In a recent ruling, the Punjab and Haryana High Court held that denial of exemption to assessee for want of approval from competent authority, is not justified when the application for approval is not considered by the authority within reasonable time.
The assessee, M/s Shrikar Hotels Pvt. Ltd, engaged in Hotel business, filed income tax return claiming deduction under setion 80-IB of the Income Tax Act. The claim for deduction was rejected on ground that the assessee failed to obtain approval from the competent authority. The assessee contended that they had filed an application in the year 2002 before the Director General in the Directorate General of Tourism, Government of India, i.e, the prescribed authority under the Act. However, the same remained unanswered. Since no order was passed by Prescribed Authority on Assessee’s application seeking approval, it filed an application before Tribunal on 27.11.2014 requesting to defer hearing of appeal. The Tribunal, while dismissing the application, upheld the order denying deduction to the assessee.
Quashing the order of the Tribunal, the bench noted that the benefit of Section 80 IB(7), would be available only if hotel is for the time being approved by Prescribed Authority. Authority has in order to attract Clause (a), no decision has been taken by Director General, Income Tax (Exemptions) though application has been filed by Assessee in this regard in 2002. Competent Authority for granting approval is an officer of Income Tax Department itself. Assessee has neither any administrative control nor otherwise can compel said authority to act within a particular time and in a particular manner. It is the authority of Revenue itself, who has to grant approval. For own lethargy or inaction on the part of an officer of Income Tax Department, a deduction which otherwise may be available to Assessee, cannot be denied since it is not a case where Assessee is disqualified being ineligible for such deduction but question of approval is pending before Competent Authority, who is a senior officer of Income Tax Department and has not been able to get enough time to take a decision on the application filed by Assessee on 28.08.2002. Observations of Tribunal that Assessee did not pursue matter are unwarranted for the reason that whatever could have been done by Assessee, it has done by submitting application and rest is the job of departmental authority, specified in Rule 18 BBC.”
“Even otherwise, where a power has been conferred upon a holder of public office, it has to exercise such power within a reasonable time and in accordance with relevant considerations of law. Such authority cannot sit over matter for time immemorial and the person who suffers on account of inaction of authority cannot be denied a benefit which would have been admissible if approval is granted, by keeping matter pending for a long time and failing to take a decision. In our view, it is a fit case where Tribunal ought to have required Director General, Income Tax (Exemptions) to take a decision on Assessee’s application within a particular time and thereafter it ought to have decided matter but that has not been done.”
Read the full text of the Judgment below.
