Back
2013 Supreme(Bom) 198
High Court of Judicature at Bombay
D.Y. CHANDRACHUD & A.A. SAYED
Society of the Franciscan (Hospitaller) Sisters
Versus
Deputy Directors of Income Tax (Exemptions) 1(2) & Others
Writ Petition (Lodging) No. 155 of 2013
Decided on : 23-01-2013
For the Petitioner:Jehangir D. Mistri, Sr. Advocate & Vipul Joshi i/by Aditya N. Bhatt, Advocates.
For the Respondents:A.R. Malhotra, Advocate.
Equitable relief can be granted under Article 226 of the Constitution in cases of arbitrary and high-handed actions by the Revenue, and pending appeals and applications for stay must be considered with fairness and expedition.
Headnote:
Public Trust - Income Tax Act - 1950, 1961 - The judgment discusses the registration and exemption under section 12A and 11 of the Income Tax Act, 1961, and the amendment made to the objects clause of the Petitioner. The court analyzes the high-handed action of the Revenue under Section 226(3) and grants equitable relief to the Petitioner.
Fact of the Case:
The Petitioner, a public trust, was granted registration and exemption under the Income Tax Act, 1961. The Revenue took high-handed action under Section 226(3) to recover outstanding demands, leaving the Petitioner with virtually no funds to run its welfare activities.
Finding of the Court:
The court found the action of the Revenue to be arbitrary and high-handed, and granted equitable relief to the Petitioner by directing the disposal of stay applications and repatriation of a portion of the withdrawn amount.
Issues: The issues involved the arbitrary action of the Revenue under Section 226(3), pending appeals and applications for stay of demand, and the need for equitable relief to the Petitioner.
Ratio Decidendi: The court held that the action under Section 226(3) was arbitrary and high-handed, and directed the disposal of stay applications and repatriation of a portion of the withdrawn amount to provide equitable relief to the Petitioner.
Final Decision: The court directed the disposal of stay applications within three weeks, repatriation of a portion of the withdrawn amount, and left the balance of the recovered amount subject to further remedies available to the Petitioner.
Dr. D.Y. Chandrachud, J.
1. The Petitioner is a public trust registered under the Bombay Public Trusts Act, 1950 and conducts educational institutions all over India as well as homes for the elderly, hostels for small children and health centres for the poor and needy. On 14 July 1975, the Petitioner was granted a registration under section 12A of the Income Tax Act, 1961 (`the Act'). On 6 September 1986, an amendment was made to the objects of the Petitioner and as amended, the objects clause, insofar as material, reads as follows :
"3. The Society is established for educational, medical relief, religious and charitable objects for the benefit of women and children in India, primarily Catholics, and in consonant with Catholic principles for all persons irrespective of race, community, caste, religion, language or social status; and in furtherance of the above objects.
(a) To take over, conduct, develop, improve equip, administer and carry on such of the religious educational, medical and charitable institutions, works and activities at present conducted and carried on in India, by the Congregation of the Franciscan Hospitaller Sisters of the Immaculate Conception, a Religious Congregation of Roman Catholic Nuns (hereinafter referred to as the said Congregation) with or without all or any of the property rights, assets and liabilities belonging or attaching thereto, as the Governing Body of the Society may deem fit."
(Emphasis supplied)
In the objects clause as amended a reference is incorporated to the rendering of services primarily for Catholics and in consonance with Catholic principles.
2. Admittedly the registration under section 12A of the Act was not withdrawn from 1986 till 2008 and a certificate under section 80G of the Act was granted from time to time. Between 1975 and 2010, the Petitioner was also allowed an exemption under Section 11 of the Act including upon scrutiny assessments which were made after taking note of the amendment in the objects clause. For assessment years 2004-2005 and 20062007, orders were passed under section 143(3) on 29 November 2006 and 26 November 2008. Both the orders, as submitted by the Petitioner, refer to the amended objects clause and grant the exemption under section 11. The assessments for A.Y. 2004-05 and A.Y.2006-07 were reopened by notices under section 148 issued on 25 March 2011. Simultaneously, a notice was issued on 25 March 2011 for the withdrawal of the registration under section 12AA. Though the Petitioner has filed its objections on 23 September 2011, proceedings in pursuance of the notice for withdrawal are still pending. For A.Y.2009-10, an order of assessment was passed on 7 December 2012 under section 143(3) denying exemption under section 11 on the ground that the objects clause had been amended. On 29 December 2011, orders were passed under section 143(7) read with Section 147 for A.Ys.2004-05 and 2006-07 withdrawing the exemption which had been granted earlier.
3. The Petitioner has filed appeals before the Commissioner of Income Tax (Appeals) for A.Ys.2004-05, 2006-07 and 2009-10. Those appeals are pending.
4. On 2 March 2012, the First Respondent issued a communication for recovery of demands for A.Ys.2004-05 and 2006-07. By a communication dated 15 March 2012, the Petitioner requested that the demands be kept in abeyance pending the disposal of the appeal. On 12 October 2012, the Petitioner filed written submissions for A.Ys.2004-05, 2006-07 and 2009-10 before the CIT (A).
5. On 9 January 2013, the Petitioner received a notice dated 28 December 2012 for the recovery of outstanding demands for A.Y. 2004-05 in the amount of Rs.5.75 crores, for A.Y.2006-07 in the amount of Rs.5.25 crores and for the A.Y.2009-10 in the amount of Rs.75.35 lakhs. On 17 January 2013, the Petitioner addressed a reply seeking an opportunity of being heard in the event that the recovery of the demands was sought to be enforced. No hearing has been given to the Petitioner.
6. A
