Court orders withdrawal of approval under Section 10(23C) and processing under Section 10(46) for petitioners.

The court allowed the writ petitions, directing the 2nd respondent to withdraw the approval granted to the petitioners under Section 10(23C) with effect from the date of their applications for notification under Section 10(46). The 2nd respondent was also instructed to process the petitioners' applications for notification under Section 10(46) from the relevant previous year. Pending miscellaneous petitions were closed, with no order as to costs.

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Issues Involved:

1. Eligibility for notification under Section 10(46) of the Income Tax Act, 1961.
2. Validity of denial of exemption under Section 10(46) despite existing approval under Section 10(23C)(iv).
3. Power to withdraw exemption under Section 10(23C)(iv) at the behest of the assessee.
4. Interpretation of the provisions of Section 10(23C)(iv) and Section 10(46) of the Income Tax Act.
5. Applicability of Section 293C of the Income Tax Act regarding the withdrawal of approval.

Detailed Analysis:

1. Eligibility for Notification under Section 10(46) of the Income Tax Act, 1961:

The petitioners, Telangana State Pollution Control Board (TSPCB) and Andhra Pradesh Pollution Control Board (APPCB), argued that they are eligible for notification under Section 10(46) of the Income Tax Act, 1961, due to their establishment under Central Acts, their constitution by State Governments, their activities benefiting the general public, and their non-engagement in commercial activities. The petitioners submitted applications for notification under Section 10(46) on 07.03.2017 and 08.03.2017, respectively, claiming they satisfy the conditions specified under this section. Despite similar Pollution Control Boards being notified under Section 10(46), the petitioners' applications were not considered.

2. Validity of Denial of Exemption under Section 10(46) Despite Existing Approval under Section 10(23C)(iv):

The respondents contended that the petitioners are not eligible for notification under Section 10(46) because they already have approval under Section 10(23C)(iv). The respondents referenced the 18th proviso to Section 10(23C), which they interpreted as preventing the petitioners from availing benefits under Section 10(46).

3. Power to Withdraw Exemption under Section 10(23C)(iv) at the Behest of the Assessee:

The court examined whether the petitioners could request the withdrawal of their approval under Section 10(23C)(iv). The respondents argued that the approval under Section 10(23C)(iv) is in perpetuity and can only be withdrawn by the prescribed authority, not at the behest of the assessee. The court found no provision in the Act expressly restricting an assessee from surrendering approval obtained under Section 10(23C)(iv).

4. Interpretation of the Provisions of Section 10(23C)(iv) and Section 10(46) of the Income Tax Act:

The court analyzed the differences between Section 10(23C)(iv) and Section 10(46). Section 10(23C)(iv) involves approval by the prescribed authority, allowing an assessee to claim exemption subject to scrutiny. In contrast, Section 10(46) provides automatic exemption for specified income once notified by the Central Government. The court noted that the petitioners could choose the more beneficial provision and that the respondents' interpretation restricting withdrawal of approval under Section 10(23C)(iv) was not tenable.

5. Applicability of Section 293C of the Income Tax Act Regarding the Withdrawal of Approval:

The court referred to Section 293C of the Income Tax Act, which allows the Central Government, the Board, or an income-tax authority to withdraw approval at any time, even if the provision does not specifically provide for such withdrawal. The court concluded that the power to withdraw approval under Section 10(23C)(iv) encompasses requests from the assessee, and the respondents' contrary view was incorrect.

Conclusion:

The court allowed the writ petitions, directing the 2nd respondent to withdraw the approval granted to the petitioners under Section 10(23C) with effect from the date of their applications for notification under Section 10(46). The 2nd respondent was also instructed to process the petitioners' applications for notification under Section 10(46) from the relevant previous year. Pending miscellaneous petitions were closed, with no order as to costs.

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