2008 (4) TMI 345 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case include the eligibility of the assessee for tax exemption u/s 10(21) and registration u/s 12A, the delay in filing the application for registration, and the categorization of the assessee as a scientific research association or an institution engaged in research activities.

Eligibility for Tax Exemption u/s 10(21) and Registration u/s 12A:
The appellant, a society engaged in scientific and industrial research, had been notified u/s 10(2)(xiii) of the Indian Income-tax Act, 1922, and later u/s 35(1)(ii) of the Income-tax Act, 1961, for deduction purposes. Despite submitting annual accounts and reports, the appellant faced challenges in obtaining renewal of exemption. The appellant eventually filed for exemption u/s 11 as a charitable institution, which was denied due to lack of registration u/s 12AA. The Director of Income-tax (Exemption) refused to condone the delay in filing for registration u/s 12A, citing the appellant's awareness of the need for registration.

Delay in Filing Application for Registration:
The appellant filed for registration u/s 12A in 2007, seeking retrospective registration from 2000. The Director of Income-tax (Exemption) rejected the application, emphasizing the appellant's failure to apply for registration before July 1, 1973. The Tribunal, however, considered the circumstances leading to the delay, noting that the appellant's income was exempt u/s 10(21) until the change in categorization in 2005. The Tribunal concluded that the delay in filing for registration was not unreasonable, especially considering the appellant's significant role in scientific research and development.

Categorization of the Assessee:
The categorization of the appellant as an institution partly engaged in research activities raised concerns, prompting the appellant to request reclassification as a scientific research association. The delay in notification renewal and change in categorization led the appellant to file for exemption u/s 11, triggering the need for registration u/s 12A. The Tribunal acknowledged the appellant's genuine intent and the significant contributions made in the field of research and development.

The Tribunal allowed the appeal, condoning the delay in filing for registration u/s 12A and directing the Director of Income-tax (Exemption) to review the appellant's application for registration from 2000 onwards.