Income Tax Act, 1961 – Sub-section 7 of s.35AC – Validity of – In the year 2014 appellant filed an application u/s. 35AC to the National Committee for promotion of social and economic welfare for grant of approval to their hospital project so as to enable any ‘assessee’ to incur expenditure by way of making payment of any amount to the appellant for construction of their approved hospital project and accordingly claim appropriate deduction of such payment from his total income during the previous year – Government approved 28 Projects ‘eligible projects’ including the project of appellant u/s. 35AC – Appellant received donations from several assessees during the years 2015-2016 and 2016-2017 – Assessees claimed deduction for the said financial years – However, benefit of deduction was discontinued from the assessment year 2018-2019 by insertion of sub-section 7 of s.35AC – Appellant urged that they were not able to receive more amount by way of donation for their project in the financial year 2017-2018 – Writ petition by appellant challenging the Constitutional validity of subsection 7 of s.35 – High Court repelled the challenge and dismissed the petition – On appeal, held: The real aggrieved parties, which should have felt aggrieved by insertion of sub-section (7) in s. 35AC of the Act, were those assessees i.e. donors who despite paying the donation to the appellant were not allowed to claim deduction of the said amount from their total income during the financial year 2017-2018 (Assessment year 2018-2019) – However, none of the assessees have complained – Further, neither the appellant nor the assessees has any right to set up a plea of promissory estoppel against the exercise of legislative power such as the one exercised while inserting sub-section 7 in section 35AC of the Act – Also, this sub-section was made applicable uniformly to all alike the appellant prospectively – Time to donate the amount to eligible projects for claiming deduction for the year 2017-2018 has also expired – Thus, no deduction could be allowed to such assessee for period 20172018 – In a tax matter, neither any equity nor hardship has any role to play while deciding the rights of a taxpayer qua the Revenue – Therefore, no interference required with the impugned order of the High Court.
Dismissing the appeal, the Court
HELD : 1. It is not in dispute that 28 projects were approved by the Committee by notification dated 07.12.2015 but none of them (27) has come forward to question the constitutional validity of sub-section (7) except the appellant herein. In other words, out of 28 projects owners whose projects were approved by the Committee by notification dated 07.12.2015, only the appellant herein has felt aggrieved and filed the petition in the High Court. Be that as it may, as rightly argued by the respondent (Revenue), the real aggrieved parties, which should have felt aggrieved by insertion of sub-section (7) in Section 35AC of the Act, were those assesses, i.e., Donors who despite paying the donation to the appellant were not allowed to claim deduction of the said amount from their total income during the financial year 2017-2018. In other words, one of the main objects for which Section 35AC was enacted was to allow the assessees to claim deduction of the amount paid by them to the appellant for their project. [Paras 19, 20, 21] [840-B-E]
2. As mentioned above, none of the assessees (Donee), who claimed to have paid amount to any eligible projects came forward complaining that despite their donating the amount to the appellant for their project, they were denied the benefit of claiming deduction of such amount from their total income by virtue of sub-section (7) of Section 35AC of the Act during the financial year 2017-2018. It is not in dispute that the benefit of the deduction available under Section 35AC of the Act was duly availed of by all the assessees for two financial years, namely, 2015-2016 and 2016-2017. [Paras 22, 23] [840-E-F]
3. The dispute is now confined only to third financial year, i.e., 2017-2018 because for this year, the assessees were not allowed to claim deduction of the amount paid by them to the appellant on account of insertion of sub-section(7) in Section 35AC of the Act with effect from 01.04.2017. [Para 24] [840-G-H]
4. As rightly argued by the respondent (Revenue), a plea of promissory estoppel is not available to an assessee against the exercise of legislative power and nor any vested right accrues to an assessee in the matter of grant of any tax concession to him. In other words, neither the appellant nor the assessee has any right to set up a plea of promissory estoppel against the exercise of legislative power such as the one exercised while inserting sub-section (7) in Section 35AC of the Act (M/s Motilal Padampat Sugar Mills Co. Ltd. and other cases relied on by the counsel for the respondent-Revenue). It is more so when this Court finds that this sub-section was made applicable uniformly to all alike the appellant prospectively. [Para 26] [841-C-D]
5. It is not in dispute that now time to donate the amount to eligible projects for claiming deduction from the total income for the year 2017-2018 has expired. It is now no longer available due to efflux of time. In this view of the matter, even if the appellant received any amount from any assessee for their project, no deduction could be allowed to such assessee either for the period 2017-2018 or for any subsequent period. [Para 27] [841-E]
6. It was, however, stated by the appellant that they have received 3.84 crores during the year 2017-2018 from various assessees. It was also stated that if sub-section(7) had been held not applicable to the appellant’s project then the appellant would have received much more amount than Rs.3.84 crores during the financial year 2017-2018, which is clear from the amount received by the appellant in earlier two years prior to insertion of sub-section(7), i.e., Rs. 10.97 crores during the financial year 2015-2016 and Rs. 20.55 crores during the financial year 20162017. There is no merit in this submission. In a taxing statute, a plea based on equity or/and hardship is not legally sustainable. The constitutional validity of any provision and especially taxing provision cannot be struck down on such reasoning. [Paras 28, 29] [841-F-H; 842-A]
7. The appellant urged that this Court may consider appropriate to invoke powers under Article 142 of the Constitution and allow the appellant to receive donation even for the third financial year in terms of the notification dated 07.12.2015 from their donors. This submission cannot be accepted for more than one reason. First, in tax matter, neither any equity nor hardship has any role to play while deciding the rights of any taxpayer qua the Revenue; Second, once the action is held in accordance with law and especially in tax matters, the question of invoking powers under Article 142 of the Constitution does not arise; and third, the appellant’s Donors were admittedly allowed to claim deduction of the amount paid by them to the appellant under Section 35AC during the two financial years 20152016 and 2016-2017. It is for all these reasons, the matter must rest there. [Paras 30, 31] [842-B-D]
S.L. Srinivasa Jute Twine Mills (P) Ltd. v. Union of India & Anr., (2006) 2 SCC 740 : [2006] 2 SCR 235 ; Sangam Spinners v. Regional Provident Fund
Commissioner I, (2008) 1 SCC 391 : [ 2007] 12 SCR 883 ; Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Pvt. Ltd. (2015) 1 SCC
1 : [2014] 12 SCR 1037 ; State of Kerala & Anr. v. Gwalior Rayon Silk Manufacturing (WVG.) Co. Ltd. Etc., (1973) 2 SCC 713 : [ 1974] 1 SCR 671 ; Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. & Ors., (1979) 2 SCC 409 : [1979] 2 SCR 641 ; R.K. Garg v. Union of India & Ors., (1981) 4 SCC 675 : [1982] 1 SCR 947 ; Kasinka Trading & Anr. v. Union of India & Anr., (1995) 1 SCC 274 : [ 1994] 4 Suppl. SCR 448 ; Bannari Amman Sugars Ltd. v. Commercial Tax Officer & Ors., (2005) 1 SCC 625 : [2004] 6 Suppl. SCR
264 ; Shree Sidhbali Steels Ltd. & Ors. v. State of U.P. & Ors., (2011) 3 SCC 193 : [2011] 3 SCR 134 ; Bajaj Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd. & Anr., (2011) 1 SCC 640 : [2010] 15 SCR 156 ; Kothari Industrial Corporation Ltd. v. Tamil Nadu Electricity Board & Anr., (2016) 4 SCC 134 : [2016] 1 SCR 564 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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