Competence of approval process upheld where renewal refusal followed business rules and was approved by the prescribed authority.

Refusal to extend approval under Section 35(1)(ii) of the Income-tax Act was upheld because the approval process was shown to have followed the Government of India (Transaction of Business) Rules, 1961. The initial approval had been granted by the Minister and conveyed by the Director, and the later decision not to extend it had been approved by the prescribed authority. Since the appellant's material on compliance with Rule 3 remained uncontroverted, the High Court's view that the order was invalid merely because it was passed by the Director was unsustainable. The challenge on want of competence therefore failed, and the refusal to extend approval was held valid.

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Issues: Whether the refusal to extend approval under Section 35(1)(ii) of the Income-tax Act, 1961 was liable to be set aside on the ground that it had been made by the Director instead of the competent authority.

Analysis: The order refusing renewal showed that the initial approval had been granted by the Minister and conveyed by the Director, and that the decision not to extend the approval had been approved by the prescribed authority. The material placed by the appellant that the decision process conformed to Rule 3 of the Government of India (Transaction of Business) Rules, 1961 remained uncontroverted. In these circumstances, the finding of the High Court that the order was invalid merely because it was passed by the Director was unsustainable.

Conclusion: The refusal to extend the approval was valid, and the challenge based on want of competence failed.

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