A.K. Ganguly, C.J.
1. In this matter the petitioner is Shri Jagannath Temple Managing Committee being represented by its Chief Administrator. The subject-matter of challenge in this petition is the order dated 12-10-2006 passed by the Income-tax Officer, Puri Ward, Puri to the effect that letter No. 1015, dated 17-8-1995, issued by the Assistant Commissioner of Income-tax, Circle-1, Bhubaneswar granting exemption to the petitioner under Section 10(23BBA) of the Income-tax Act stands withdrawn with immediate effect. Apart from withdrawing exemption, various other notices were issued under Section 142 of the Income-tax Act (hereinafter, 'the Act') and letters to the Bankers and others were issued under Sections 201 & 201(1A) of the Act and notices under Section 221(1) of the Act have also been issued and have been impugned in this petition.
2. Shri Jagannath Temple Managing Committee (hereinafter, the 'said Committee'), the petitioner herein, has been constituted by the State Government under the provisions of Shri Jagannath Temple Act, 1954 (Orissa Act II of 1955) (hereinafter, the 'Act of 1955'). The Act of 1955 was assented to by the President of India on 15th October, 1955.
3. From a perusal of the preamble of the Act of 1955, it is clear that the temple of Lord Jagannath of Puri, since its inception has been and suit is an institution of unique national importance and attracts millions of Hindu devotees from all over the world. The temple stands as a symbol of Hindu religions traditions and an icon of faith, belief and worship for countless Hindu devotees all over the world. As such in order to properly organize its management and to formulate a scheme of running the affairs of the temple, the Act of 1955 was enacted.
4. The Committee, i.e. the petitioner is a body corporate under the said Act of 1955 and having a perpetual succession and a common seal, and can sue and be sued in its own name. This Committee is constituted under Section 5 and under Section 6 thereof, the Committee shall consist of a large number of members of whom the Raja of Puri shall be the Chairman and an officer, not below the rank of Additional Chief Secretary, shall be the ex-officio member and its working Chairman. The Committee shall also consist of Chief Administrator appointed under Sub-section (1) of Section 19 of the said Act.
5. Under Section 25 of the Act of 1955 the Chief Administrator shall, each year, prepare a budget in the prescribed manner and form a budget estimate of the receipts and expenditure of the Temple and its endowments in the next year and shall place it before the Committee which may approve it with or without modification. After the budget is approved by the Committee, the same shall be placed before the State Government for sanction. The State Government before sanctioning the budget can make various queries under Section 25(2). Under Section 28, it is provided that there shall be constituted a Fund called "Shri Jagannath Temple Fund" which shall be vested in and be administered by the Committee. The fund shall consist of the income derived from the movable and immovable properties of the Temple, contributions by the State Government either by way of grant or by way of loan, all fines and penalties imposed under the said Act, recoveries under the said Act, other gifts or contributions made by the public, local authorities or institutions. The said Fund shall be utilized for the purpose permitted under the said Act and for any of the purposes mentioned in Sub-section (2) of Section 28. Section 28-C provides for constitution of a Fund called "Shri Jagannath Temple Foundation Fund". The said Fund shall vest in and be administered by the Foundation Fund Committee constituted under Sub-section (6) of Section 28-C of the said Act. The said Foundation Fund Committee shall consist of the Chief Minister of the State of Orissa who shall be the Chairman, the Law Minister who shall be the Vice-Chairman, the Secretary to the Government in law Department, the Secretary to the Government in the Finance Department or his nominee who shall not be below the rank of a Joint Secretary, the Collector of the District of Puri and the Chief Administrator of the Temple who shall be the Secretary. Under Section 33 of the said Act the Committee shall be entitled to take possession of all the movable and immovable properties including the Ratna Bhandar and funds and jewelleries, records, documents and other assets belonging to the Temple.
