2016 (7) TMI 709 - HC - Income Tax

Registration under Section 12AA(a)(ii) - what should be the effective date for acceptance of the application for registration? - Held that - The view expressed by different High Courts is about the requirement to submit audited accounts along with the application. The requirement is held to be directory in nature and not mandatory. If filing of the the audited accounts is not mandatory, the application submitted by the non-appellant cannot be said to be defective. The registration should have been allowed from the date the application was submitted and not from the date when alleged defects in the application were cured. The Tribunal and the revenue have not pointed out any other defect in the application than for filing of the audited accounts. In the light of the aforesaid, we do not find it to be a case of relating back of the date of registration from the date of its filing. The application was filed without any defect and the audited accounts were submitted later on because submission of audited accounts along with the application was not mandatory.

Summary

Issues:
Challenge to the order of Income Tax Appellate Tribunal regarding registration of a Trust under Section 12AA(a)(ii) of the Income Tax Act.

Analysis:
The appellant-revenue argued that registration of the Trust should be from the date when defects in the application were cured, not from the date of submission with defects. They cited Section 12AA(a)(ii) and emphasized that the audited accounts were not submitted initially, which was later rectified. They referred to a judgment of the Gujarat High Court in a similar case.

The respondent contended that the application was complete, and the absence of audited accounts was not a mandatory requirement for registration under Section 12AA. They argued that the Tribunal correctly found the application to be in order, supported by judgments from the Madhya Pradesh, Punjab and Haryana, and Allahabad High Courts. They highlighted that the requirement for audited accounts was directory, not mandatory.

The Court examined the submissions and the record, focusing on the effective date for accepting the registration application. It noted the disagreement on whether the defects in the application necessitated a later effective date. Relying on precedents from various High Courts, including Madhya Pradesh, Punjab and Haryana, and Calcutta, the Court concluded that the requirement for audited accounts was not mandatory but directory. As the application was not defective except for the audited accounts, the registration should have been allowed from the date of application submission, not from the date of curing the alleged defects.

In the Court's view, there was no error in the Tribunal's decision as the application was initially without defects, and the submission of audited accounts later was not mandatory. Therefore, the appeal was dismissed based on the detailed analysis of the legal provisions and precedents cited by both parties.