In State Bar Council of Chhattisgarh vs. CIT & Ors., the Chhattisgarh High Court held that the State Bar Council is entitled to be exempted from Income Tax by virtue of Section 10(23A) of the Income Tax Act, 1961 with effect from 01-11-2000.
The assessee, State Bar Council of Chhattisgarh, was constituted by the bifurcation of the undivided Madhya Pradesh Bar Council from 01-11-2000. It was constituted under Section 3 of the Advocates Act, 1961 read with Section 24(2) of the Madhya Pradesh Reorganization Act, 2000 (Act of 2000). The undivided Madhya Pradesh Bar Council was enjoying exemption granted by the Central Government by notification dated 09-08-1966 from taxation of its income other than specifically excluded under Section 10(23A) of the Income Tax Act, 1961.
The bar council did not make any application for fresh exemption under Section 10(23A) of the Income Tax Act presumably on the ground that the notification issued by the Central Government exempting the Bar Council of Madhya Pradesh from the provisions of the Income Tax Act under Section 10(23A), dated 9-8-1966 would also be applicable to the Bar Council of Chhattisgarh by virtue of the provisions contained in Section 2(f) read with Sections 78 and 79 of the Madhya Pradesh Reorganization Act, 2000.
The Assessing Officer (A.O.) held that the Petitioner Council didn’t have any valid exemption certificate granted by the competent authority under the provisions of sub-section (23A) of Section 10 of the Income Tax Act,1961 and directed the Bar Council to pay tax incurred. Writ Petition was filed before the Chhattisgarh High Court challenging orders of assessment directing payment of tax liability.
The Counsel for the Petitioner submitted that the notification dated 09-08-1966 exempting the Bar Council of Madhya Pradesh from operation of the provisions of the IT Act would apply automatically to the new Bar Council of Chhattisgarh constituted with effect from 1-11-2000 by operation of the Act of 2000 read with Sections 2(f), 78 and 79 of the Act of 2000, as the notification dated 9-8-1966 would constitute a law within the meaning of Section 2(f) of the Act of 2000 and, therefore, the order of assessment passed by the assessing officer of the respondents Department is per se without jurisdiction and without authority of law.
The Counsel for the Revenue contended that no express order has been passed by the Central Government in favour of the petitioner-assessee granting exemption under the provisions of sub-section (23A) of Section 10 of the IT Act giving it retrospective effect or with effect from 1-11-2000.
The bench comprising of Justice Sanjay K. Agrawal relied on the decision of the Supreme Court in the case of Swarn Rekha Cokes and Coals (P) Ltd & by the Division Bench of the High Court in the case of Gurumukh Singh Hora and found that the notification would also be applicable to the State Bar Council of Chhattisgarh till it is modified or altered by the competent authority by virtue of provisions contained in Section 78 and 79 of the Act of 2000.
Quashing the assessment order the bench observed “It is quite vivid that the notification dated 9-8-1966 issued by the Central Government exempting the State Bar Council of M.P. from taxation of income other than those specifically excluded under Section 10(23A) of the IT Act, was applicable and was in force in the new State of Chhattisgarh with effect from 1-11-2000 and would fall within the meaning of law under Section 2(f) of the Act of 2000 and by virtue of that, the State Bar Council of Chhattisgarh was entitled to have exemption under Section 10(23A) of the IT Act from the operation of IT Act, but that was not understood properly by the Income Tax Authorities and holding that the petitioner Council is not entitled for the said exemption”.
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