6. After pointing out the aforesaid features of the said Act, the learned Counsel for the petitioner submitted that keeping in view the said provision, exemption was allowed under Section 10(23BBA) of the Income-tax Act which was introduced in the year 1979 by the Finance Act with retrospective effect from 1st April, 1962.
Section 10 of the Income-tax Act provides that in computing the total income of previous year of any person, any income indicated in any of the clauses in Section 10 including Clause (23BBA) shall not be included.
7. The purpose of introduction of the said provision is to unconditionally exempt the income of statutory bodies which are entrusted with the administration of public, religious or charitable institution and are not engaged in commercial activities. The said Section 10(23BBA) is set out herein-below:
(23BBA). Any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurudwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force:
Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein;
8. From a perusal of the said Section it appears that it gives complete exemption in respect of any income of any body or authority whether it is a body corporate or a corporation, which is established and appointed under a Central or State Act for the administration of any public religious or charitable trusts or endowments including maths, temples, gurdwaras, wakfs, churches etc.
9. It has been contended by the learned Counsel for the petitioner that Section 10(23BBA) grants complete exemption to any income of any such body or authority established under the said Act as of the petitioner. The activities of the petitioner are concerned with the administration of a body which is solely engaged in public religious worship or charitable purpose, and the said administration vests in a statutory Committee which was set up under the State Act.
10. It has been urged that in the instant case the administration of the Temple and its endowments vests in a Committee which is set up under Section 6 of the Act of 1955 and the said Committee is a body corporate. It has been further contended that the power of the Committee regarding the administration and governance of the Temple and its Funds are absolute. Excepting, the Committee set up under the Act no other authority is vested with the power of administration and governance of the Temple and its administration and this is clear from Sections 25, 26, 28 and 28-C of the said Act. It is also submitted that the said Committees need not furnish any return of its income since its income is totally exempted and no proceeding for deducting tax at source can be initiated against any Bank or Institutions in which the funds of the Committee are deposited. The learned Counsel for the petitioner further submitted that in the year 1995 a letter was given by the Assistant Commissioner of Income Tax, Circle-I, Bhubaneswar to the Administrator of the said temple to the effect that income of Lord Shri Jagannath Temple, Puri, Orissa is exempted from Income-tax under Section 10(23BBA) of the Income-tax Act, 1961 with effect from 1st April, 1962. The said letter dated 17-8-1995 has been disclosed as An-nexure-1 to the petition.
11. The petitioner's case is that under Section 5 read with Section 33 of the said Act all the endowments of Shri Jagannath Temple are vested in the petitioner Managing Committee. Therefore, whether the endowments of the Temple can be subjected to income-tax and therefore necessitating Tax Deduction at Source (TDS) in view of statutory exemption provided under Section 10(23BBA) of the Act has to be examined in the light of Section 5 of the said Act.
12. While Annexure-1 remained in force, suddenly, opposite party No. 2 by letter dated 18th September, 2006 called for various details including the details of deduction of tax at source from the petitioner and the petitioner was called upon to furnish the details by 4th October, 2006. Thereafter opposite party No. 2 issued the impugned order dated 12th October, 2006 withdrawing the exemption granted under the letter dated 17th August, 1995 whereby the petitioner was formally recognised by the opposite parties to be entitled to exemption under Section 10(23BBA) of the said Act. Immediately thereafter, on 13th October, 2006, opposite party No. 2 issued a notice under Section 142 of the said Act asking the petitioner to prepare and file return of income for the assessment year 2005-06.
