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2025 (4) TMI 1091 - HC - Income TaxRefusing to grant registration u/s 12A - delay in filing the application for registration u/s 12A - as argued registration u/s 12A was not required until its gross receipts exceeded Rs.1 crore (the threshold limit u/s 10(23C)(iii ad)) - whether appellant could not had been granted registration with a retrospective effect from 1989 onwards or even from the previous financial year? HELD THAT - From perusal of the pleadings there seems to be only two grounds that the appellant have raised seeking for condonation of delay and for grant of registration w.e.f. 15.05.1989. One can easily reach to the conclusion that the assessees therein had made application seeking registration u/s 12A of the Act belatedly giving cogent and justifiable reasons in the delay that took place in applying for registration. However when we look into the facts of the present case what can be visualized is that in the present case though the appellant has tried to give certain explanation but what is required to be considered is whether the grounds raised were cogent and strong enough to justify the delay in seeking for registration. As would be seen from the order passed by the Director of Income Tax (Exemptions) so also the order passed by the ITAT it clearly reflects that the appellant has taken contradictory stand justifying the delay. The appellant on the one hand submits that because of the rush of work on account of frequent expansion of the educational society they were not able to apply for registration under Section 12A of the Act. At the same time they also try to take a stand that since they had an exemption under Section 10(23C) (iii ad) of the Act therefore they were not required to seek another registration under Section 12A of the Act and once when they crossed the limit that was prescribed u/s 10(23C) (iii ad) of the Act they had immediately moved an application. This again is not-sustainable and acceptable as compared to the first ground giving explanation for the delay; as the two do not match each other and are self-contradictory in itself. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this appeal under Section 260A of the Income Tax Act, 1961, are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to retrospective registration under Section 12A from 1989 Relevant legal framework and precedents: Section 12A of the Income Tax Act provides for registration of charitable or religious trusts and institutions, which enables them to claim exemption under the Act. Registration is generally granted from the date of application, but courts have in certain cases condoned delay and granted retrospective registration where sufficient cause was shown. The appellant relied on several precedents where retrospective registration was allowed on justifiable grounds. Court's interpretation and reasoning: The Court examined the facts that the appellant society was registered under the Public Societies Registration Act in 1989 and had been operating educational institutions since then. However, the application for registration under Section 12A was filed only on 30.08.2004. The Court observed that the appellant had initially obtained exemption under Section 10(23C)(iii ad), which applies only if the income is below Rs.1 crore. The appellant's income crossed this threshold only in 2003-04. The Court noted that the appellant's explanation for delay was twofold: inadvertence by the society's accountant, and the fact that registration was not sought earlier because the income was below Rs.1 crore. These grounds were found to be contradictory and self-defeating. If the delay was due to inadvertence, the income-based ground would be an afterthought, and vice versa. Key evidence and findings: The appellant's prior exemption under Section 10(23C)(iii ad) showed awareness of statutory requirements. The appellant did not apply for Section 12A registration until after the income crossed Rs.1 crore. The Court found no cogent or justifiable reason for the delay. Application of law to facts: Given the absence of a satisfactory explanation for delay and contradictory grounds, the Court upheld the refusal to grant retrospective registration from 1989. Treatment of competing arguments: The appellant's reliance on precedents allowing retrospective registration was distinguished on factual grounds, as those cases involved cogent reasons for delay, which were lacking here. Conclusion: The Court concluded that retrospective registration from 1989 was not justified. Issue 2: Condonation of delay in filing application for registration under Section 12A Relevant legal framework and precedents: Courts have discretion to condone delay in filing registration applications under Section 12A if sufficient cause is shown. The appellant cited multiple decisions where delay was condoned on bona fide grounds. Court's interpretation and reasoning: The Court scrutinized the appellant's explanations and found them inconsistent. The appellant initially attributed delay to ignorance and workload but also claimed no need to apply earlier as income was below Rs.1 crore. The Court held that these explanations were mutually exclusive and not credible. Key evidence