2017 (2) TMI 394 - HC - Income Tax

Delay in filing application for registration under section 12A - reasons for delay - Held that - Initial application filed by the society did not make any request for condonation of delay and no justification was given. In the subsequent application filed seeking condonation of delay, the only reason given is that the society was not aware that instead of getting separate individual educational institutions registered, society itself should have got registration. This explanation has not been found satisfactory by the Commissioner of Income-tax since society admittedly had assistance of well qualified chartered accountants, etc. and it is not the case that registration granted to two educational institutions separately was illegal or impermissible. The Tribunal has discussed several law, applicable for considering the question of condonation of delay under the Limitation Act, 1963 but looking to the language of the statute in the case in hand, we do not find that the respondents have given any such explanation, what to say of satisfactory, and the Tribunal has read much more therein which has not been stated at all. The registration of the individual institutions have been cancelled with the consent prospectively and simultaneously, society as a whole, has been granted registration. Therefore, in our view, the Tribunal in condoning delay and granting registration to society with effect from April 1, 1973, has erred in law and the aforesaid judgment and order cannot be sustained.

Issues Involved:
1. Condonation of delay in filing an application for registration under section 12A of the Income-tax Act, 1961.
2. Direction to treat the assessee-society as registered under section 12A(2) of the Income-tax Act, 1961, with effect from April 1, 1973.

Detailed Analysis:

Issue 1: Condonation of Delay in Filing Application for Registration under Section 12A

The Revenue's appeal questioned whether the Income-tax Appellate Tribunal (Tribunal) was right in condoning the delay in filing the application for registration under section 12A of the Income-tax Act, 1961. The Allahabad High School Society (AHS Society) was founded in 1861 and set up two schools. It was registered under the Societies Registration Act, 1860, in February 1988. Section 12A was inserted into the Income-tax Act, 1961, by the Finance Act, 1972, effective from April 1, 1973. The section required that an application for registration be made before July 1, 1973, or within one year from the creation of the trust or institution, whichever was later. The Commissioner had the discretion to admit applications after this period.

An application was filed on behalf of Boys High School in 1991, which was granted registration with effect from January 1, 1973, and the delay was condoned. However, a separate application for Girls High School and College in 1999 did not explain the delay, and thus registration was granted from April 1, 1999. Subsequently, an application was filed on behalf of the AHS Society in 2004, seeking registration for the society itself, stating that the society was the parent body of both schools. The Commissioner granted registration from April 1, 2004, but the Tribunal directed the registration to be effective from April 1, 1973.

The High Court found no merit in the Tribunal's decision to condone the delay, noting that the reasons for the delay were not satisfactorily explained. The initial application did not request condonation, and the subsequent application only stated that the society was unaware that it should have registered itself instead of the individual schools. The Tribunal's decision was influenced by the educational nature of the institution, which the High Court found irrelevant for condoning the delay. The High Court emphasized that the reasons for the delay must be genuine and satisfactorily explained, which was not the case here.

Issue 2: Direction to Treat the Assessee-Society as Registered under Section 12A(2) with Effect from April 1, 1973

The Tribunal directed that the AHS Society be treated as registered under section 12A(2) with effect from April 1, 1973. The High Court noted that this would cause an overlap in the registration periods of the two schools, creating complications. The Tribunal's decision to grant retrospective registration from April 1, 1973, was found to be erroneous. The High Court pointed out that the registration of the individual schools was valid and that the society's registration should not overlap with these periods.

The High Court concluded that the Tribunal erred in law by condoning the delay and granting retrospective registration. The Tribunal's order was set aside, and the Commissioner's order, which granted registration from April 1, 2004, was restored. The appeal was allowed with costs.

Conclusion:

The High Court answered both questions in favor of the appellant (Revenue) and against the respondents (AHS Society). The Tribunal's order dated September 22, 2005, was set aside, and the Commissioner's order was restored. The appeal was allowed with costs.

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