TaxTMI 
TaxTMI 
2017 (9) TMI 1237
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the petitioner, the petitioner set up its first operation at Rajkot providing free medical service to the poor which included operations for by-pass and valve replacement etc. at no costs. The petitioner survives entirely on donations. The petitioner thereafter set up hospitals at Puttaparthy and Bangalore providing similar services. 2.2 The petitioner wanted to set up another hospital at Ahmedabad for which a resolution was adopted on 27.09.2014 for construction of a heart hospital with 250 beds. In order to get maximum donations for the purpose of constructing a new hospital at Ahmedabad, the petitioner applied to the concerned authority being the National Committee for Promotion of Social and Economic Welfare, Department of Revenue, North Block, New Delhi ('the Committee' for short) for approval of the project which would qualify the donors to claim exemption under section 35AC of the Act. As per the application, the date of commencement of the project would be 05.05.2014 and the likely date of completion was 23.11.2015 with estimated capital cost of Rs. 52 crores and estimated revenue costs of Rs. 198 crores. By an order dated 08.12.2015, the Committee had approve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that the petitioner had prepared a project for setting up of a heart hospital at Ahmedabad at considerable capital costs which project was also approved by the Central Government for the purpose of Section 35AC of the Act. Midway through the implementation of the project the deduction came to be withdrawn. Counsel submitted that the petitioner has been providing free medical aid to large number of poor and needy patients at various hospitals already set up by the trust. Sudden withdrawal of the benefit would make the project in question unviable. The benefit is withdrawn by the legislature without citing any reason. The provision is therefore required to be read down. 3.1 In support of his contentions, counsel relied on the following decisions: (1) Binoy Viswam vs. Union of India and Others reported in [2017] 396 ITR 66 (SC) in which the Supreme Court in the context of the requirement of quoting of Aadhar number while filing the return of income upholding such a requirement provided under section 139AA of the Act held that such provision cannot be read retrospectively. It was observed that if failure to indicate the Aadhar number renders the Permanent Account Number ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re. There is no promise held out that the deduction shall continue for all times to come. In any case there cannot be an estoppel against the statute. Even reading down the provision as suggested by the petitioner would result into great uncertainty and anarchy since many similar projects and schemes would have a span of number of years. 4.1 Counsel relied on the following judgements: (I) R.K. Garg vs. Union of India and Others reported in (1981) 4 SCC 675 in which the Supreme Court observed that every legislation particularly in economic matters is essentially empiric and is based on experimentation. The court must adjudge the constitutionality of such legislation by the generality of its provisions. Laws relating to economic activities should be viewed with greater latitude than other laws. It was also observed that there is always a presumption in favour of the constitutionality of the statute and the burden is upon one who attacks it to show that there has been a clear transgression of the constitutional principles. (II) Case of M/s. Seema Silk and Sarees and Another vs. Directorate of Enforcement and Others reported in AIR 2008 SC 2564 was cited to contend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,- (a) the approval granted to such association or institution has been withdrawn; or (b) the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn.] (3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year. [(4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently- (i) that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (1) in respect of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee under sub-section (5), the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub-section (2) or the deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year.] Explanation.-For the purposes of this section,- (a) "National Committee" means the Committee constituted by the Central Government, from amongst persons of eminence in public life, in accordance with the rules made under this Act; (b) "eligible project or scheme" means such project or scheme for promoting the socia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ittee. 7. This was broadly the scheme of deduction under section 35AC of the Act. Sub-section (7) which was inserted with effect from 01.04.2017 withdrew the exemption by providing that no deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018. 8. In plain terms, thus, this provision discontinued the deduction available under section 35AC from the assessment year commencing on or after 01.04.2018. In other words, any expenditure incurred after 01.04.2017 would no longer be eligible for deduction under the said section. The fact that the parliament had the competence to enact the said provision has nowhere been disputed before us. It is not even the stand of the petitioner that the parliament which granted the deduction could not have withdrawn it. In plain terms, a deduction is in the nature of waiver to a limited extent from payment of tax. In absence of such a deduction, the assessee incurring such expenditure would have to account for the full amount to tax. In order to encourage donations for or direct expenditure in certain approved projects or schemes meant for promoting social and economic welfa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umption, judicially recognised and accepted, that the legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation. 8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. .... ... The court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry" that exact wisdom and nice adoption of remedy are not always possible and that "judgment is largely a pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... importers interalia on the ground that it breached the principle of promissory estoppel. Rejecting the challenge, the Supreme Court observed that the doctrine of promissory estoppel is part of the administrative law and is applicable against the Government also to prevent fraud and injustice and such doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the public authority to its promise, assurance or representation. It was observed that an exemption notification does not make the items which are subject to levy of customs duty as not leviable. It only suspends the levy and collection of customs duty wholly or partly as the case may be. Under section 25 of the Customs Act, if the Government had the power to grant exemption it also had the power to withdraw the same. 11. In case of Kothari Industrial Corporation (supra), the court held that the Government had the power to determine what should be the policy for grant or refusal of concessional power to different units. In case of Kanak Exports (supra), the court observed that an incentive scheme promulgated by the Governmen....