and findings: The appellant's contradictory stand before the authorities and the Court undermined the plea for condonation. The appellant's prior exemption under Section 10(23C)(iii ad) indicated knowledge of the need for compliance. Application of law to facts: The Court applied the principle that delay must be justified by strong and cogent reasons, which were absent. Therefore, condonation of delay was rightly refused. Treatment of competing arguments: The appellant's arguments for condonation were rejected as insufficient and self-contradictory. The Court distinguished the cited precedents on the basis of factual differences. Conclusion: The Court held that the delay in filing the application could not be condoned. Issue 3: Whether registration under Section 12A was required only after income crossed Rs.1 crore threshold Relevant legal framework and precedents: Section 10(23C)(iii ad) provides exemption to certain educational institutions with income not exceeding Rs.1 crore. Section 12A registration is a separate requirement for claiming exemption under the Act. Court's interpretation and reasoning: The Court observed that exemption under Section 10(23C)(iii ad) is limited by income ceiling, but registration under Section 12A is an independent procedural requirement. The appellant's contention that registration was unnecessary until income exceeded Rs.1 crore was held to be legally untenable. Key evidence and findings: The appellant had exemption under Section 10(23C)(iii ad) from inception, indicating awareness of tax provisions. The failure to apply for Section 12A registration earlier was deliberate or due to negligence. Application of law to facts: The Court applied the statutory framework to reject the appellant's argument that registration was only necessary after crossing the income threshold. Treatment of competing arguments: The Court rejected the appellant's income-based justification as inconsistent with statutory requirements. Conclusion: The appellant was required to seek registration under Section 12A irrespective of income levels. Issue 4: Legality and correctness of orders of Director of Income Tax (Exemptions) and ITAT Relevant legal framework and precedents: The Director of Income Tax (Exemptions) and ITAT have jurisdiction to grant or refuse registration under Section 12A and to decide appeals. Court's interpretation and reasoning: The Court found that both authorities had considered the facts and appellant's explanations, and had reasonably concluded that registration could only be granted prospectively from the date of application. The orders recorded the lack of sufficient reasons for delay and contradictory explanations. Key evidence and findings: The orders reflected careful scrutiny and adherence to legal principles. No error or illegality was found. Application of law to facts: The Court applied the principle of judicial deference to administrative and quasi-judicial orders where no error of law or fact is apparent. Treatment of competing arguments: The appellant's challenge to the orders was dismissed due to lack of merit. Conclusion: The orders of the Director of Income Tax (Exemptions) and ITAT were upheld as valid and lawful. 3. SIGNIFICANT HOLDINGS The Court held: "Both these grounds are self-contradictory in itself. If there would have been an ignorant and bona fide lapse on the part of the appellant in applying, the second ground would not be available to them. At the same time, if the second ground is to be accepted, then the first ground would become an afterthought and the fact that they had applied only for after their income crossed Rs.1 crore goes to show that they had deliberately not sought for registration earlier because their income was less than Rs.1 crore." "The appellant had obtained exemption under Section 10(23C)(iii ad) of the Act from the beginning which goes to show that they were aware of the statutory requirement, and in spite of that, they did not thought it necessary for seeking registration under Section 12A of the Act. This again would amount to an intentional act in not filing of an application considering the fact that there income was less than Rs.1 crore." "The findings given by the Director of Income Tax (Exemptions) as also by the ITAT does not seem to be in any manner erroneous or contrary to law." "The appellant has taken contradictory stand justifying the delay. The appellant, on the one hand, submits that because of the rush of work on account of frequent expansion of the educational society they were not able to apply for registration under Section 12A of the Act. At the same time, they also try to take a stand that since they had an exemption under Section 10(23C)(iii ad) of the Act, therefore they were not required to seek another registration under Section 12A of the Act and, once when they crossed the limit that was prescribed under Section 10(23C)(iii ad) of the Act, they had immediately moved an application. This again is not-sustainable and acceptable as compared to the first ground giving explanation for the delay; as the two do not match each other and are self-contradictory in itself." "The instant appeal therefore fails and is accordingly dismissed."
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