TaxTMI 
TaxTMI 
2007 (10) TMI 173
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....Shri Jagannath Temple Managing Committee (hereinafter, the "said committee"), the petitioner herein, has been constituted by the State government under the provisions of the Shri Jagannath Temple Act, (Orissa Act II of 1955) (hereinafter, the "Act of 1955"). The Act of 1955 was assented to by the President of India on October 15, 1955. 3 From a perusal of the preamble of the Act of 1955, it is clear that the temple of Lord Jagannath of Puri, since its inception has been and still is an institution of unique national importance and attracts millions of Hindu devotees from all over the world. The temple stands as a symbol of Hindu religious traditions and an icon of faith, belief and worship for countless idu devotees all over the world. As such in order to properly organize its management and to formulate a scheme of running the affairs of the temple, the Act of 1955 was enacted. 4 The Committee, i.e., the petitioner is a body corporate under the said Act of 1955 and having a perpetual succession and a common seal, and can sue and be sued in its own name. This Committee is constituted under section 5 and under section 6 thereof, the Committee shall consist of a large number of....
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....her assets belonging to the temple. 6 After pointing out the aforesaid features of the said Act, learned counsel for the petitioner submitted that keeping in view the said provision, exemption was allowed under section 10(23BBA) of the Income-tax Act which was introduced in the year 1979 by the Finance Act with retrospective effect from April 1, 1962. 7 Section 10 of the Income-tax Act provides that in computing the total income of a previous year of any person, any income indicated in any of the clauses in section 10 including clause (23BBA) shall not be included. 8 The purpose of introduction of the said provision is to unconditionally exempt the income of statutory bodies which are entrusted with the administration of public, religious or charitable institution and are not engaged in commercial activities. The said section 10(23BBA) is set out herein below :- "(23BBA) any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which pro vides for the administration of any one or more of the following, that is to say, public religious or charitable trus....
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....income of the Lord Shri Shri Jagannath Temple, Puri, Orissa, is exempted from income-tax under section 10(23BBA) of the Income-tax Act, 1961, with effect from April 1, 1962. The said letter dated August 17, 1995, has been disclosed as annexure 1 to the petition. 12 The petitioner's case is that under section 5 read with section 33 of the said Act all the endowments of Shri Jagannath Temple are vested in the petitioners, managing committee. Therefore, whether the endowments of the temple can be subjected to income-tax and, therefore, necessitating tax deduction at source (TDS) in view of the statutory exemption provided under section 10(23BBA) of the Act has to be examined in the light of section 5 of the said Act. 13 While annexure 1 remained in force, suddenly, opposite party No. 2 by letter dated September 18, 2006, called for various details including the details of deduction of tax at source from the petitioner and the petitioner was callcd upon to furnish the details by October 4, 2006. Thereafter, opposite party No. 2 issued the impugned order dated October 12, 2006, withdrawing the exemption granted under the letter dated August 17, 1995, whereby the petitioner was for....
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.... have been treated as assessees-in-default. 15 The stand of learned counsel for the Revenue-opposite parties is that, the temple administration by letter dated October 20, 2006, addressed to opposite party No. 2 informed the said opposite party that section 10(23BBA) is applicable retrospectively from 1962 as explained in the Central Board of Direct Taxes Circular No. 258, dated June 14, 1979, and no exemption was claimed by the temple administration. Therefore, it has been contended that if the same is the stand of the petitioner, then with wal of the letter dated August 17, 1995, issued by the Assistant commissioner of Income-tax, Bhubaneswar, by letter dated October 12, of the Income-tax Officer suffers from no legal infirmity. 16 It was also urged that the notice under section 142(1) of the Act dated October 13, 2006, which was issued to the temple administration by the Revenue for furnishing the return by the managing committee of Shri Jagannath Temple, is neither illegal nor without jurisdiction as the temple administration was required to file a return under the provisions of the Income-tax Act before claiming exemption under section 10(23BBA) of the Act. The sta....
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....e-tax Act, 1961. The said action against the bankers cannot be impugned in the instant writ petition which is wholly premature and a misconceived one. 17 These are the rival contention. 18 Coming to the order dated October 12, 2006, which was issued by the Revenue purporting to withdraw the exemption which was granted to the petitioner, it is clear that the said order was passed without recording any reason, without giving any prior hearing and the said order was passed in a peremptory manner and was given immediate effect. Along with the said order dated October 12, 2006, several other orders were passed on the different banks on the very same day directing them to deduct the tax on interest and impose TDS in so far as the petitioner is concerned. Therefore, those consequential orders appear to have been passed in order to implement the impugned order of withdrawal of exemption. 19 Now, the question is whether such an order withdrawing the exemption can be passed without giving the petitioner an opportunity of hearing. Admittedly, the said order was passed changing the petitioner's status relating to grant of exemption from payment of income-tax which th....
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....ve been reiterated in the case of Shekhar Ghosh v. Union of India reported in [2007]1 SCC 331. 23 In the instant case, this court finds that the post-decisional hearing which has been sought to be given by the Revenue is more or less in the form of an idle ceremony, since the authorities had already issued the impugned order withdrawing exemption, coupled with an attempt to implement the same immediately. This makes it very clear that they are determined to implement the order of withdrawing the exemption. Therefore, the impugned order having been passed without giving the petitioner an opportunity of hearing, is violative of the basic tenets of natural justice and cannot be sustained and the same is liable to be quashed. 24 Learned counsel for the opposite party very much relied on the provision of section 10(23BBA) in order to contend that in any event no exemption is available to the petitioner. This court is unable to accept the aforesaid contention. The purpose of incorporating the said exemption was explained in the memo to the Finance Bill of 1979 (see [1979]116 ITR (St.) 108). In paragraph 69 of the said memo, it has b provided as follows (page 125): "In case....
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....mption is not extended to any trust, endowment or the society which are created by parties. 26 It is not in dispute that in the instant case the petitioner is a body corporate with perpetual succession and a common seal and is created by section 5 of the said Act (Orissa Act 11 of 1955) and which has received the assent of the President on October 15, 1955. Therefore, the proviso to section 10(23BBA) does not apply to the petitioner and the exemption which has been granted to the petitioner under section 10(23BBA) is a total unconditional exemption. 27 It is not in dispute that the temple and all its endowment have vested in the petitioner, namely, the Committee which was set up under section 5 read with section 6 of the said Act. Section 10 (23BBA) of the Income-tax Act mandates that any income of a body like the petitioner is "unconditionally exempt" from the levy of income-tax. A perusal of section 10 would indicate that other exempted incomes require the satisfaction of certain conditions for substantiating that claim of exemption and, therefore, can be termed as "conditional ex This aspect has been clarified by the Central Board of Direct Ta....
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....in the case reported in [1999] 237 ITR 889 (UCO Bank v. CIT) that the circulars of the Central Board of Direct Taxes are legally intended to ensure proper administration of the statute. The status of such circular has been very succinctly laid down in page 896 of the report as follows :- "The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act." 30 In coming to the aforesaid conclusion the learned judges also relied on the five-judge Bench decision in the case of Navnit Lai (C.) Javeri v. K. K. Sen. AAC reported in [1965] 56 ITR 198 (SC). 31 In so far as the Revenue's direction for deduction of tax at source is concerned reference may be made to section 139(4C). In the said provision it has been made clear that certain institutions which are allowed exemption under section 10 are not to file return of income, Under the amendment, the income of the body or authority which is created under the Central or State Act for administering public religio....