Sec. 10(23C) exemption isn’t a perpetual relief; assessee can seek to surrender approval granted u/s 10(23C)

Case details: Telangana State Pollution Control Board, Hyderabad v. CBDT - [2021] 129 taxmann.com 23 (TELANGANA)

Judiciary and Counsel Details

• • M.S. Ramachandra Rao and T. Vinod Kumar, JJ.
  • Y. Ratnakar for the Petitioner. 
  • K. Raji Reddy, Sr. Standing Counsel for the Respondent.

Facts of the Case

Assessee-Telangana State Pollution Control Board had contention in view of insertion of sub-section (46) to Section 10 with effect from 1-6-2011, assessee was eligible for being notified under section 10(46). Thus, it filed application seeking withdrawal of exemption granted under section 10(23C) and seeking for being notified under section 10(46) with effect from the Assessment Year 2016-17.

However, revenue contended that the assessee was not eligible to be notified under section 10(46), since it was already granted registration under section 10(23C)(iv). The said registration is still in force and that in view of the 18th proviso to Section 10(23C), the benefit of approval under section 10(46) would not be available. Assessee filed writ petition before the Madras High Court.

High Court Held

The Madras High Court held that though there are two different provisions of the Act under which the assessee can claim the benefit, mere fact of assessee being granted approval under one particular provision of the Act, namely Section 10(23C)(iv), would not disentitle assessee to seek for being notified under a different provision.
The basic difference between sections 10(23C)(iv) and 10(46), is that, while under the first section, it is only a grant of approval. It makes assessee eligible to claim exemption without any certainty of exemption being allowed on any income since it is subject to scrutiny. However, the latter section confers benefit of automatic exemption in respect of the specified income of the assessee as notified by the Central Government in the gazette. Thus, section 10(46) grants certainty with regard to claim of exemption.

No assessee can be compelled to continue any exemption, if it intends not to avail same. It is always open for an assessee to arrange its affairs in a manner which it feels would be beneficial, and it cannot be compelled to continue its operations/activities in a particular manner that would be prejudicial to its interest. Thus, revenue was directed to withdraw the approval granted under section 10(23C) effect from the date of applications made by assessee for being notified under section 10(46).