S.12AA – Recent Judgment of The Supreme Court about registration needs a reconsideration to avoid miscarriage of justice - because for inaction of authorities, an applicant should not suffer. This was a fit case for help of an Amicus Curie

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				By: CA DEV KUMAR KOTHARI
				April 7, 2016
All Articles by: CA DEV KUMAR KOTHARI View Profile

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Commissioner of Income Tax, Kanpur & Others Versus Society For The Promn. of Edn., Allahabad 2016 (2) TMI 672 - SUPREME COURT

Society for the Promotion of Education, Adventure Sport & Conservation of Environment Versus Commissioner of Income-tax, Central, Kanpur 2008 (4) TMI 700 - ALLAHABAD HIGH COURT

Facts:

The date of application was 24.02.2003, in fact of peculiar circumstances (change in law) registration was sought from the date of establishment of the the petitioner-society, i.e., 11-1-1993.
The petitioner is a Society running a school. The petitioner enjoyed exemption up to the assessment year 1998-99 under section 10(22) of the Income-tax Act, 1961,
In view of exemption u/s 10(22) it did not seek separate registration under section 12A of the Act, so as to claim exemption under section 11.
Section 10(22) was omitted by the Finance Act, 1998, therefore the petitioner applied for registration under section 12A of the Act, with retrospective effect, that is since the inception of the petitioner-society, i.e., 11-1-1993.
An application for the purpose was duly made on 24-6-2003under section 12A(a) (as it stood at the time.
A petition for condonation of delay was also made.

From these facts it is clear that the application was in order and there was reason beyond control of applicant to make an application earlier. Therefore the condonation of delay was likely to be allowed and registration would have been allowed as applied for, if the authority had acted on the application.

No action was taken by authority within six months, there was no rejection of application, no further information was called by the authority. Therefore, there was any inquiry was not initiated, but application was neither rejected nor granted in writing.

Therefore, question was whether it must be deemed that registration should be deemed to have been granted.

In view of author, it must be deemed that application for registration was allowed, that means allowed in all respect - the registration and the effective date and other incidental matters, if any.

Supreme Court approved judgment of High Court and upheld that in the given circumstances, the Registration must be considered as granted. However, on apprehension of the Counsel of revenue, honourable Supreme Court held that it must be deemed to have been allowed w.e.f. 24.08.2003, that is limitation for disposal of application for registration.

With all respect, author feels that the learned Counsel of revenue , in this case, The learned Additional Solicitor General , was not correct in raising apprehension, such apprehension is totally against the law which provide privilege for registration before the date of registration. When the law provide for registration from a date prior to date of application, and an application which has not been responded / rejected must be deemed to have been granted on all aspects. Unfortunately, even very senior counsels of revenue adopt approach like of junior officers of revenue. With due respect, the author feels that learned Additional Solicitor General raised apprehension which should not have been raised, rather it is expected from him that he will help the court in rendering justice, as per law, and in interest of justice and also public at large. His case is not like of an advocate of private party, who may at some time, not volunteer on some aspects , and just try to win the case of his client(though it is also not proper). The Counsel of revenue should not act like a junior authority which have tendency of denying benefit provided under law. This sort of practice of counsels, must not be encouraged by Courts.

With all respect, the author feels that the decision of the Supreme Court deserve a relook and reconsideration and a decision afresh is desired, for the following reasons:

If the authority had considered application, as per specific provision, he could have allowed registration from a date earlier then the date of submission of application (from the date of creation of institution or from the first day of the previous year just preceding the FY in which application was made or from some other date, as may be applicable in view of facts and circumstances of the case).In fact, in case of new institutions, such registration is allowed from the date when institution was established or became eligible. Even authority has power to condone delay in submission of application for registration. On reading of facts from the judgment of High Court, author feel that in this case if application was considered , registration was likely to be granted, as applied for.
For inaction of authority, why applicant should suffer? When admittedly authority had not taken any action, the application must be deemed to have been allowed / granted and to have effect of registration from the date for registration sought in application.

Provisions:

Before section 12AA it is important to read and understand the provisions of S. 12A. This is because S.12A provides about conditions for applicability of section 11 and 12 and also when and how registration is to be applied for and obtained. From which date registration can be granted etc.

Provisions of Section 12A are reproduced below in first column of table with high lights of relevant portions, and observations of author are given in column 2:

