2018 (7) TMI 1737 - HC - Income Tax

Deemed registration under Section 12A - whether Tribunal is right in deeming the application as being condoned and in directing the CIT to condone delay and to grant registration under Section 12A of the I. T Act? - mandatory provision of consideration of application - Held that - Section 12AA(2) specifically provides that on an application, an order granting or refusing registration shall be passed before the expiry of the six months of the date on which the application was received. We also directed the revenue to produce the files, which are before us. We see from the files that the application was filed on 10. 10. 2006. A report was called for from the Income-Tax officer which was submitted only on 24. 07. 2007, after almost nine months. The communication of the Commissioner of Income-Tax based on which such report was made also is seen to be dated 12. 01. 2006 referred to in the report of the Income-Tax Officer. The Income-Tax Officer has recommended the registration under Section 12AA(2). However an adverse report is seen authored by the Joint Commissioner of Income-Tax dated 31. 07. 2007 addressed to the Commissioner of Income-Tax. There has been some adjournments later and eventually the order impugned before the Tribunal dated 29. 11. 2007 was passed. We cannot but notice that there was unreasonable delay insofar as complying with the mandatory provision under Section 12AA(2). The officers of the Department are necessarily bound by the directions so issued by the CBDT; which in the present case is a reiteration of the mandate statutorily prescribed. In the present case, we see failure to comply with the mandatory provision as provided under section 12AA(2); the circular having come later to the impugned order. - Decided in favour of assessee

Summary

Issues:
- Deemed registration under Section 12A of the Income Tax Act, 1961.

Analysis:
1. The primary issue in this case was whether there could be a deemed registration under Section 12A of the Income Tax Act. The appellant argued that there was a considerable delay in filing the application for registration, and there were insufficient reasons provided for condoning the delay. It was contended that there is no deeming provision in the statute for registration under Section 12A. The appellant also highlighted that the trust in question was not charitable as it involved collection of fees and contributions from students and parents, despite being primarily for setting up an educational institution.

2. The respondent, on the other hand, pointed out that the Tribunal had relied on a Special Bench decision which considered the limitation under Section 12AA(2) as mandatory. The respondent referred to a circular by the CBDT mandating consideration of applications within six months. The respondent emphasized a Supreme Court decision supporting the mandatory nature of the time limit for registration under Section 12AA.

3. The Court referred to a Full Bench decision of the Allahabad High Court which held that there could be no deemed registration solely due to non-disposal of an application within six months under Section 12AA. The Court emphasized the absence of a specific deeming provision for registration under Section 12AA and the significance of complying with mandatory provisions within the stipulated time frame.

4. The Court noted that the application in this case was filed on 10.10.2006, but the report from the Income-Tax officer was submitted after nine months, indicating unreasonable delay. The CBDT's instruction highlighted the strict adherence to the six-month time limit for processing applications under Section 12AA, which was not followed in this case.

5. Ultimately, the Court followed the Supreme Court decision which clarified that registration under Section 12AA would only take effect from the date of expiry of six months from the date of application. The Court rejected the appeal, ruling in favor of the assessee and against the revenue. The registration was deemed applicable only from the date of expiry of the six-month period, in line with the statutory provisions and judicial precedents.

In conclusion, the judgment emphasized the importance of adhering to statutory timelines for processing applications under Section 12AA and clarified the implications of deemed registration under the Income Tax Act, 1961 based on relevant legal precedents and interpretations.