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2007 (8) TMI 380 - AT - Income TaxCharitable And Religious Trust - Exemption u/s 11 - Deemed registration u/s 12AA - No order passed granting or refusing registration of Trust with the period laid down in section 12AA(2) registration would be deemed to have been granted? - no order was passed within 6 months from the date of application u/s 12A - HELD THAT - If the application for registration is to abate because the CIT did not pass an order thereon and the assessee is asked to file another application again that would be putting the assessee to the grind all over again for no fault of his. That consequence should be avoided. If the application is to be treated as pending then again the CIT would be getting an extended period of limitation which the section does not allow. Further it would be uncertain as to how long the period can be extended. The assessee cannot be kept waiting to the end of time. If we hold that the application must be deemed to have been refused obviously the assessee must be in a position to file an appeal against the refusal to the Tribunal but it will not be able to do so in the absence of a written order containing the reasons for refusal; the appeal remedy would be rendered illusory. That consequence cannot be countenanced. Therefore by a process of exclusion we are inclined to accept the conclusion that the CIT must be deemed to have allowed the registration if he has not passed any order within the time prescribed. That way the rights of the department are also protected in the sense that it would be open to the CIT to cancel the deemed registration by invoking sub-section (3) to section 12AA if it is otherwise permitted and the procedure prescribed therefor is followed. The assessee if aggrieved by the cancellation of registration has a right to appeal to the Tribunal u/s 253(1)(c). We find that DLF Universal Ltd. s case 2000 (5) TMI 2 - SUPREME COURT helps the assessee the most. In that case the provisions of section 269UD of the Act appearing in Chapter XXC of the Act providing for pre-emptive purchase of a property by the Government came up for consideration. A statement in Form No. 37-I was filed before the appropriate authority. It was found to be in order. It was filed within the time prescribed. Under the section the appropriate authority had to pass an order within three months from the receipt of the statement purchasing the property or to give a no objection certificate. The petitioner before the Court had complied with all the conditions imposed on it. But the appropriate authority did not pass any order within the period of three months mentioned above for purchase of the property by the Central Government. The Supreme Court held that in these circumstances the appropriate authority is duty bound to issue no objection certificate to the transfer of the property . The only difference without any substantial distinction is that while the time-limit of three months was prescribed in the first and second provisos to section 269UD the time-limit of 6 months from the month in which the application for registration was filed is prescribed in the sub-section (2) itself of section 12AA. Another difference again without any distinction is that the provisos to section 269UD are couched in negative language ( no such order shall be passed... after the expiration of... ) while sub-section (2) of section 12AA is couched in positive language ( every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of... ). The effect or the result is in our opinion the same viz. the orders have to be passed within the time-limit prescribed and if not the application should be deemed to have been granted. In the ultimate analysis it seems to us that we must agree with the conclusion which the Bangalore Bench reached in Karnataka Golf Association v. Director of Income-tax 2003 (3) TMI 260 - ITAT BANGALORE-C the Delhi Bench in Sardari Lal Oberoi Memorial Charitable Trust v. ITO 2005 (3) TMI 401 - ITAT DELHI-F and Chennai Bench in People Education Economic Development Society (PEEDS) v. ITO 2006 (1) TMI 215 - ITAT MADRAS-C . We accordingly answer the question referred to us in the affirmative. The order of the CIT refusing registration is a nullity and is quashed. Registration is deemed to have been granted as applied for by the assessee. The appeal is allowed. In the light of this we do not propose to examine the merits of the claim for registration.
Issues Involved:
1. Whether the CIT must pass an order granting or refusing registration of a trust within the period laid down in Section 12AA(2) of the IT Act. 2. The consequence of the CIT failing to pass such an order within the prescribed period. Issue-wise Detailed Analysis: 1. Mandatory Nature of the Time-Limit in Section 12AA(2): The key issue is whether the CIT is mandated to pass an order within six months from the end of the month in which the application for registration is received, as per Section 12AA(2) of the IT Act. The Tribunal concluded that the CIT has no option but to adhere to the time-limit set by the law, stating, "The Sub-section (2) of Section 12AA does not admit of any exception to the rule." The Tribunal emphasized that the language of the statute is mandatory and must be strictly followed, noting that "it is mandatory for the CIT to dispose of the application for registration within six months from the end of the month in which the application was filed." 2. Consequence of Failure to Pass an Order Within the Prescribed Period: The Tribunal examined the consequences of the CIT's failure to pass an order within the prescribed period. The Tribunal considered several potential outcomes, including: - Registration is deemed to be granted. - Registration is deemed to be refused. - The application for registration would abate. - The application would be treated as pending. After thorough deliberation, the Tribunal concluded that the only viable consequence is that registration must be deemed to have been granted. The Tribunal reasoned that deeming the application as refused would render the appeal remedy illusory, as there would be no written order to appeal against. Similarly, treating the application as pending would unjustly extend the period of limitation, which the section does not allow. Therefore, the Tribunal stated, "By a process of exclusion, we are inclined to accept the conclusion that the CIT must be deemed to have allowed the registration if he has not passed any order within the time prescribed." 3. Protection of Revenue's Rights: The Tribunal addressed concerns about potential misuse of deemed registration by trusts with non-charitable objects. It noted that the CIT retains the power to cancel the registration under Sub-section (3) of Section 12AA if subsequent enquiries reveal that the trust is not entitled to registration. This provides a safeguard for the Revenue, ensuring that deemed registration does not grant undue benefits to ineligible entities. The Tribunal stated, "The apprehension is not fully justified, because there is nothing in law to prevent the CIT from making his own enquiries even after the expiry of the time-limit and making use of the results thereof to cancel the registration under Sub-section (3)." 4. Precedents and Analogous Situations: The Tribunal referred to various precedents and analogous situations to support its conclusion. It cited cases under Section 139, where courts have held that if an application for extension of time to file a return is not disposed of within the prescribed period, it must be deemed to have been allowed. The Tribunal also referred to the Supreme Court's decision in DLF Universal Ltd. v. Appropriate Authority, where it was held that if the appropriate authority does not pass an order within the prescribed period, it is duty-bound to issue a "no objection" certificate. The Tribunal concluded that the same principle applies to Section 12AA(2), stating, "The effect or the result is in our opinion the same, viz., the orders have to be passed within the time-limit prescribed and if not the application should be deemed to have been granted." 5. Interpretation of Statutes: The Tribunal emphasized the importance of interpreting statutes in a manner that avoids uncertainty, friction, or confusion in the administration of the law. It cited G.P. Singh's "Interpretation of Statutes" to support its view that provisions as to time should be construed as mandatory when they are related to a right conferred upon a person. The Tribunal concluded that "the interpretation suggested by Dr. Gupta, in our humble opinion, would conform to this rule." Conclusion: The Tribunal answered the question referred to it in the affirmative, holding that if the CIT does not pass an order within the period laid down in Section 12AA(2), registration is deemed to have been granted. The order of the CIT refusing registration was declared a nullity and quashed. The Tribunal allowed the appeal, stating, "Registration is deemed to have been granted as applied for by the assessee."
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