State Bar Council of Chhattisgarh Vs CIT (Chhattisgarh High Court)
It was held that The State Bar Council of Chhattisgarh is entitled for income tax exemption under Section 10(23A) of the Income Tax Act, 1961 with effect from 1-11-2000 (from the date of constitution of the Council).
It is quite vivid that the notification dated 9-8-1966 issued by the Central Government exempting the State Bar Council of MP 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 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.
I deem it proper to remind the duty of the petitioner State Bar Council, as rendered by the Supreme Court, to ensure quality service of competent lawyers to the litigating public,to spread legal literacy, promote law reforms and provide legal assistance to the poor and downtrodden people. I hope and trust that the State Bar Council will follow and observe the duty of the Council religiously and scrupulously as indicated.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:
1. Since common question of law and fact is involved in these three writ petitions, they are heard together and are being disposed of by this common order.
2. The State Bar Council of Chhattisgarh is a statutory body constituted under Section 3 of the Advocates Act, 1961 (for short, ‘the A Act’) read with Section 24(2) of the Madhya Pradesh Reorganisation Act, 2000 (for short, ‘the Act of 2000’) with effect from 1-11-2000 upon carving out of the new State of Chhattisgarh. The undivided Bar Council of Madhya Pradesh was availing the exemption granted by the Central Government by notification dated 9-8-1966 from taxation of its income other than those specifically excluded under Section 10(23A) of the Income Tax Act, 1961 (for short, ‘the IT Act’).
3. The State Bar Council of Chhattisgarh started functioning with effect from 1-11-2000 upon reorganisation of the State of Madhya Pradesh, but did not make any application for fresh exemption under Section 10(23A) of the IT 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 IT 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 Act of 2000. But the understanding of the State Bar Council of Chhattisgarh did not act as the order of assessment Annexure P-1 for the assessment year 2004-05 and 2005-06 came to be passed by the assessing officer of the Income Tax Department assessing the income ₹ 26,34,767/- and ₹ 40,98,770/-, respectively, and holding that the petitioner Council did not have any valid exemption certificate granted by the competent authority under the provisions of sub-section (23A) of Section 10 of the IT Act leading to filing of these writ petitions challenging those orders of assessment directing payment of tax liability.
4. The facts projected in the writ petitions by the petitioner Council are that the exemption granted by the Central Government to the erstwhile Bar Council of Madhya Pradesh by notification dated 9-8- 1966 would constitute a law within the meaning of Sections 2(f), 78 and 79 of the Act of 2000 and that would continue to operate and would apply to the State Bar Council of Chhattisgarh, as it is not a new State Bar Council, though it is State Bar Council of Chhattisgarh constituted but by virtue of Section 24(2) of the Act of 2000, it is a bifurcation of the undivided State Bar Council of Madhya Pradesh into two Bar Councils namely, the Bar Council of Madhya Pradesh and the Bar Council of Chhattisgarh by amending Section 3(1)(a) of the A Act, therefore, no separate exemption is to be granted by the Central Government by virtue of the provisions contained in sub-section (23A) of Section 10 of the IT Act and unless the Central Government withdraws the exemption already granted to the Bar Council of Madhya Pradesh on 9-8-1966, it would continue to apply to the Bar Council of Chhattisgarh. It has further been pleaded that the respondents did not understand the law properly and assessment orders were issued, then only the petitioner by way of abundant precaution made an application vide Annexure P-2 on 4-8-2005 to the Central Government for exemption from the IT Act under the proviso to sub-section (23A) of Section 10 of the IT Act and claimed exemption from payment of tax with effect from 1-11-2000, but erroneously, the Central Government granted exemption from assessment year 2006-07 and onwards by order dated 10-5-2007. Thus, the assessment order has been questioned preliminary on two grounds firstly, that the notification dated 9-8-1966 granted by the Central Government under sub-section (23A) of Section 10 of the IT Act would apply to the State Bar Council of Chhattisgarh also till it is modified or amended under the proviso to sub-section (23A) of Section 10 of the IT Act; and secondly, that even though the application was made subsequently, but the Central Government partly granted the application and partly rejected by not granting exemption with effect from 1-11-2000 without assigning and any reason and without holding that the petitioner Council is not exempted from payment of tax from 1-11-2000 that is retrospective effect. Therefore, the impugned orders be set aside.
5. Return has been filed by the respondents / Income Tax Department stating inter alia 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 and when the application was made on 4-8-2005, the application has been considered and exemption has been granted with effect from the assessment year 2006-07 and onwards, even otherwise, the order impugned is appealable under Section 246 of the IT Act. Therefore, the writ petitions cannot be entertained and are liable to be dismissed.
6. No rejoinder has been filed.
7. Mr. Neelabh Dubey, learned counsel appearing for the petitioner, would vehemently submit that the notification dated 9-8-1966 exempting the Bar Council of M.P. 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. He would additionally submit that even otherwise, when the respondent Department did not follow the law mandated by the Act of 2000 and assessment order was made, the State Bar Council of Chhattisgarh was forced to claim exemption with effect from 1-11-2000, but erroneously, again the exemption was granted with effect from 1-4-2005 i.e. for assessment year 2006-07 and onwards, and did not assign any valid and acceptable reason for not granting exemption with retrospective effect that is 1-11-2000 which the petitioner Council was entitled by operation of law, as it is not the case of the respondent Department that the petitioner Council is not entitled and not eligible for exemption under sub-section (23A) of Section 10 of the IT Act with effect from 1-11-2000. Therefore, the impugned order is liable to be set aside.
8. Countering the argument, Mr. Amit Chaudhari, learned Senior Standing Counsel appearing for the respondents Department, vehemently opposed the submissions made by Mr. Dubey, learned counsel for the petitioner, and would submit that the order being appealable under Section 246 of the IT Act, the writ petitions cannot be maintained and are liable to be thrown at the threshold without entering into merits of the matter. Further, replying the submission on merits, Mr. Chaudhari would submit that once the application claiming exemption was made on 4-8-2005, the competent authority rightly held the petitioner Council to be entitled for exemption from next assessment year 2006-07 and with effect from 1-4-2005 holding the petitioner Council to be entitled for exemption under sub-section (23A) of Section 10 of the IT Act, as such, there is no jurisdictional error or illegality committed in the impugned orders and the writ petitions deserve to be dismissed.
9. Mr. Prasun Kumar Bhaduri, learned counsel appearing for State Bank of India / respondent No.6 in W.P.(T)No.167/2009, would submit that the order of the Income Tax authority was complied with in its letter and spirit.
10. I have heard learned counsel for the parties and considered the rival submissions made herein-above and also went through the record with utmost circumspection.
11. Prior to reorganisation of the State of Madhya Pradesh by the Act of 2000, the undivided State Bar Council of Madhya Pradesh was in existence. The Central Government in exercise of power conferred under sub-section (23A) of Section 10 of the IT Act, granted exemption to the erstwhile State Bar Council of Madhya Pradesh by notification No.37/3/66-IT(AI) dated 9-8-1966 exempting from taxation of its income other than those specifically excluded under Section 10(23A) of the Act of 1961. The notification dated 9-8-1966 has not been produced by the petitioner. However, “Law of Income Tax” authored by A.C. Sampath Iyengar (10th Edition) after Section 10(23A) of the Act of 1961 enlists Approved Bar Councils of different States including Madhya Pradesh as under: –