13. Simultaneously with the withdrawal of the exemption granted to the petitioner by its order dated 12th October, 2006, opposite party No. 2 also issued notices to the bankers asking them to give show cause for non-deduction of taxes at source under Section 194A of the said Act on interest income for Term Deposit Receipts kept with them in the name of Chief Administrator, Shri Jagannath Temple. The bankers were further directed to deduct tax at source on such Term Deposit Receipts and to furnish particulars of the Term Deposit Receipts and the bankers were further informed that the exemption granted to the petitioner had been withdrawn. The petitioner states that against such order of the opposite parties, it made a representation on 20th October, 2006. Thereafter by letter dated 8th December, 2006, the opposite party No. 2 communicated to the petitioner that it has decided to give the petitioner the liberty of being heard in connection with the impugned order dated 12th October, 2006 which was passed by it purporting to withdraw the exemption granted to the petitioner by its letter dated 17th August, 1995. It also appears that on 17th November, 2006, an order was passed by opposite party No. 2 by treating the bankers of the petitioner as an assessee deemed to be in default under Section 201 of the said Act, inter alia, on the ground that the said bankers had failed to deduct tax at source in respect of the alleged income of the petitioner and had not credited nor paid to the treasury the said deduction of tax at source for the financial year 2005-06 and 2006-07. Similar orders have been issued to other bankers, namely, Syndicate Bank and United Commercial Bank, being pro forma Opposite Party Nos. 6 and 7 by orders dated 23rd November, 2006 and 26th November, 2006 respectively. It also appears that the "interest" has also been levied upon such bankers under Section 201(1A) of the Act and notice for "penalty" under Section 221(1) has been served upon the said bankers by way of imposing penalty upon them for not paying the amount in respect of which they have been treated as assessees in default.
14. The stand of the learned Counsel for the Revenue-opposite parties is that, the Temple Administration by letter dated 20th October, 2006 addressed to opposite party No. 2 informed the said opposite party that Section 10(23BBA) is applicable retrospectively from 1962 as explained in CBDT Circular No. 258, dated 14-6-1979 and no exemption was claimed by the Temple Administration. Therefore, it has been contended that if same is the stand of the petitioner, then withdrawal of the letter dated 17th August, 1995 issued by the Assistant Commissioner of Income-tax, Bhubaneswar by letter dated 12-10-2006 of the Income-tax Officer suffers from no legal infirmity. It was also urged that the notice under Section 142(1) of the Act dated 13-10-2006 which was issued to the Temple Administration by the Revenue for furnishing the return by the Managing Committee of Shri Jagannath Temple, is neither illegal nor without jurisdiction as the Temple Administration was required to file a return under the provisions of the I.T. Act before claiming exemption under Section 10(23BBA) of the Act. The stand of the Revenue is that since no return was filed for the assessment years 2005-06 and 2006-07 it was imperative on the part of the Income-tax authorities to call for the return under Section 142(1). The learned Counsel for the Revenue submitted that this fact was admitted by Shri Jagannath Temple Administrative by its letter dated 16-12-2006. It was also stated that notices which were issued to the bankers under Section 201 and 201(1 A) of the Income-tax Act and under Section 221(1) are related to the bankers and those notices were issued for non-deduction of tax by those banks on the interest accrued on the deposits standing in the name of the Chief Administrator of Shri Jagannath Temple. According to the opposite parties, these facts came to light on the basis of inspections carried out in the banks that they have failed to deduct Income-tax at source. It was also stated that such non-deduction of tax at sources is permissible only if the depositor furnishes a "No deduction certificate" from the Assessing Officer and files a declaration in the prescribed form. No certificate having been filed by the depositors, the banks were under a statutory obligation to deduct tax at source and in view of their failure to do so actions under Section 201(1), 201(1A) and 221(1) of the Act has been taken and the petitioner has nothing to do and lacks any locus standi to challenge those orders which were issued at the Bank failed to discharge its statutory duties. It was also stated that no "return of income" has ever been filed about by the Endowments of Shri Jagannath Temple or its income by Shri Jagannath Temple Managing Committee and, therefore, notice was issued to the Chief Administrator to examine the taxability of the income and to consider the exemption granted to them as per the request made to the Income-tax Officer vide letters which have been marked as Annexures-A/2 to F/2. It was further stated that the Assessing Officer granted several adjournments to the petitioner but the petitioner did not cooperate with the Assessing Officer. As such this writ petition is not maintainable and is a premature one. It was also stated that no action has been taken against the petitioner by the Assessing Officer. It was also stated that against the steps which have been taken against the bankers, the bankers are free to challenge the same under Section 246A of the Income-tax Act, 1961. The said action against the bankers cannot be impugned in the instant writ petition which is wholly premature and a misconceived one.
