight that the object was to encourage the projects or schemes for promoting social and economic welfare or upliftment of the public as may be specified by the Central Government on the recommendation of the Natio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, medium and big newspapers depending on the circulation, made certain observations regarding the power of the delegated legislation to frame the law within its sphere. (4) Reliance was also placed on a decision of Karnataka High Court in case of Commissioner of Income Tax and Another vs. Asea Brown Boveri Ltd reported in [2009] 316 ITR 450 (Karn) in which the court found that exemption was granted to one Vidya Sagar Hospital for three consecutive assessment years by the competent authority and that the exemption was not operating from a particular date and the same was effective for the full assessment year. On such basis, the court confirmed the view of the Tribunal that the donation made to the said hospital prior to it being eligible under notification under section 35AC of the Act could also be claimed as deduction by the donor assessee. 4. On the other hand, learned counsel Shri Manish Bhatt for the department opposed the petition contending that the Parliament had the power to grant deduction and also power to withdraw the same. In the present case, there is nothing unconstitutional about the said provision. In economic sphere, the courts recognize a greater degre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on approved by the National Committee for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year: Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme. ( 2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate- ( a) where the payment is to a public sector company or a local authority or an association or institution referred to in sub-section (1), from such public sector company or local authority or, as the case may be, association or institution; ( b) in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288, in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed. [ Explanatio n.-The dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars and within such time as may be prescribed, such notification may be withdrawn in the same manner in which it was issued: Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the concerned association, institution, public sector company or local authority, as the case may be: Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority, as the case may be, carrying on such eligible project or scheme.] [( 6) Notwithstanding anything contained in any other provision of this Act, where- ( i) the approval of the National Committee, granted to an association or institution, is withdrawn under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution under sub-section (5); or ( ii) a company has claimed deduction under the proviso to sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (3) of section 35AC ensures that there will be no double deduction of the said expenditure. Under sub-section (4) of section 35AC under certain circumstances the approval granted to an association or institution by the National Committee could be withdrawn. Likewise, under sub-section (5) of section 35AC the notification making a project or scheme could be withdrawn under certain circumstances. Sub-section (6) of section 35AC however provides that the deduction available on the expenditure incurred by the assessee would not be disturbed even if the approval granted to the association or institution was subsequently withdrawn under sub-section (4) or the notification approving the project or scheme under sub- section (5) is withdrawn and instead the income would be taxed at the hands of the company, authority association or the institution as the case may be. Clause (b) of the Explanation to Section 35AC defines eligible project or scheme as to mean such project or scheme for promoting the social and economic welfare or the uplift of the public as the Central Government may by its notification in the Official Gazette specify on the recommendations of the National Committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Union or the State legislature, the courts have however recognized that the law framed by the Parliament or State legislature can be declared unconstitutional only on the grounds that the same is opposed to the fundamental rights contained in part III of the Constitution or is opposed to any other provision in the Constitution. Particularly when it comes to the laws pertaining to the economic matters, the courts recognize greater degree of latitude in the legislature. These principles have been highlighted in the constitutional bench judgement of the Supreme Court in case of R.K. Garg (supra) in which it was observed as under: 7. Now while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the courts as rules of guidance in discharge of its constitutional function of judicial review. The first rule is that there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues. 10. In case of Kasinka Trading (supra), the Union Government had granted exemption under a notification dated 15.03.1979 on customs duty on import of resin which is a raw material used for manufacturing of PVC. The notification provided that the same shall be in force upto and inclusive of 31.03.1981. However, before expiry of the said time mentioned in the notification, the Government issued another notification on 16.10.1980 withdrawing the exemption and providing that in public interest it was necessary that the import of resin could invite duty at the rate of 4% ad valorem. This was done with a view to equalising the sale prices of indigenous and imported materials. The notification was challenged by the importers i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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