B.K. Mehta, J.
1. A short but interesting question which arises in this petition is as to what is the scope and ambit of s. 35CCA of the I.T. Act, 1961, and particularly sub-s. (2)(b) thereof as amended by the Finance Act, 1983, with effect from April 1, 1983. The question arises in the following context.
2. The petitioner is a public charitable trust constituted under the deed of trust dated November 23, 1972, having several public charitable objects. It is registered under the Bombay Public Trust Act, 1950, and is also granted recognition under s. 80G of the I.T. Act, 1961 (hereafter referred to as 'the Act'), by the I.T. Department from time to time. It appears that the petitioner had decided to set up a well-equipped hospital of 100 beds in a phased manner at an estimated cost exceeding Rs. 1 crore for the general public in a rural area at village Utaraj, within Hansot Taluka of Broach District. It should be recalled that by the Finance Act, 1978, s. 35CCA was enacted and put on the statute book with effect from June 1, 1978. Broadly stated, the scheme of s. 35CCA, before its amendment as inserted by the aforesaid Finance Act, 1978 was that an assessee was entitled to claim, for the purpose of computation of his income or profits of business, as the case may be, deduction of expenses incurred on account of donation to any institution or association which has as its object the undertaking of any programme of rural development, provided both the programme and the association or institution were approved. Accordingly, the petitioner-trust had, by its application dated March 1, 1980, sough t approval of its project of establishing 100 beds' rural hospital in village Utaraj. The Commissioner of Income-tax, Gujarat, had granted approval to the petitioner-trust as well as its programme. This approval was effective for the period commencing from March 7, 1980, to March 31, 1981. The petitioner, therefore, again applied for the renewal of approval by its application dated January 20, 1981, which approval was also granted to the petitioner-trust as well as its aforesaid programme by the Commissioner of Income-tax, Gujarat Circle I, Ahmedabad, by his letter dated March 20, 1981. This approval was valid and effective up to March 31, 1983. Before the expiry of the said approval, by the Finance Act, 1983, s. 35CCA as it then stood, was repealed and an altogether new provision was substituted as s. 35CCA with effect from April 1, 1983. Broadly stated, the purpose underlying the new s. 35CCA was that there would not be any fresh approval for any rural development programme to be undertaken by any association or institution. However, the Legislature permitted the rural development programme which has commenced to be completed on certain conditions. One of the conditions which would enable the assessee to claim deduction of the expenses incurred by way of donation to such an association or institution after March 1, 1983, is the production of a certificate issued by the association or institution as prescribed under new s. 35CCA. However, it has been provided in the said section that it is only the authorised institution or association which can issue the certificate. It is with that view of obtaining an authorization that the petitioner-trust applied to the Chief Commissioner of Income-tax, Gujarat Circle, vide its application dated April 17, 1983. It should be noted that before making the application for authorisation, the petitioner-trust had by its application dated March 18, 1983, applied for renewal of the approval to the trust as well as its programme as was hitherto done under old s. 35CCA. It appears that the Commissioner made a reference to the CBDT for clarification as to whether approval can be renewed for an institution for the work already started before March 1, 1983. By the letter of September 14, 1983, the Commissioner of Income-tax, Gujarat Circle I, Ahmedabad, intimated the petitioner-trust that the CBDT has clarified that s. 35CCA now does not envisage renewal of any programme approved by the prescribed authority and hence no renewal of approval can be granted in the case of the petitioner-trust. It is this communication of the Commissioner which required the petitioner-trust to move this court for appropriate writ, order or direction enjoining the respondents to renew the approval to the petitioner's rural development project for a further period and grant authorisation to the petitioner to issue certificates to the donors in this behalf.
3. Since the petitioner trust was expecting certain donations before the close of Samvat year, the matter was taken up for urgent hearing, and rule was issued and made returnable today. No reply has been filed on behalf of the respondents since this petition involved merely a question of interpretation of new s. 35CCA.
4. We are of the opinion that this petition must be allowed obviously for the following reasons.
5. Before we briefly describe the scheme incorporated in new s. 35CCA, it would be profitable to set out the material part of the section which is relevant for our purposes.
'35CCA. (1) Where an assessee incurs any expenditure by way of payment of any sum -
(a) to an association or institution which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved by the prescribed authority; or
(b) to an association or institution, which has as its object the training of persons for implementing programmes of rural development; or
(c) to a rural development fund set up and notified by the Central Government in this behalf.
the assessee shall, subject to the provision of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year.
(2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution referred to in the said clause unless the assessee furnishes a certificate from such association or institution to the effect that -
(a) the programme of rural development had been approved by the prescribed authority before the 1st day of March, 1983; and
(b) where such payment is made after the 28th day of February, 1983, such programme involves work by way of construction of any building or other structure (whether for use as a dispensary, school, training or welfare centre, workshop or for any other purpose) or the laying of any road or the construction or boring of a well or tube-well or the installation of any plant or machinery, and such work has commenced before the 1st day of March, 1983.
(2A) The deduction under clause (b) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution unless the assessee furnishes a certificate from such association or institution to the effect that -
(a) the prescribed authority had approved the association or institution before the 1st day of March, 1983; and
(b) the training of persons for implementing any programme of rural development had been started by the association or institution before the 1st day of March, 1983.
(2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by any association or institution unless such association or institution has obtained from the prescribed authority authorisation in writing to issue certificates of such nature. Explanation. - For the purpose of this section, 'programme of rural development' shall have the meaning assigned to it in the Explanation to sub-section (1) of section 35CC....'