These are the rival contentions.
15. Coming to the order dated 12-10-2006 which was issued by the Revenue purporting to withdraw the exemption which was granted to the petitioner, it is clear that the said order was passed without recording any reason, without giving any prior hearing and the said order was passed in a peremptory manner and was given immediate effect. Along with the said order dated 12-10-2006, several other orders were passed on the different banks on the very same day directing them to deduct the tax on interest and impose TDS in so far as petitioner is concerned. Therefore, those consequential orders appear to have been passed in order to implement the impugned order of withdrawal of exemption.
16. Now, the question is whether such an order withdrawing exemption can be passed without giving the petitioner an opportunity of hearing. Admittedly, the said order was passed changing the petitioner's status relating to grant of exemption from payment of income-tax which the petitioner was enjoying since 1962. Therefore, the same order definitely visits the petitioner with civil consequences and affects the petitioner's right in so far as its income is concerned. The principles of natural justice is, therefore, attracted in the situation. Admittedly, the said order has been passed without giving the petitioner an opportunity of hearing.
17. However, an attempt was made by the Revenue to give the petitioner an opportunity of post-decisional hearing. Such order was passed on 8-12-2006. The question, is whether such post-decisional hearing complies with the requirement of natural justice. In the facts of the instant case, this Court is inclined to hold that such post-decisional hearing is nothing but an empty ritual. In the instant case, order dated 12-10-2006 was passed with immediate effect and the authorities did not merely stop by passing the said order, but in order to implement the same, passed several other directions. Therefore, the authorities have virtually taken a final decision to implementing its order. In the affidavit, which has been filed in this proceeding, the authorities have showed the same attitude of enforcing its decision which was passed on 12-10-2006 by which exemption granted to the petitioner was sought to be withdrawn.
18. In such a situation, Hon'ble Supreme Court has held that the grant of a post-decisional hearing does not serve any effective purpose. Reference in this connection be made to the decision of the Supreme Court in the case of K.I. Shephard v. Union of India . and para 16 of the report, Hon'ble Supreme Court held that once a decision is taken, it is the common experience that there is a tendency to uphold it and a representation does not yield any fruitful purpose.
19. Similar principles have been reiterated in the case of Siemens Ltd. v. State of Maharashtra reported in (2006) 12 SCC 33 : 2006 AIR SCW 6380 and in paragraph 9, learned Judges after noting the decision in the case of K.I. Shephard v. Union of India and also the decision of the Supreme Court in the case of V.C. Banaras Hindu University v. Shrikant held that a
post-decisional hearing in a situation where authorities have made up their mind is illusory. Similar principles have been reiterated in the case of Shekar Ghosh v. Union of India .
20. In the instant case, this Court finds that the post-decisional hearing which has been sought to be given by the Revenue is more or loss in the form of an idle ceremony, since the authorities had already issued the impugned order withdrawing exemption, coupled with any attempt to implement the same immediately. This makes it very clear that they are determined to implement the order of withdrawing the exemption. Therefore, the impugned order having been passed without giving the petitioner an opportunity of hearing, is violative of the basic tenets of natural justice and cannot be sustained and the same is liable to be quashed.
