Case Note & Summary
The appellant, Prashanti Medical Services & Research Foundation, a charitable trust registered under the Bombay Public Trust Act, 1950, established a heart hospital in Ahmedabad. On 27.09.2014, it applied under Section 35AC of the Income Tax Act, 1961 to the National Committee for approval of its hospital project as an eligible project, enabling donors to claim deductions for donations made. The Committee approved the project on 07.12.2015 for three financial years (2015-16, 2016-17, 2017-18) with an estimated cost of Rs. 250 crore. The appellant received donations of Rs. 10.97 crore, Rs. 20.55 crore, and Rs. 3.84 crore in the respective financial years. However, the Finance Act, 2016 inserted sub-section (7) in Section 35AC with effect from 01.04.2017, discontinuing the deduction from assessment year 2018-2019 onwards. The appellant challenged the constitutional validity of this amendment in the Gujarat High Court, arguing that the amendment should not apply to projects approved before its effective date. The High Court dismissed the petition, leading to the present appeal. The Supreme Court considered whether the amendment applies prospectively and whether the appellant has locus standi. The Court held that sub-section (7) is clearly prospective, operating from 01.04.2017, and applies to all assessees regardless of prior approvals. The appellant, not being an assessee under Section 35AC, has no locus standi to challenge the provision. The Court also rejected the plea of promissory estoppel, stating it cannot be invoked against legislative action. The appeal was dismissed, upholding the High Court's decision.
Headnote
A) Constitutional Law - Prospective Operation of Statute - Section 35AC(7) Income Tax Act, 1961 - Amendment prospective from 01.04.2017 - Challenge to withdrawal of deduction benefit for approved projects - Court held that sub-section (7) operates prospectively and applies to all assessees irrespective of prior approval, as the amendment clearly states it takes effect from assessment year 2018-2019 onwards (Paras 18-20). B) Tax Law - Vested Rights - Section 35AC Income Tax Act, 1961 - No vested right in tax deduction scheme - Appellant, a charitable trust, not an assessee under the section - Court held that the appellant has no locus standi to challenge the provision as it is not an assessee and has no vested right to ensure continued deduction for donors (Paras 11, 17). C) Administrative Law - Promissory Estoppel - Section 35AC Income Tax Act, 1961 - Promissory estoppel cannot be invoked against legislative action - Court held that the principle of promissory estoppel does not apply to prevent Parliament from amending a statute, even if it affects expectations based on prior approvals (Paras 11, 16).
Issue of Consideration
Whether insertion of sub-section (7) in Section 35AC of the Income Tax Act, 1961 with effect from 01.04.2017, which discontinued deduction for donations made to approved projects from assessment year 2018-2019, applies to projects approved prior to that date, and whether the appellant has locus standi to challenge the provision.
Final Decision
The Supreme Court dismissed the appeal, upholding the High Court's judgment. The Court held that sub-section (7) of Section 35AC is prospective and applies from assessment year 2018-2019 onwards, and the appellant has no locus standi to challenge the provision. No order as to costs.
Law Points
- Prospective operation of statutory amendment
- No vested right in tax deduction scheme
- Promissory estoppel not applicable against legislative action
- Locus standi of non-assessee to challenge tax provisions
