2013 (3) TMI 268 - HC - Income Tax

Registration granted to trust - Whether ITAT was right in holding that registration had been granted to the Trust if the application was not either accepted or rejected within a period of six months from the end of the month in which such application was filed by the applicant Trust? - Held that - Period of six months as provided in Sub-section (2) of Section 12AA is not mandatory. Though the word shall has been used but it is well known that to ascertain whether a provision is mandatory or not, the expression shall is not always decisive. It is also well known that whether a statutory provision is mandatory or directory has to be ascertained not only from the wording of the statute but also from nature and design of the Statute and the purpose which it seeks to achieve. Herein the time frame under Sub-section (2) of Section 12AA of the Act has been so provided to exclude any delay or lethargic approach in the matter of dealing with such application. Since the consequence for non-compliance with the said time frame has not been spelt out in the statute, this Court cannot hold that the said time limit is mandatory in nature nor the period of six months has been couched in negative words. When public duty is to be performed by the public authorities, the time-limit which is granted by the Statue is normally not mandatory but is directory in the absence of any clear statutory intent to the contrary. As decided in irector of Income Tax (Exemption) v. Anjuman-E-Khyrkhah-E-Aam 2010 (12) TMI 957 - MADRAS HIGH COURT Section 12AA (1)(b)(i) and (ii) of Income Tax Act makes it clear that there is a statutory mandate imposed on the Department to pass an order in writing either registering the Trust/Institution or refusing to register the Trust/Institution. Thus the conclusion of the Tribunal in holding that registration was deemed to have been granted on not passing order in the application within the stipulated period of six months cannot be sustained and remitted the matter back to the Director of Income Tax (Exemption) to afford an opportunity of hearing to the assessee-Trust and hearing the matter afresh.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was correct in assuming registration for the Respondent Trust?
2. Whether the Tribunal had jurisdiction to adjudicate on issues not raised by the Trust?
3. Whether the time frame for passing registration orders under Section 12AA(2) of the Income Tax Act is mandatory or directory?

Analysis:

Issue 1: The Respondent Trust applied for registration under Section 12AA of the Income Tax Act, but the Commissioner rejected the request due to a delay in filing the application. The Tribunal held that the registration could be assumed to have been granted to the Trust as the application was not accepted or rejected within the prescribed six-month period. The Tribunal cited a relevant case to support its decision (216 CTR 167). The Appellant argued against this assumption, citing other cases to support their position (2006 (II) OLR 75 and 2011 237 CTR (Mad) 509).

Issue 2: The Appellant contended that the Tribunal erred in considering the original application as accepted and granting assumed registration. They argued that the Trust could not raise the earlier application in a subsequent one and that there was no deemed registration under Section 12AA(2) of the Act. The Respondent's counsel agreed that there was no deemed registration and requested the matter to be remitted back to the Commissioner for a fresh consideration.

Issue 3: The High Court analyzed the provisions of Section 12AA(2) of the Income Tax Act. It referred to a judgment from the Orissa High Court (2006 (II) OLR 75) stating that the six-month period for passing registration orders is not mandatory but directory. Another judgment (2011 237 CTR (Mad) 509) emphasized the statutory mandate for the Department to either register or refuse registration in writing. The Court concluded that the Tribunal's decision on assumed registration was incorrect and remitted the matter back to the Commissioner for a fresh consideration.

In the final judgment, the High Court set aside the Tribunal's order, remitted the matter to the Commissioner for a fresh decision, and clarified that there is no deemed registration. The Court answered the substantial questions of law accordingly, allowing the appeal and directing the Commissioner to provide sufficient opportunity to the Respondent for further proceedings.