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Taxation Lawyer: The Income Tax exemption benefit can be withdrawn by the government ; promissory estoppel not applicable: SC.

Supreme Court of India

Justice Abhay Manohar Sapra and Justice Indu Malhotra

The SC {Prashanti Medical Services and Research Foundation versus Union of India and others} was seized of the matter, in which, the tax exemption benefit to the assessee for donation to the appellant under Section 35AC of the Income Tax Act was withdrawn from financial year 2017-2018. The constitutional validity of the same was assailed before the High Court, which was negated, and the appeal against that judgement was filed before the Supreme Court.

In the said case, the appellant project was approved, that is, hospital in 2004 by the appropriate authority under Section 35AC of the Act, by virtue of which, the person who is giving donations to the appellant would be exempted from paying the income tax on the amount of donation; and this approval to the project of the appellant was valid for three financial years.

It was the case of the appellant that due to withdrawal of exemption, with effect from 1st April, 2017, the donations substantially reduced to Rupees 3.84 crores only in the financial year 2017-2018, and whereas in the earlier financial year it was Rupees 20.55 crores.

The Supreme Court dismissing the appeal held: firstly, In Taxation matters neither any equity nor hardship has any role to play while deciding the rights of any taxpayer qua the revenue; secondly, it was held that once the action is held in accordance with law and specially in Taxation matters the question of invoking powers under Article 142 of the Constitution does not arise. It was also held that the appellants donors were admittedly allowed to claim deduction of the amount paid by them to the appellant under Section 35AC during the the two financial years i.e. 2015-16 and 2016-17, and there is no promissory estoppel against the government in present case. Therefore, the challenge fails of the appellant to the amendment, as a fortiori, the appeal was dismissed.

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