21. Learned Counsel for the opposite party very much relied on the provision of Section 10(23BB) in order to contend that in any event no exemption is available to the petitioner. This Court is unable to accept the aforesaid contention. The purpose of incorporating the said exemption was explained in the memo to the Finance Bill of 1979. In para 69 of the said Memo, it has been provided as follows:
...In case of public, religious or charitable trusts or endowments of other communities, there are similar bodies under enactments in force in different States. These bodies or authorities set up by or under the Central, State or Provincial Act are entrusted with the administration of public religious and charitable trusts within their jurisdiction. These public religious or charitable trusts also cover temples, maths, wakfs, churches, synagogues, agiaries and other places of public religious worship, other religious and charitable endowments, as also societies formed for religious or charitable purposes under the Societies Registration Act, 1860. Such bodies or authorities are at times in receipt of income during the course of administration of such public religious or charitable trusts or institutions. Since these bodies or authorities are not engaged in any commercial activity, it is proposed to insert a new Clause (23BBA) in Section 10 in order to grant exemption in respect of income arising to any body or authority established, constituted or appointed under any enactment for the administration of such public religious or charitable trusts or endowments or societies for religious or charitable purposes. It is, however, being made clear that the exemption would not apply to the income of such trust, endowment or society.
22. If we follow the said explanation of introducing the statutory provision to Section 10(23BBA), it will be clear that the said exemption has been introduced in order to exempt the income of the bodies or authorities which are set up by or under any Central, State or Provincial Act and which are entrusted with the administration of public religious and charitable trusts within their jurisdiction. It was made clear that since the bodies are not engaged in any commercial activity, it was proposed to insert a new Clause (23BBA) to Section 10 in order to grant exemption in respect of income arising to any body or authority established, constituted or appointed under any enactment. But such exemption would not apply to the income of such trust, endowment or society which are obviously not created under any enactment. Therefore, under Sub-section (23BBA) of Section 10 of the Act exemption is only granted to the bodies which are created under an Act passed by the State Government, Central Government or Provincial Government. But such exemption is not extended to any trust, endowment or the society which are created by parties.
23. It is not in dispute that in the instant case the petitioner is a body corporate with perpetual succession and a common seal and is created by Section 5 of the said Act (Orissa Act 11 of 1955) and which has received the assent of the President on 15-10-1955. Therefore, the proviso to Section 10(23BBA) does not apply to the petitioner and the exemption which has been granted to the petitioner under Section 10(23BBA) is a total unconditional exemption.
24. It is not in dispute that the temple and all its endowment have vested in the petitioner namely, the Committee which was set up under Section 5 read with Section 6 of the said Act. Section 10(23BBA) of the Income-tax Act mandates that any income of a body like the petitioner is "unconditionally exempt" from the levy of Income-tax. A perusal of Section 10 would indicate that other exempted incomes require the satisfaction of certain conditions for substantiating that claim of exemption and, therefore, can be termed as "conditional exemptions". This aspect has been clarified by the Central Board of Direct Taxes (CBDT) in Circular No. 4 of 2002, dated 16-7-2002, the relevant portion of which is set out below:
2. This matter has been examined by the Board. It has been decided that in case of those funds or authorities or Boards or bodies by whatever name called, whose income is unconditionally exempt under Section 10 of the Income-tax Act and who are statutorily not required to file return of income as per Section 139 of the Income-tax Act, there would be no requirement for tax deduction at source since their income is anyway exempt under the Income-tax Act. The institutions whose income is unconditionally exempt under Section 10 and who are statutorily not required to file return of income as per the provisions of Section 139 are:
xxx xxx xxx
(v) Body or authority referred to in Clause (23BBA).
Section 139(4C) was inserted by the Finance Act, 2002 w.e.f. 1-4-2003 requiring certain specific body or institutions such as, Scientific Research Association, News Agency or Institution referred to under various sub-clauses of Section 10 to file I.T. returns, would be clear that while incorporating the aforesaid amendment, the Union Parliament did not include therein, a "body" covered under Section 10(23BBA) such as, the present petitioner. Therefore, it is clear that it is only those institutions/bodies whose income are "conditionally exempt", are required to file their "I.T. returns" and the bodies like the petitioner whose income are "un conditionally exempt" from the levy of income-tax are consequently not. required to file their I.T. returns.
