REGISTRATION OF TRUST WITH RETROSPECTIVE EFFECT

[Mr. M. GOVINDARAJAN]

 Sec. 11 of the Income Tax Act, 1961 (‘Act’ for short) deals with the income that are not to be included in the total income of the previous years of the person.  Sec12 of the Act deals with the income of trusts or institutions from contribution.

Sec. 12A specifies conditions for applicability of Sections 11 and 12.  Sec. 12A(1) provides that the provisions of Sec. 11 and Sec. 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-

(a) the person receipt of the income has made an application for registration of the trust or the Institution in the prescribed form and in the prescribed manner to the Commissioner before 1.7.1973 or before the expiry of a period of one year from the date of creation of the trust or the establishment of the institution whichever is later and such trust or institution is registered under Sec.12AA.  Where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of Sec. 11 and shall apply in relation to the income of such trust or institutions –

(i) from the date of creation of the trust or the establishment of the institution, if the Commissioner is, for the reasons to be recorded in writing, satisfied that the person in  receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reason;

(ii) from the 1^st day of the Financial year in which the application is made, if the Commissioner is not so satisfied. The provisions of this clause shall not apply in relation to any application made on or after 1.6.2007.

Sec. 12(1) (aa) provides that the person in receipt of the income has made an application for registration of the trust or institution on or after 01.06.2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered Sec. 12AA.

In ‘Saharanpur Development Authority V. Assistant Commissioner of Income Tax’ – (2011) 8 ITR (Trib) 263 (Delhi) the assessee filed an application for registration under Section 12AA on 01.06.2007.   The Commissioner passed order under Section 12AA on 01.11.2007.   The assessee made an application for registration under Sec. 12AA to be granted with retrospective effect from 01.04.2001.   The Commissioner rejected the request of the assessee holding that as per the amendment brought by the Finance Act, 2007, the provisions for condoning the delay in making application for registration would not be applicable in respect of any application for registration filed on or after 01.06.2007.  The assessee submitted the application for registration on 01.06.2002.   Therefore the Commissioner has no power to condone the delay under the Act. 

The assessee aggrieved against the order of Commissioner of Income Tax filed an appeal before the Tribunal.   In the appeal before the Tribunal the assessee has taken a ground that the Commissioner of Income Tax law has erred in law and on facts in refusing condonation of the application for registration under Sec. 12AA with retrospective effect from 01.04.2001.

The Tribunal perused the order against which the appeal was made and the provisions of law contained in that behalf.   It is not in dispute that under Section 12(1)(a)(i), if the Commissioner is, for the reasons to be recorded in writing, satisfied that the person in receipt of the income of any trust or institution was prevented from making the application before the expiry of one year from the date of creation of the trust or the establishment of the institution for sufficient reasons, he will grant registration to the trust from the date of creation of the trust of the institution.  The Tribunal further observed that a proviso has now been inserted by the Finance Act, 2007 with effect from 01.06.2007 providing further that the provisions of this clause i.e., Sec. 12A(1)(a)(i) shall not apply in relation to any application made on or after 01.06.2007.  The Tribunal further held that it is clear that the power to grant registration from the date of creation of the trust of the establishment or from any date earlier than the date of the first day of the financial year in which the application is made, given to the Commissioner has been taken away by the statute by inserting a proviso to that clause in respect of an application for registration made on or after 01.06.2007.   Since there is no power to condone the delay available to the Commissioner in respect of the application for registration filed under Sec. 12A on or after 01.06.2007 the question of condoning the delay in his part did or could not arise.

The Tribunal held that the Commissioner of Income Tax has rightly held that in respect of the application made on or after 01.06.2007 he has no power of condonation so as to grant registration from the earlier date other than the first day of the financial year on which the application for registration is made. The order of the Commissioner of Income Tax was upheld by the Tribunal.