Supreme Court affirms Revenue's win on Section 35AC; rejects retrospective application.

The Supreme Court upheld the High Court's decision, ruling in favor of the Revenue. The Court found the insertion of sub-section (7) in Section 35AC to be prospective, not affecting deductions for previous financial years. It held that the appellant lacked standing to challenge the provision, and rejected arguments of promissory estoppel against legislative power. The Court dismissed claims of hardship and equity influencing tax statutes and declined to invoke Article 142, emphasizing adherence to the law.

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Issues Involved:
1. Constitutional validity of sub-section (7) of Section 35AC of the Income Tax Act, 1961.
2. Retrospective vs. prospective application of sub-section (7) of Section 35AC.
3. Appellant's locus standi to challenge the insertion of sub-section (7).
4. The plea of promissory estoppel against legislative power.
5. Hardship and equity in tax statutes.
6. Invocation of Article 142 of the Constitution.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Sub-section (7) of Section 35AC:
The appellant challenged the constitutional validity of sub-section (7) of Section 35AC, arguing that once the Committee granted approval to their hospital project for three financial years, this approval could not be withdrawn based on the new sub-section. The appellant contended that sub-section (7) should not apply to projects approved before its insertion.

2. Retrospective vs. Prospective Application of Sub-section (7) of Section 35AC:
The appellant argued that sub-section (7) is prospective and should not affect projects approved before its insertion. The Revenue countered that sub-section (7) is prospective and applies to all projects equally from the assessment year 2018-2019 onwards. The Court agreed with the Revenue, stating that the sub-section is prospective and does not affect deductions for the financial years 2015-2016 and 2016-2017.

3. Appellant's Locus Standi to Challenge the Insertion of Sub-section (7):
The Revenue argued that the appellant, not being an assessee, has no locus standi to challenge the insertion of sub-section (7). The Court noted that the real aggrieved parties would be the assessees (donors) who were denied deductions for donations made in the financial year 2017-2018. However, none of the assessees came forward to challenge the provision.

4. The Plea of Promissory Estoppel Against Legislative Power:
The appellant argued that the insertion of sub-section (7) violated the principle of promissory estoppel. The Court rejected this argument, citing precedents that promissory estoppel cannot be used against the exercise of legislative power, especially in tax matters.

5. Hardship and Equity in Tax Statutes:
The appellant claimed that the insertion of sub-section (7) caused hardship and inequity. The Court dismissed this argument, stating that equity and hardship are not valid grounds to challenge the constitutional validity of a taxing provision.

6. Invocation of Article 142 of the Constitution:
The appellant requested the Court to invoke Article 142 to allow donations for the third financial year. The Court declined, stating that equity and hardship do not apply in tax matters, and the action was in accordance with the law.

Conclusion:
The Supreme Court upheld the High Court's decision, agreeing with the Revenue's arguments. The Court found no merit in the appellant's submissions and dismissed the appeal. The insertion of sub-section (7) in Section 35AC was held to be prospective, and the plea of promissory estoppel was not applicable against legislative power. The Court also declined to invoke Article 142, emphasizing that equity and hardship do not influence tax statutes.

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