Conditions for applicability of sections 11 and 12 .	Important conditions are provided for exemptions and benefits.
12A . ³[(1)] The provisions of section 11 and 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the ⁴[***] ¹⁴[Principal Commissioner or Commissioner] before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA :	Benefits are conferred from an earlier date than the date of application. Application can be made within one year from creation of trust or institution. The registration can be from such date.
[Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,-	Belated application can also be considered.
(i) from the date of the creation of the trust or the establishment of the institution if the ⁷[***]¹⁴[Principal Commissioner or Commissioner] is, for 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 reasons;	Delay in making application can be condoned and registration can be with effect from the date of creation of institution.
(ii) from the 1st day of the financial year in which the application is made, if the ⁸[***]¹⁴[Principal Commissioner or Commissioner] is not so satisfied:]	The registration shall be w.e.f. 1^st day of the FY in which the application is made. Thus if an application is made say of 31.03.16 the registration will be w.e.f. 01.04.15, even if authority is not satisfied about reasons for delay.
[Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;
(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the ¹⁴[Principal Commissioner or Commissioner] and such trust or institution is registered under section 12AA;]	This is for new institutions created after the specified date and are much after the date relevant in case before the supreme Court.
(b) where the total income of the trust or institution as computed under this Act without giving effect to ¹⁰[the provisions of section 11 and 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.]	Audit is required in case total income without considering income exempted in terms of S. 11 and 12 , exceeds basic exemption applicable.
¹²[(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.]	This is in relation to period which is much after the period with which the case concerns. As per author there is no justification for allowing deductions from the FY next to the year in which application is made.
[Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year:	This proviso will come into play, and income of earlier years can also be exempted if conditions laid down in the proviso are satisfied.
Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year:	This imposes a bar on re assessment , merely because of non-registration , for relevant years.
Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]	The proviso imposes further restrictions if registration was refused or cancelled.

Application:

Application is to be made within prescribed time and in prescribed form ( Form no. 10A under Rule 17A) with necessary details and evidences about creation of trust or institution, its activities, documents for creation of trust and details of trustees/ governing body etc. as the case may be. Therefore, all requisites for consideration of applications must be submitted with the application and eligibility for grant of registration should be explained in the application. It is advisable that application should be made ready simultaneously with creation of trust or institution and should be submitted as soon as possible to avoid any controversy. The practice of ‘craves leave to submit at the time of hearing’ or if required, etc; should be avoided.

If the application is complete in all respect, the authority can consider it and grant registration even without a hearing. This is because in case of a new institution, objects are more relevant than activities undertaken. Major activities can be undertaken only after registration u/s 12AA is granted and certificate u/s 80G or other provisions, where applicable are granted. Because these are preconditions for obtaining donations, grants, subsidy etc, in a big way.

However, unfortunately, in practice we find that concerned authority usually issue notice, without application of mind and ask for many documents and information which are already provided in the application or accompanied with application. Some irrelevant information are also called for like audited accounts, details of donations etc. for last several years, though the institution was not existing at that time. The authorities must have practical approach and must have open mind and not biased mind that such institutions are not genuine or their activities are not genuine.

Provisions of Section 12AA are reproduced below in first column of table with high lights of relevant portions, and observations of author are given in column 2:

From provisions	Observations of author
[Procedure for registration. 12AA. (1) The ²[**] ⁹[Principal Commissioner or Commissioner] on receipt of an application for registration of a trust or institution made under clause (a) ³[or clause (*aa) of sub-section (1)]of section 12A, shall-	This is a procedural provision.
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and	As per prescribed forms for application, relevant information and documents are to be provided with application. In case any document or information is missing same can be called from applicant to complete the application. Still if further information is required the authority can call the same and has to hear the applicant.
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he-	The satisfaction must be based on documents and in objective manner. Satisfaction is about objects and activities, if any. In case there is no activity ,then only objects of the trust or institution need to be considered. Because in many cases activities can really be started only after registration is granted. In case authority do not call any more information, then it is clear that authority is satisfied with documents and information already on record with application and subsequent submissions of applicant, if any
(i) shall pass an order in writing registering the trust or institution;	Registration is mandatory, unless authority issues a show cause notice as to why registration should not be refused.
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,	Without calling information, and hearing applicant, authority should not say that he is not satisfied.
and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.	Before rejection a reasonable opportunity of being heard the applicant is essential. However, as noted earlier, such opportunity is not essential for granting of registration.
⁴[(1A) All applications, pending before the ⁹[Principal Chief Commissioner or Chief Commissioner] on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the ⁹[Principal Commissioner or Commissioner] and the ⁹[Principal Commissioner or Commissioner] may proceed with such applications under that sub-section from the stage at which they were on that day.]	This is administrative provision about transfer of jurisdiction and files etc.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) ⁵[or clause (aa) of sub-section (1)] of section 12A.]	The time limit is fixed under law in mandatory terms. When any notice calling further information is not issued, and any show cause notice (SCN) is not issued for not granting registration, then question of rejection of application does not arise at all. And Registration must be deemed to have been granted, from the date from which such registration is sought and is prima facie applicable.
⁶[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) ⁷[or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] and subsequently the ⁹[Principal Commissioner or Commissioner] is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:	This is about withdrawal of registration and related procedures.
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]	DO
⁸[ (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] [33 of 1996]and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution:	This provision is in response to subsequent development which may cause initiation of proceedings for cancellation of registration.
Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.]	DO

On analysis of above provisions, it is clear that learned Counsel of Revenue failed in pointing out applicable provisions, and instead wrongly raised apprehension that application should not be granted from the date of application but from the date of limitation for disposal of application. Author also feels and request to the honourable Supreme Court ( and other courts) , that in such cases of importance, particularly when respondent is not represented, the Court must appoint ‘amicus curiae’

By: CA DEV KUMAR KOTHARI - April 7, 2016