HYDERABAD: A division bench of the Telangana High Court, comprising Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao, issued notices to the Income Tax department in response to a writ petition filed by the Telangana Building and Other Construction Workers Welfare Board (TBOCWWB) represented by its secretary and CEO E Gangadhar, challenging the orders issued by the Commissioner of Income Tax Exemption on August 7, 2024, as well as an assessment order dated February 27, 2024 and subsequent proceedings.
Counsel for the petitioner argued that the Board is a statutory entity established under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. Since its formation in 2008, the Board has been exempted from paying taxes, according to an exemption notification dated November 9, 2017. Based on this exemption, it did not pay taxes. However, for the financial year 2022-23, the Income Tax department issued notices to the Board, which it failed to respond to, resulting in the assessment order on February 27, 2024. The Board has since filed a statutory appeal along with a stay application against this order. The appeal is currently pending.
The petitioner’s counsel contended that the Central Board of Direct Taxes office memorandums dated February 29, 2016, and July 31, 2017, were inappropriately applied by the appellate authority, which directed the Board to deposit 20% the outstanding tax demand. The petitioner argued that this requirement was unjustified as the appellate authority did not question the Board’s claim to the tax exemption provided by the 2017 notification. Counsel further argued that multiple court rulings have indicated that the CBDT office memorandums are directory rather than mandatory. Therefore, there was no justification for directing the Board to pay 20% the tax demand. The petitioner maintains that the appellate authority’s decision failed to consider the exemption notification.