1983 (10) TMI 43 - HC - Income Tax

Trust entitled to issue donation certificates under amended law; Commissioner's refusal deemed unjustified.

The court held that the petitioner-trust, having an already approved rural development programme, was entitled to receive authorization to issue ... Deduction Issues Involved:1. Scope and ambit of Section 35 CCA of the Income Tax Act, 1961, particularly sub-section (2)(b) as amended by the Finance Act, 1983.2. Whether the petitioner-trust is entitled to renewal of approval for its rural development programme and authorization to issue certificates to donors under the amended Section 35 CCA.Issue-wise Detailed Analysis:1. Scope and Ambit of Section 35 CCA:The central issue revolves around the interpretation of Section 35 CCA of the Income Tax Act, 1961, particularly sub-section (2)(b) as amended by the Finance Act, 1983, effective from April 1, 1983. The court examined the legislative intent and the scheme incorporated in the new Section 35 CCA. The amended provision stipulates that no fresh approval for any rural development programme will be granted; however, ongoing programmes can be completed under certain conditions. These conditions include the requirement for an assessee to produce a certificate from an authorized institution or association confirming that the rural development programme was approved before March 1, 1983, and that the work commenced before this date.2. Entitlement to Renewal of Approval and Authorization:The petitioner, a public charitable trust, had previously received approval for its rural development programme, specifically for setting up a 100-bed hospital in a rural area. This approval was valid until March 31, 1983. The petitioner sought renewal of this approval and authorization to issue certificates to donors, which would enable the donors to claim deductions under the amended Section 35 CCA. The Commissioner of Income-tax referred the matter to the Central Board of Direct Taxes (CBDT) for clarification. The CBDT clarified that the new Section 35 CCA does not envisage the renewal of any programme approved by the prescribed authority, leading to the Commissioner's refusal to renew the approval.The court held that the legislative intent behind the new Section 35 CCA was to ensure that institutions or associations already executing approved rural development programmes should not be deprived of funds, provided they meet certain conditions. The court emphasized that the requirement for an approval under the old Section 35 CCA and the authorization under the new Section 35 CCA operate in different fields. The former was for enabling an assessee to claim deductions, while the latter is for empowering the institution to issue certificates.The court concluded that the Commissioner was not justified in refusing authorization based on the CBDT's clarification. The petitioner-trust, being an already approved institution with an approved programme, was entitled to receive authorization to issue certificates to its donors. The court directed the respondents to issue the necessary authorization to the petitioner-trust by November 3, 1983, or within a reasonable time thereafter with retrospective effect from November 3, 1983, enabling the donors to claim deductions.Conclusion:The petition was allowed, and the court directed the respondents to issue the authorization to the petitioner-trust, ensuring compliance with the legislative scheme of the amended Section 35 CCA. The rule was made absolute with no order as to costs.