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Issues: (i) Whether the retrospective cancellation of the earlier approval granted under section 10(15)(iv)(c) of the Income-tax Act, 1961 was sustainable; (ii) whether the proposal for approval of the rate of interest on the later deferred-payment purchase required separate consideration by the Ministry of Finance under section 10(15)(iv)(c).
Issue (i): Whether the retrospective cancellation of the earlier approval granted under section 10(15)(iv)(c) of the Income-tax Act, 1961 was sustainable.
Analysis: The approval orders had been passed after the relevant documents, including the industrial approval letter, the contract, and the application materials, were before the Central Government. The supposed basis for cancellation was that the Ministry of Industry had approved a different interest clause and that this fact had been discovered only on re-examination. The record showed that the relevant terms were already available to and considered by the Ministry of Finance when the exemption was originally granted. The stated ground for retrospective cancellation was therefore unsupported by the record and could not sustain the impugned action.
Conclusion: The retrospective cancellation was invalid and was quashed in favour of the assessee.
Issue (ii): Whether the proposal for approval of the rate of interest on the later deferred-payment purchase required separate consideration by the Ministry of Finance under section 10(15)(iv)(c).
Analysis: The approval given by the Ministry of Industry related to industrial clearance and the terms of the purchase arrangement, whereas the exemption from income-tax on interest was a distinct matter under the Income-tax Act. Under the amended provision, the Central Government in the Ministry of Finance had to approve the rate of interest for tax exemption having regard to the terms of the loan and repayment. The Ministry of Industry was not the authority competent to decide tax exemption, so the later application had to be examined afresh on its merits by the Ministry of Finance.
Conclusion: The later application required fresh consideration by the Ministry of Finance and was not finally rejected on merits.
Final Conclusion: The writ petition succeeded to the extent that the retrospective cancellation was set aside, and the matter relating to the later application was sent back for reconsideration by the competent authority.
Ratio Decidendi: An administrative exemption order under section 10(15)(iv)(c) cannot be retrospectively cancelled on a ground unsupported by the record, and tax exemption on interest under that provision must be determined by the competent authority under the Income-tax Act, not by an industrial approval granted for a different purpose.
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