REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL No. 5849 OF 2019 (Arising out of S.L.P.(C) No.34287 of 2017)

Prashanti Medical Services & Research Foundation ….Appellant(s)

VERSUS

Union of India & Ors.               ….Respondent(s)

                 J U D G M E N T

Abhay Manohar Sapre, J.  

1. Leave granted.

2. This appeal is filed against the final judgment

and order dated 14.09.2017  passed by the  High

Court of Gujarat at Ahmedabad in SCA No.7558 of

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2017 whereby the High Court dismissed the petition

filed by the appellant herein.

3. A few facts need mention hereinbelow for the

disposal of this appeal, which involves a short point.

4. The appellant herein is the petitioner and the

respondents herein are the respondents in the

petition out of which this appeal arises.

5. The appellant is a Charitable Trust registered

under the  provisions  of the  Bombay  Public  Trust

Act, 1950. The appellant has set up a Heart

Hospital in Ahmadabad. The commencement of the

project of the appellant's hospital began in the year

2014 (05.05.2014).  

6. On 27.09.2014, the appellant filed an

application under Section 35AC of the Income Tax

Act, 1961 (hereinafter referred to as "the Act) to the

National Committee for Promotion of Social and

Economic  Welfare,  Department  of  Revenue,  North

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Block,  New  Delhi (hereinafter referred to as “the

Committee") for grant of approval to their hospital

project as specified in Section 35AC of the Act so as

to enable any "assessee" to incur expenditure  by

way of making payment of any amount to the

appellant for construction of their approved hospital

project and accordingly claim appropriate deduction

of such payment   from his total income during the

previous year.   Like the appellant, several persons,

as specified in Section 35AC of the Act, also made

applications to the Committee for grant of approval

to their hospital projects.

7. A notification was issued by the Government of

India on 07.12.2015  mentioning therein that the

Committee has approved 28 projects as "eligible

projects" under Section 35AC of the Act.  The name

of the appellant appears at serial  No. 10 in the

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notification  dated  07.12.2015. It reads as  under:

S.No. Name of the Institution

Project or scheme and estimated cost thereof

Maximum amount of cost to be allowed as deduction under Section 35AC and period of approval

10. Prashanti Medical Research Foundation, Sri Satya Sai Heart Hospital, Kashindra Village, Ahmedabad­ Dholka Road(Gujarat)

Prashanti Medical Services & Reasearch Foundation, Ahmedabad RS.250.00 Crore

The Committee recommended approval for the project at the estimated cost of Rs.250.00 crore   for three financial years commencing with financial year, 2015­ 16,i.e., 2015­ 16, 2016­17 and 2017­18

8. According to the appellant, they received

amount by way of donation from several assesses

during the years 2015­2016 and 2016­2017.  These

assesses then claimed deduction of the amount,

which they had donated to the appellant for their

hospital project, from their total income. As per the

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appellant, they received donations in three financial

years from several assesses for their hospital project

as detailed below:

Financial year

Rs.

2015­16 10.97 crores 2016­17 20.55 crores 2017­18 3.84 crores

9. The benefit of claiming deduction was,

however, discontinued from the assessment year

2018­2019 by insertion of sub­section(7) in Section

35AC of the Act by the Finance Act, 2016 with effect

from 01.04.2017.  

10. It is this insertion of sub­section(7) in Section

35AC of the  Act,  which  gave rise to filing  of the

petition by the appellant in the Gujarat High Court.

The appellant in the petition questioned the

constitutional validity of sub­section(7) of  Section

35AC of the Act  inter alia on the ground that once

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the Committee granted an approval to the

appellant's hospital project for a period of three

financial  years, the same could not be withdrawn

qua  the  appellant  on the strength  of insertion  of

sub­section (7) in Section 35AC of the Act. In other

words, the challenge was on the ground that sub­

section (7) of Section 35AC is essentially prospective

in nature and, therefore, it will have no application

to those projects which were approved by the

Committee prior to insertion of sub­section(7), i.e.,

01.04.2017. The challenge was also on the ground

that the Revenue cannot apply sub­section (7)

retrospectively and withdraw the benefits, whether

fully or partially, which were approved to the

appellant. It was, therefore, contended that the

appellant and the assessees should be held entitled

to  avail of the full  benefit for the three financial

years in terms of the notification dated 07.12.2015.

