Rescission of tax exemption notification upheld where saving clause preserved withdrawal power and estoppel and discrimination claims lacked proof.

The commentary explains that the Central Government's power to withdraw an earlier notification continued under the saving clause in section 297 of the Income-tax Act, 1961, and was also supported by section 21 of the General Clauses Act; the later amendment was treated as clarificatory rather than the sole source of rescission power. It further notes that estoppel did not bar withdrawal because there was no clear representation that the concession would remain permanent, and State action under statutory power is not ordinarily defeated by estoppel absent fraud or manifest injustice. The article also records that the article 14 challenge failed for lack of specific pleadings and proof of discriminatory treatment.

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Issues: (i) Whether the Central Government had power to withdraw the earlier notification recognising the Mysore palace as an official residence after the repeal of the 1922 Act and before the later amendment to section 297 of the Income-tax Act, 1961. (ii) Whether the Central Government was estopped from issuing the withdrawal notification because the petitioner had allegedly leased out part of the palace at its instance. (iii) Whether the withdrawal notification was invalid for hostile discrimination under article 14 of the Constitution of India.

Issue (i): Whether the Central Government had power to withdraw the earlier notification recognising the Mysore palace as an official residence after the repeal of the 1922 Act and before the later amendment to section 297 of the Income-tax Act, 1961.

Analysis: The continuance of the earlier notification under section 297(2)(1) of the Income-tax Act, 1961 preserved the associated power to rescind it. The power to rescind was not newly created only by the 1972 amendment but was implicit in the power to issue the notification and recognised by section 21 of the General Clauses Act. The proviso to section 60A of the Indian Income-tax Act, 1922 was treated as limiting the exercise of the power to grant exemptions, not as the sole source of power to rescind.

Conclusion: The issue was decided against the petitioner and in favour of the Revenue.

Issue (ii): Whether the Central Government was estopped from issuing the withdrawal notification because the petitioner had allegedly leased out part of the palace at its instance.

Analysis: The pleadings did not establish a clear representation that the tax concession would remain immutable notwithstanding the lease. The impugned action was an exercise of statutory power, and estoppel does not ordinarily operate against the State in the exercise of sovereign or governmental functions, absent circumstances showing fraud or manifest injustice. The factual foundation for estoppel was held insufficient.

Conclusion: The issue was decided against the petitioner and in favour of the Revenue.

Issue (iii): Whether the withdrawal notification was invalid for hostile discrimination under article 14 of the Constitution of India.

Analysis: The challenge failed for want of specific pleadings and proof. The allegations of unequal treatment were general, were denied by the respondents, and did not identify comparable cases with sufficient precision. A constitutional challenge to executive action on the ground of discrimination requires specific factual foundation, which was lacking here.

Conclusion: The issue was decided against the petitioner and in favour of the Revenue.

Final Conclusion: The writ petition failed on all substantive grounds and the impugned withdrawal of exemption was sustained.

Ratio Decidendi: The power to rescind a notification continued under the saving clause and the General Clauses Act, and a challenge to executive action based on estoppel or article 14 discrimination must be supported by a sufficient factual foundation and cannot ordinarily defeat valid statutory power.

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