Plea Based On Equity/Hardship Not Legally Sustainable In Tax Matters: SC [Read Judgment]

The Supreme Court has observed that, in a taxing statute, a plea based on equity or/and hardship is not legally sustainable and the constitutional validity of taxing provisions cannot be struck down on such reasoning.

In Prashanti Medical Services & Research Foundation Union of India, a writ petition was filed challenging the constitutional validity of sub-section(7) of Section 35AC of the Income Tax Act inter alia on the ground that once National Committee for Promotion of Social and Economic Welfare granted an approval to the the petitioner's hospital project for a period of three financial years, the same could not be withdrawn qua them on the strength of insertion of sub-section (7) in Section 35AC of the Act. The High Court turned down the plea and the matter was taken up before the Apex Court.

Before the Apex Court, it was submitted that if sub-section (7) 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 2017-2018. In this context, the bench comprising Justice Abhay Manohar Sapre and Justice Indu Malhotra said:

"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. "

The appellant then pleaded before the bench to invoke powers under Article 142 of the Constitution and allow them to receive donation even for the third financial year in terms of the notification dated 07.12.2015 from their donors. The court observed:

"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 Section 35AC during the two financial years 2015- 2016 and 2016-2017. "

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