6. Broadly stated the scheme of the new s. 35CCA is that an assessee will be entitled to deduction of expenses incurred on account of donation made to any institution or association for the purposes of approved rural development programme or for the training of persons for implementing programmes of rural development or to a rural development fund set up and notified by the Central Government. However, the deduction is not absolute but conditional depending upon the requisite certificate to be produced by an assessee. In so far as the deduction claimed for an expenditure by way of payment of any sum to any institution or association for the purpose of utilising it for the implementation of approved rural development programme is concerned, the certificate must be to the effect that the rural development programme was already approved before March, 1983, and if the payment is made after 28th February, 1983, it must be for the purposes of the capital cost of construction of any building or structure or laying of a road or boring of a well or tube-well or installation of any plant or machinery, the work in respect of which must have commenced before March 1, 1983. Such a certificate is to be obtained from the institution or association which has as its object the undertaking of any programme of rural development. But before the institution or association concerned can issue such a certificate, it must have been authorised in that behalf by the prescribed authority.
7. It is in the context of this new scheme contained in s. 35CCA that the petitioner applied for authorisation to issue requisite certificate so as to enable its donors to claim deduction of expenses incurred by them on account of payment of any sum to the petitioner-trust after February 28, 1983, in the assessment of their income or profits or gains of business, as the case may be. The Commissioner of Income-tax, Gujarat, made a reference to the CBDT possibly because the petitioner-trust had, before making the application for authorisation, applied for renewal of the approval of its programme and to the institution. This is brone out from the letter addressed to the petitioner-trust by the Commissioner dated August 16, 1983, wherein he had referrerd to the application of the petitioner-trust and decided that since the approved period of the rural development programme has been over by March 31, 1983, issue of authorisation under s. 35CCA(2B) will be considered on receipt of the clarification from the CBDT as to whether the renewal of approval can be given or not. With respect to the Commissioner, we are of the opinion, that the scheme of new s. 35CCA, as has been rightly advised by the CBDT, does not envisage of fresh approval of the programme or the institution. The legislative intent manifested by the scheme incorporated in s. 35CCA appears to be clearly that those institutions or associations who have already commenced executing or implementing the approved rural development programme, should not be starved of funds provided they satisfy certain conditions. One of the conditions, as mentioned above, requires an assessee to produce a certificate before he can claim the deduction for expenses by way of payment to such institution or associations for the purpose of utilising it in the rural development programme. The prescribed certificate must state that the rural development programme has been already approved before March 1, 1983, and if the payment is made after February 28, 1983, it must be for the purpose of capital cost of construction which construction must have commenced before March 1, 1983. In order that the certificate will have some presumptive value, it is prescribed that the institution or association to which payment is made is authorised by the prescribed authority to issue such a certificate. The requirement of the approval to the institution or programme as envisaged in old s. 35CCA and the authorisation which is now to be accorded to the institution for the purpose of issuing a certificate under new s. 35CCA operate in different fields altogether. The approval which was envisaged to the programme as well as to the institution under old s. 35CCA was for the purpose of enabling the assessee to claim deduction on account of any expenses made by way of payment to such an institution or association. The authorisation which has now been envisaged under s. 35CCA is to empower the institution or the association to issue certificate so as to enable the assessee concerned to claim deduction on account of such expenses. The learned counsel for the Revenue, therefore, attempted to persuade us that the prescribed authority must examine and decide whether the two conditions of the certificate as required by sub-s. (2) of s. 35CCA are satisfied by the institution or association concerned before it can be granted the authorisation. We are afraid that we cannot agree with the learned counsel for the simple reason that the conditions of the certificate whcih are for the purpose of enabling an assessee to claim deduction cannot be considered to be conditions precedent for grant of authorisation. We are, therefore, of the opinion that the Commissioner was clearly not justified in construing the clarification of the CBDT as a ground for refusing authorisation to the petitioner-trust. The petitioner-trust was an approved institution and its programme of setting up 100 beds' hospital in the rural area was also an approved programme which approval was effective up to March 31, 1983. The Commissioner was not required to renew the approval to the institution or the programme but as a matter of fact he was required to grant authorisation to the petitioner-trust so as to enable it to issue certificate to is donors so that they may be able to claim deduction on account of expenses incurred by them by giving donations to the petitioner-trust after February 28, 1983. We do not mean to say that every and any institution which has as its object the rural development programme is entitled to the authorisation under sub-s. (2B). In the very nature of the legislative history of this section, the Commissioner is duty bound to give authorisation only to those institutions or associations which are approved and which have undertaken and are implementing approved rural development programme after March 1, 1983. Our view is fortified by sub-ss. (2) and (2A). The said sub-sections provide that the deduction under sub-s. (1)(a) or (1)(b) shall not be allowed for payment to institutions or associations referred to in the said clause unless certificate is produced from such institution or association. The word 'such' gives an indication that the institution or association must be such which must be carrying on, in furtherance of its objects, the approved rural development programme. If, therefore, any such institution or association approaches the prescribed authority it cannot be refused the authorisation on the ground that new s. 35CCA does not envisage of renewal of the approval to the institution and/or to the programme. Such a refusal would be entirely on irrelevant and non-existent ground. The Commissioner has no doubt the power to issue authorisation, but it is coupled with a duty and, therefore, he cannot refuse to exercise the power on the ground which would frustrate the legislative scheme. In that view of the matter, we are of the opinion that the petitioner-trust being an institution already approved and having undertaken the rural development programme which has also been already approved before March 1, 1983, is entitled to get authorisation from the prescribed authority.
8. In the result, we allow this petition, and direct respondents Nos. 1 and 2 to issue authorisation to the petitioner-trust before November 3, 1983, so as to enable it to issue the certificates to their donors so as to enable them to claim deduction on account of expenses incurred by way of payment to the petitioner-trust. In case he is unable to do so by the aforesaid date, he shall grant the same within a reasonable time thereafter but with retrospective effect from November 3, 1983. Rule is accordingly made absolute with no order as to costs.