2013 (8) TMI 252 - HC - Income Tax

Registration u/s 12A - Tribunal followed previous decisions of Bhagwad Swarup Shri Shri Devraha Baba Memorial Sh. Hari Parmarth Dham Trust Vs. C.I.T. Dehradun 2007 (8) TMI 380 - ITAT DELHI-B directed to assessee as registered u/s 12A - Difference of opinions - matter referred to larger bench on the following issues (i) whether non disposal of application for registration by granting or refusing registration before the expiry of six months as provided under Section 12AA(2) of the Income Tax Act, 1961 would result in deemed grant of registration. (ii) Whether the Division Bench judgment of this Court in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment (supra) holding that the effect of non consideration of the application for registration within the time fixed by Section 12AA(2) would be deemed grant of registration, is legally correct.

Summary

Issues Involved:

1. Deemed registration under Section 12AA(2) of the Income Tax Act.
2. Exemption eligibility under Sections 11, 12, and 13 of the Income Tax Act post the omission of Section 10(20-A).
3. Classification of the assessee as an Artificial Juridical Person versus a Local Authority.

Issue-Wise Detailed Analysis:

1. Deemed Registration under Section 12AA(2):

The primary issue revolves around whether the non-disposal of an application for registration under Section 12AA(2) within six months results in deemed registration. The assessee, Muzaffarnagar Development Authority (MDA), applied for registration under Section 12A(a) on 31.03.2003, but the application was not disposed of within the prescribed time. The ITAT ruled in favor of the assessee, directing the Assessing Authority to treat the MDA as registered under Section 12A, citing the Special Bench judgment in Bhagwad Swarup Shri Shri Devraha Baba Memorial Sh. Hari Parmarth Dham Trust v. CIT Dehradun.

The Revenue contested this, arguing that Section 12AA(2) does not imply deemed registration if the application is not decided within six months. They contended that the provision is directory, not mandatory, and non-compliance should not result in deemed registration, as this would amount to judicial legislation.

The court reviewed the relevant provisions of Sections 12A and 12AA, noting that the Division Bench in Society for the Promotion of Education, Adventure Sport & Conservation of Environment had held that non-consideration within the specified time results in deemed registration. However, the court disagreed, emphasizing that there is no statutory provision for deemed registration and that such an interpretation would render the words "refusing registration" redundant. The court highlighted that the principles of purposive construction cannot be applied to rewrite statutory language and that public duty provisions are generally directory unless specified otherwise.

The court referred the question of deemed registration and the correctness of the Division Bench judgment to a larger bench for authoritative pronouncement.

2. Exemption Eligibility under Sections 11, 12, and 13:

The second issue concerns whether the assessee could claim exemptions under Sections 11, 12, and 13 of the Act after the omission of Section 10(20-A) from the statute by the Finance Act, 2002, effective from 01.04.2003. The ITAT had directed the Assessing Authority to allow these exemptions, subject to the satisfaction of other conditions laid down in these sections.

The court did not delve deeply into this issue in the provided text, focusing primarily on the question of deemed registration. However, it is implicit that the resolution of the deemed registration issue would significantly impact the assessee's eligibility for these exemptions.

3. Classification as Artificial Juridical Person vs. Local Authority:

The third issue pertains to whether the Assessing Authority was justified in classifying the assessee as an Artificial Juridical Person instead of a Local Authority. The MDA filed its return of income in the status of "Local Authority," but the assessment was completed in the status of "Artificial Juridical Person," denying the benefits of registration.

The court's discussion primarily revolved around the procedural aspects of registration under Section 12AA and did not provide a detailed analysis of this classification issue. However, the classification would hinge on the outcome of the registration and exemption eligibility issues.

Conclusion:

The court referred the critical questions regarding deemed registration and the correctness of the Division Bench judgment to a larger bench for authoritative pronouncement. The resolution of these questions would have significant implications for the assessee's eligibility for exemptions and its classification status.