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Ramdas Maneklal Gandhi Vs. the Union of India and Another - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWrit Petition No. 957 of 1990
Judge
Reported in1999(4)ALLMR539; 2000(1)BomCR581; (2000)161CTR(Bom)398; [2000]241ITR437(Bom); 2000(2)MhLj74
ActsIncome Tax Act, 1961 - Sections 35 and 148; Constitution of India - Article 226
AppellantRamdas Maneklal Gandhi
RespondentThe Union of India and Another
Appellant AdvocateJ.D. Mistry, ;D.P. Desai i/b. ;M.K. Ambalal & Co., Advs.
Respondent AdvocateR.V. Desai and ;P.S. Jetly, Advs.
Excerpt:
- - the law is now well-settled that the assessee is entitled to rely upon the certificate granted by the prescribed authority under section 35-cca of the act to the institution or association to which it had donated a sum of money for claiming deduction under that section which was valid and subsisting at the time the donation was made......donation of rs. 1,00,000/- made to the society for integral development which was approved by the prescribed authority at that time. later, the certificate issued to the said society was withdrawn by the prescribed authority on 3rd march 1987 with retrospective effect from 13th december 1982. the impugned notice under section 148 of the act was issued to disallow the deduction granted to the assessee under section 35-cca of the act, as according to the income-tax officer, the assessee was not entitled to deduction in view of the withdrawal of the certificate granted to the society for integral development by the prescribed authority with retrospective effect from 13th december 1982. the case of the respondents is that in view of the withdrawal of the certificate granted to the above.....
Judgment:
ORDER

Dr. B.P. Saraf, J.

1. By this writ petition, the petitioner seeks to challenge the notice dated 29th March, 1988 issued by the Income-tax Officer under section 148 of the Income-tax Act, 1961 ('Act') for the assessment year 1985-86. The case of the petitioner is that the condition precedent for the issuance of the notice under section 148 of the Act does not exist in this case and hence the notice is without jurisdiction.

2. The respondents have filed affidavit wherein they have given the reason for issue of the notice under section 148 in the instant case. The reason shown is that the assessee had claimed deduction under section 35-CCA of the Act in respect of donation of Rs. 1,00,000/- made to the Society for Integral Development which was approved by the prescribed authority at that time. Later, the certificate issued to the said society was withdrawn by the prescribed authority on 3rd March 1987 with retrospective effect from 13th December 1982. The impugned notice under section 148 of the Act was issued to disallow the deduction granted to the assessee under section 35-CCA of the Act, as according to the Income-Tax Officer, the assessee was not entitled to deduction in view of the withdrawal of the certificate granted to the Society for Integral Development by the prescribed authority with retrospective effect from 13th December 1982. The case of the respondents is that in view of the withdrawal of the certificate granted to the above Society under section 35-CCA of the Act, the deduction given to the petitioner under that section in respect of the donation of Rs. 1,00,000/- made to the said Society was not an allowable deduction and the notice has been issued to withdraw the allowance wrongly made.

3. We have heard the learned Counsel for the parties. There is no dispute about the fact that the assessee had made a donation of Rs. 1,00,000/- to the Society for Integral Development. It is also the admitted position that the prescribed authority had issued certificate to the above Society to the effect that the programme of rural development had been approved by it before the 1st day of March 1983 and that certificate was furnished by the assessee in support of its claim for deduction under section 35-CCA of the Act and on that basis the assessee was entitled to get deduction which was allowed by the assessing officer in the original assessment for the assessment year 1985-86. The only case of the respondents is that the assessee is not entitled to deduction under section 35-CCA of the Act in view of the withdrawal of the certificate issued by the prescribed authority to the concerned Society with retrospective effect from 13th December 1982. The withdrawal as made on 3rd March 1987.

4. We have heard Mr. J.D. Mistry, learned Counsel for the petitioner as also Mr. R.V. Desai, learned Counsel for the respondents. We have perused the facts of the case. The only question that arises in this case is whether the assessee is entitled to get deduction under section 35-CCA of the Act on the basis of the certificate granted to the Society by the prescribed authority under section 35-CCA of the Act which was valid and operative in the previous year relevant to the assessment year under consideration despite withdrawal of the same by the prescribed authority subsequently with retrospective effect. The law is now well-settled that the assessee is entitled to rely upon the certificate granted by the prescribed authority under section 35-CCA of the Act to the institution or association to which it had donated a sum of money for claiming deduction under that section which was valid and subsisting at the time the donation was made. The retrospective withdrawal and/or cancellation of the certificate will have no effect upon the assessee who has acted upon it when it was valid and operative.

5. Reference may be made in this connection to the decision of the Supreme Court in State of Maharashtra v. Suresh Trading Company, : (1997)11SCC378 . In that case also the controversy before the Supreme Court was whether the retrospective cancellation of the certificate of registration granted to a purchasing dealer under the Bombay Sales-tax Act, 1959 would affect any person who had acted upon the strength of such certificate when it was current. The Supreme Court held:

'In our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a state of facts exists which would justify the cancellation of registration must be rejected. To accept it would be to nullify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates.'

The ratio of the above decision squarely applies to the present case.

6. In the premises, we are of the clear opinion that there is no escapement of income of the assessee as a result of the allowance of deduction under section 35-CCA of the Act in the previous year relevant to the assessment year under consideration. The impugned notice of the Income-tax Officer dated 29th March 1988 issued under section 148 of the Act is, therefore, quashed and set aside. Writ petition is allowed with no order as to costs.

7. Petition allowed.


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