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11. The respondent (Revenue) supported insertion

of sub­section (7) in  Section  35AC and  inter  alia

contended that, firstly, insertion of sub­section (7) is

prospective in nature; secondly, it operates  qua

every person alike the appellant irrespective of the

approval  granted by  the  Committee;  Thirdly,  sub­

section (7), in clear terms, provides discontinuance

of deduction only from the assessment year 2018­

2019 onwards; Fourthly, this intention of the

legislature is clear from the perusal of the budget

speech of the Minister of Finance, notes on clauses

and memorandum explaining the amended

provisions in the Finance  Bill, 2016; Fifthly, the

appellant not being an assessee under Section 35AC

of the Act has no locus to raise the issue in question

and nor they   are, in any  way, affected due to

insertion of  sub­section  (7);  Sixthly, the  appellant

neither  has any vested right in such matters  nor

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has any right to set up a plea of promissory estoppel

against the exercise of any legislative power such as

the one exercised by the Parliament while inserting

sub­section(7); and lastly, the appellant has already

received substantial donations from several

assessees for their hospital project during the two

financial years (2015­2016 and 2016­2017) and,

therefore, there is neither any hardship nor any

prejudice caused to the appellant due to insertion of

sub­section (7) in Section 35AC of the Act.    

12. The High Court,   in the impugned order,

repelled the challenge and while upholding the pleas

raised by the respondent(Revenue) dismissed the

appellant's petition, which has given rise to filing of

this appeal by the appellant after obtaining special

leave from this Court.

13. Heard Mr. Arvind Datar, learned senior

counsel for the appellant and Mr. K.

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Radhakrishnan, learned senior counsel for the

respondents.

14. Mr. Arvind Datar, learned senior counsel

appearing for the appellant reiterated the

aforementioned submissions,  which were urged  in

High Court,  and while  elaborating contended that

the appellant so also the assesses, who made

payment to the appellant in the financial year 2017­

2018 should have been allowed to claim deduction

during the financial year 2017­2018 (Assessment

Year 2018­2019) also notwithstanding insertion of

sub­section (7) in Section 35AC of the Act with

effect from 01.04.2017.  

15. In support of his submissions, learned counsel

placed reliance on the decisions of this Court in S.L.

Srinivasa Jute Twine Mills (P) Ltd. vs. Union of

India & Anr., (2006) 2 SCC 740, Sangam Spinners

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vs. Regional Provident Fund Commissioner I,

(2008) 1 SCC 391 and  Commissioner of Income

Tax(Central)­I, New Delhi vs. Vatika Township

Pvt. Ltd., (2015) 1 SCC 1.

16. In reply, learned  counsel for the respondent

(Revenue) supported the reasoning and the

conclusion arrived at by the High Court and prayed

for dismissal of the appeal. Learned counsel placed

reliance on the decisions in  State of Kerala & Anr.

vs. Gwalior Rayon Silk Manufacturing (WVG.) Co.

Ltd.  Etc., (1973) 2  SCC  713,  Motilal  Padampat

Sugar  Mills  Co. Ltd. vs. State of  U.P.  &  Ors.,

(1979) 2 SCC 409, R.K. Garg vs. Union of India &

Ors.,  (1981) 4 SCC 675,  Kasinka Trading & Anr.

vs.  Union of India  & Anr.,    (1995)  1  SCC 274,

Bannari Amman Sugars Ltd. vs. Commercial Tax

Officer & Ors.,  (2005) 1 SCC 625,  Shree Sidhbali

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Steels Ltd. & Ors. vs. State of U.P. & Ors., (2011)

3 SCC 193, Bajaj Hindustan Ltd. vs. Sir Shadi Lal

Enterprises  Ltd.  & Anr.,  (2011)  1  SCC 640 and

Kothari Industrial Corporation Ltd. vs. Tamil

Nadu Electricity Board & Anr., (2016) 4 SCC 134.

17. Having heard the learned counsel for the

parties and on perusal of the record of the case, we

are not inclined to interfere with the impugned

order of the High Court.

