2015 (3) TMI 99 - HC - Income Tax

Effect of non consideration of the application for registration within the time fixed by Section 12AA(2) - Whether would be deemed grant of registration? - Held that - As relying of Sheela Christian Charitable case 2013 (3) TMI 268 - MADRAS HIGH COURT wherein held that the Tribunal was not right in holding that the failure to pass an order in an application under Section 12AA within the stipulated period of six months would automatically result in granting registration to the trust. Non disposal of an 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 not result in a deemed grant of registration and the judgment of the Division Bench of this Court in Society for the Promotion of Education Adventure Sport & Conservation of Environment 2008 (4) TMI 700 - ALLAHABAD HIGH COURT does not lay down the correct position of law. - The appeal shall now be placed before the regular bench in accordance with the roster for final disposal in terms of the questions so answered - Decided against assessee.

Issues Involved:
1. Interpretation of Section 12AA(2) of the Income Tax Act, 1961.
2. Legal correctness of the Division Bench judgment in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment vs. Commissioner of Income Tax.

Detailed Analysis:

Issue 1: Interpretation of Section 12AA(2) of the Income Tax Act, 1961
The primary issue revolves around whether the non-disposal of an application for registration within six months as stipulated under Section 12AA(2) results in a deemed grant of registration. Section 12AA(2) mandates that the Commissioner must pass an order granting or refusing registration within six months from the end of the month in which the application was received. The court examined whether this period is mandatory or directory and whether a failure to act within this time frame results in automatic registration.

The court held that the use of the term "shall" in Section 12AA(2) does not necessarily imply that the period is mandatory. The legislature did not stipulate that the Commissioner would be rendered functus officio or that an application would be deemed granted if not disposed of within six months. The court emphasized that introducing a legislative fiction, such as deemed registration, is not within the court's interpretative jurisdiction and would amount to rewriting the law. The court also referred to the Supreme Court's decision in Chet Ram Vashist vs. Municipal Corporation of Delhi, which held that a statutory provision prescribing a time frame does not automatically imply a deemed approval if the time frame is not adhered to.

Issue 2: Legal Correctness of the Division Bench Judgment
The Division Bench in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment vs. Commissioner of Income Tax had held that failure to consider an application within the stipulated period results in a deemed grant of registration. The Full Bench doubted the correctness of this judgment on several grounds:

1. Lack of Statutory Provision: There is no provision in Section 12AA(2) that provides for deemed registration if the application is not decided within six months.
2. Judicial Overreach: The court cannot create a deeming fiction where the legislature has not provided one.
3. Legislative Intent: The legislature's intent, as evidenced by the absence of a consequence for non-compliance within six months, does not support the interpretation of deemed registration.

The Full Bench concluded that the Division Bench's interpretation was incorrect. The court noted that the assessee is not left without a remedy, as they can seek recourse under Article 226 of the Constitution for an expeditious decision if there is undue delay.

Conclusion
The Full Bench answered the reference as follows:
1. Non-disposal of an application for registration under Section 12AA(2) within six months does not result in a deemed grant of registration.
2. The judgment of the Division Bench in Society for the Promotion of Education, Adventure Sport & Conservation of Environment does not lay down the correct position of law.

The appeal was directed to be placed before the regular bench for final disposal in accordance with the answers provided. There was no order as to costs.

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