25. It is, therefore, clear from the aforesaid Circular issued by the Central Board of Direct Taxes that the body or authority which are covered under Section 10(23BBA) are not statutorily required to file any re turn of income under Section 139 nor any tax is required to be deducted at source from such authority under Section 194A. Therefore, the direction of the Income-tax authorities in the notice purported to be issued under Section 142(1) for submission of return by the petitioner is contrary to the mandate of the said Circular. Equally the direction to deduct tax at source under Section 194A in respect of income of the petitioner which is totally exempted under Section 10(23BBA) is not authorized under law. it has been held by the Supreme Court in the case (UCO Bank, Calcutta v.
Commissioner of Income Tax, West Bengal) that the Circulars of the Central Board of Direct Taxes are legally intended to ensure proper administration of the statute. The status of such Circular has been very succinctly laid down in page 896 : (at p. 2085, para 9 of AIR) of the report as follows:
The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing Circulars in exercise of its statutory powers under Section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act.
26. In coming to the aforesaid conclusion the learned Judges also relied on the five-Judge Bench decision in the case of Navnit Lal (C) Javeri v. K.K. Sen, AAC .
27. Insofar as the Revenue's direction for deduction of tax at source is concerned, reference may be made to Section 139(14C). In the said provision it has been made clear that certain institutions which are allowed exemption under Section 10 are not to file return of income. Under the amendment, the income of the body or authority which is created under the Central or State Act for administering public religious or charitable bodies under Section 10(23BBA) are totally exempted. Considering the said amendment of Section 139(4C) the aforesaid Circular of the Central Board of Direct Taxes was introduced. In the said Circular it was made very clear that the body or authority set up under the Central or State Act for public religious or charitable purposes are not separately required to file any return and admittedly the Circular of Central Board of Direct Taxes has binding force.
28. The learned Counsel for the Revenue has urged that the petitioner has no locus standi to challenge the notice and orders which are issued to the bankers. Unfortunately the said argument has no basis. Under Chapter XVII, Part A of the said Act, the deduction at source is dealt with. Under those provisions any person making any payment of various types is liable to deduct tax at source under certain circumstance specified in different provisions under the said Chapter. Section 194A of the Act on which the Revenue has relied enables any person to deduct tax at source in respect of any interest income excepting interest income on security. Under Section 198 of the Act, any such income which is deducted in accordance with the provision of Chapter XVII was for the purpose of computing income received by the assessee. Consequently under Section 199 such deduction made in accordance with Chapter XVII and paid to the Central Government shall be treated as payment of tax made by the assessee from whose income deduction has been made. Therefore, the tax which is deducted is treated as income of the person from whose income it is so deducted. Consequently the income so deducted and paid to the Central Government shall be treated as tax paid by the person from whose income the tax is deducted.
29. In the instant case, if such tax is to be deducted from the income of the petitioner then petitioner's income is reduced, whereas the petitioner's income enjoys total protection from tax deduction under Section 10(23BBA) of the Act. As the petitioner is entitled to enjoy the total statutory protection under Section 10(23BBA), no part of its income can be deducted by way of payment of tax and if it is so deducted, it amounts to unauthorized deduction of its income and against such deduction the petitioner has the locus standi to maintain this writ petition. Therefore, the aforesaid argument does not hold good.
30. In fact the learned Counsel for the Revenue apart from raising some unsustainable technical pleas has not been able to meet the case made out by the petitioner on merits.
31. For the reasons aforesaid, this Court, is constrained to quash the letter dated 12th October, 2006 issued by opposite party No. 2 inasmuch as the same is not legally sustainable and the various directions which have been issued consequent upon the said letter on the Bank for deduction of Tax (TDS) are also set aside. This Court holds that the petitioner is not required to file any return under Section 142(1) of the Income-tax Act and the directions given by the Revenue to that effect are unauthorized and of no legal effect.
The writ petition, therefore, succeeds. But there shall be no order as to costs.
I. Mahanty, J.
32. I agree.