18. Section 35AC  was inserted in the Act with

effect from 01.04.1992 whereas sub­section (7),

which is subject matter of this appeal, was inserted

in Section 35AC with effect from 01.04.2017, which

reads as under:  

“35AC. (1) Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme, the assessee

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shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year :

Provided that a company may, for claiming the deduction under this sub­ section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme.

(2) The deduction under sub­section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate —

(a)  where the payment is to a public sector company or a local authority or an association or institution referred to in sub­ section (1), from such public sector company or local authority or, as the case  may be, association or institution;

(b) in any other case, from an accountant, as defined in the Explanation below sub­section (2) of section 288,

in  such form,  manner  and containing such particulars (including particulars  relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed.

Explanation.—The  deduction, to  which the assessee is entitled in respect of any sum paid to a  public  sector  company or  a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied  merely on the ground

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that subsequent to the payment of such sum by the assessee,—

(a) the approval granted to such association or institution has been withdrawn; or

(b) the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn.

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub­section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.

(4) Where an association or institution is approved by the  National  Committee  under sub­section (1), and subsequently—

(i) that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or

(ii) such association or institution, to which approval has been granted, has not furnished to the National Committee, after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed,

the  National  Committee  may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the  concerned association  or institution, withdraw the approval:

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Provided that a copy of the order withdrawing the approval shall be forwarded by the National Committee to the Assessing Officer having jurisdiction over the concerned association or institution.

(5)  Where any  project or scheme  has been notified as an eligible project or scheme under clause (b) of the Explanation, and subsequently—

(i) the  National  Committee is  satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which such project or scheme was notified; or

(ii) a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed,

such  notification  may be  withdrawn  in the same manner in which it was issued:

Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the concerned association, institution, public sector company or local authority, as the case may be:

Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority,  as the case  may be,  carrying  on such eligible project or scheme.

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(6) Notwithstanding anything contained in any other provision of this Act, where—

(i) the approval  of the National  Committee, granted to  an association  or institution, is withdrawn under sub­section (4) or the notification  in respect of  eligible  project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution  under  sub­section (5); or

(ii) a company has claimed deduction under the proviso  to sub­section  (1) in respect  of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee under sub­section (5),

the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub­ section (2) or the deduction claimed by a company under the proviso to sub­section (1) shall be  deemed to  be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the  maximum marginal rate in force for that year.

(7) No deduction under this section shall be allowed in respect of any assessment year

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commencing on or after the 1st day of April, 2018.

Explanation.—For the purposes of this section,—

(a) "National Committee" means the Committee constituted by the Central Government, from amongst persons of eminence  in public  life, in accordance with the rules made under this Act;

(b) "eligible  project  or  scheme" means such project  or  scheme  for  promoting  the  social and economic welfare of, or the uplift of, the public as the  Central  Government  may, by notification in the Official Gazette, specify in this  behalf  on the  recommendations  of the National Committee.”

19. It is not in dispute that 28 projects were

approved  by the  Committee by notification  dated

07.12.2015 but none of them (27) has come forward

to question the constitutional validity of sub­section

(7) except the appellant herein. In other words, out

of 28 projects  owners whose projects were approved

by the Committee by notification dated 07.12.2015,

only the appellant herein has felt aggrieved and filed

the petition in the High Court.

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20. Be that  as it  may,  as rightly  argued by the

learned counsel for the respondent  (Revenue), the

real aggrieved parties, which should have felt

aggrieved by insertion of sub­section (7) in Section

35AC of the Act,  were those  assesses, i.e., Donors

who despite  paying the  donation  to the  appellant

were  not  allowed  to  claim deduction of the  said

amount from their total income during the financial

year 2017­2018.  

21. In other  words, one  of the  main  objects for

which Section 35AC was enacted was to allow the

assessees to claim deduction of the amount paid by

them to the appellant for their project.  

22. As  mentioned above, none of the assessees

(Donee), who claimed to have paid amount to any

eligible projects came forward complaining that

despite their donating the amount to the appellant

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for their project, they  were denied the benefit of

claiming deduction of such amount from their total

income by virtue of sub­section (7)  of Section 35AC

of the Act during the financial year 2017­2018.  

23. It is not in dispute that the benefit of the

deduction available under Section 35AC  of the Act

was  duly availed of by all the assessees for two

financial years, namely, 2015­2016 and 2016­2017.

