2014 (5) TMI 821 - HC - Income Tax

Petitioner's Extension Application Deemed Unnecessary Due to CBDT Circular

The Sunbeam Academy Educational Society Versus The Chief Commissioner of Income Tax And Others

The Court held that the petitioner's application for extension of approval under Section 10(23C)(vi) of the Income Tax Act for the assessment years ... Rejection of extension of approval u/s 10(23C)(vi) of the Act – Held that:- Relying upon Family Planning Services Project Agency vs. Union of India and others [2013 (9) TMI 767 - ALLAHABAD HIGH COURT] and CBDT circular No.7 of 2010 has clearly held that it would also be applicable for approval granted under clause (vi) and (via) of the Act - the approval can be withdrawn by the competent authority on certain conditions being satisfied and after giving a reasonable opportunity of show cause to the assessee - the application filed by the petitioner for extension of the approval u/s 10(23C)(vi) of the Act for the AYs 2008-09, 2009-10 and 2010-11 was a redundant application as there was no requirement to apply for extension of the approval as the approval in the case of the assessee was granted after 1.12.2006 on 20.12.2007 - The approval so granted by the Chief Commissioner of Income Tax was a one-time affair, which was to continue till it was withdrawn under the proviso - the order dated 17.3.2009 was otiose having no effect in law - The order only rejects the application for extension of the approval for the AYs 2008-09, 2009-10 and 2010-11 - The original order of approval dated 20.12.2007 still continues to remain in force inspite of the rejection of the assessee's application – thus, the order of the CCIT is set aside – Decided in favour of Assessee. Issues:1. Extension of approval under Section 10(23C)(vi) of the Income Tax Act for the assessment years 2008-09, 2009-10, and 2010-11.Analysis:The petitioner, a registered society providing education, applied for an extension of approval under Section 10(23C)(vi) of the Income Tax Act for the mentioned assessment years. The Chief Commissioner of Income Tax rejected this application through an order dated 17.3.2009. The petitioner challenged this rejection through a writ petition on various grounds.The petitioner's counsel argued that as per circular No.7 of 2010 issued by the Central Board of Direct Taxes (CBDT), further approval or extension was not required for approvals granted after 13.7.2006 under Section 10(23C)(vi). The petitioner was allowed to add this ground to the writ petition. The CBDT's circular aimed to clarify the period of validity of approvals granted by the Chief Commissioner of Income Tax under different sections of the Income Tax Act.The CBDT's circular specifically addressed approvals under Sub-Clauses (vi) and (via) of Section 10(23C) of the Act. It clarified that approvals granted after 1.12.2006 would be one-time approvals valid until withdrawn. The circular emphasized the importance of the proviso to Section 10(23-C) which outlined the conditions under which approvals could be rescinded or withdrawn by the competent authority.In light of the CBDT's circular and the proviso to Section 10(23-C), the Court found that the petitioner's application for extension of approval for the mentioned assessment years was unnecessary. The original approval granted on 20.12.2007 was deemed a one-time affair, valid until withdrawn as per the proviso. Therefore, the rejection of the extension application by the Chief Commissioner of Income Tax was considered legally ineffective.The Court referenced a similar decision by a Division Bench of the Lucknow Bench of the High Court to support its interpretation. Consequently, the impugned order rejecting the extension application was quashed, and the writ petition was allowed. The authorities were reminded that they could take action against the petitioner under the proviso if deemed necessary.In conclusion, the judgment clarified the legal position regarding the extension of approval under Section 10(23C)(vi) of the Income Tax Act and emphasized the significance of the CBDT's circular in determining the validity of such approvals granted after 1.12.2006.