24. The dispute is now confined only to third

financial year, i.e.,   2017­2018 because for this

year, the assessees were not allowed to claim

deduction of the amount paid by them to the

appellant on account of insertion of sub­section(7)

in Section 35AC of the Act with effect from

01.04.2017.

25. We are of the view that sub­section (7) is

prospective in its operation and, therefore, all   the

assessees were rightly allowed to claim deduction of

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the amount paid by them to eligible projects from

their total income during two financial years,

namely, 2015­2016 and 2016­2017. If  sub­section

(7) had been retrospective in its operation then the

deduction for 2015­2016 and 2016­2017 too would

have been disallowed. Admittedly, such is not the

case here.

26. As rightly  argued by  the  learned counsel for

the respondent (Revenue), a plea of promissory

estoppel is not available to an assessee against the

exercise of legislative power and nor any vested

right accrues to an assessee in the matter of grant

of any tax concession to him. In other words,

neither the appellant nor the assessee has any right

to set up a plea of promissory estoppel against the

exercise of legislative power such as the one

exercised while inserting sub­section (7) in Section

35AC of the Act (see­M/s Motilal Padampat Sugar

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Mills Co. Ltd.(supra) and other cases relied on by

the learned counsel for the respondent­Revenue). It

is more so when we find that this sub­section was

made applicable uniformly to all alike the appellant

prospectively.

27. It is not in dispute that now time to donate the

amount  to  eligible  projects for  claiming deduction

from the total  income for the year 2017­2018 has

expired. It is now no longer available due to efflux of

time. In this view of the matter, even if the appellant

received  any  amount from any  assessee for their

project, no deduction could be allowed to such

assessee either for the period 2017­2018 or for any

subsequent period.

28. It was, however, stated by the learned counsel

for the appellant that the appellant  has received

3.84 crores during the year 2017­2018 from various

assessees. It was also stated that if sub­section(7)

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had been held not applicable to the appellant's

project then the appellant would have received

much more amount than Rs.3.84  crores during the

financial  year 2017­2018, which is clear  from the

amount received by the appellant in earlier two

years  prior to insertion of  sub­section(7), i.e.,  Rs.

10.97 crores during  the financial  year  2015­2016

and Rs. 20.55 crores during the financial year

2016­2017.  

29. We find  no  merit in this submission.   In a

taxing statute, a plea based on equity or/and

hardship is not legally sustainable. The

constitutional validity of any provision and

especially taxing provision cannot be struck down

on such reasoning.   

30. Learned counsel for the appellant then urged

that having regard to the fact that the appellant has

set up a charitable hospital and that they were not

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able to receive more amount by way of donation for

their project in the third financial year 2017­2018,

this Court may consider appropriate to invoke

powers under Article  142 of the Constitution and

allow the appellant to receive donation even for the

third financial year in terms of the notification dated

07.12.2015 from their donors.  

31. We are afraid, we cannot accept this

submission for more than one reason. First, as held

above, in tax matter, neither any equity nor

hardship  has  any role to  play  while  deciding the

rights of any taxpayer  qua  the  Revenue;  Second,

once the action is held in accordance with law and

especially in tax matters, the question of  invoking

powers under Article 142 of the Constitution does

not  arise;  and third, the  appellant's  Donors  were

admittedly allowed to claim deduction of the

amount paid by them to the appellant under

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Section 35AC  during the two financial years 2015­

2016 and 2016­2017.  It is for all these reasons, the

matter must rest there.

32. Learned counsel for the appellant placed

reliance on the decision of  S.L. Srinivasa Jute

Twine Mills (P)  Ltd.  (supra),    Sangam Spinners

(supra)  and  CIT vs.  Vatika Township  Pvt.  Ltd.,

(supra).  In  our  view, in the light  of the foregoing

discussion and the findings recorded, the

arguments based on the principle laid down in

these decisions cannot be accepted. We, therefore,

need not deal with this issue any more.

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33. In view of the foregoing discussion, we find no

merit in the appeal. It is accordingly dismissed.  

                                    .………...................................J.                                    [ABHAY MANOHAR SAPRE]                                    

    …...……..................................J.              [INDU MALHOTRA]

New Delhi; July 25, 2019

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