2024 (7) TMI 1021 - HC - Income Tax

Exemption u/s 11 - Deemed registration u/s 12AA - whether non-deciding the application for registration u/s 12AA (2) within a period of six months, there shall be deemed registration or no? HELD THAT - Petitioner having already granted a registration under Section 12A (1) (ac) (ii) read with Section 12AB (1) (a) of the Act on 04 April, 2022 for a period of five years i.e. from assessment year 2022-23 to 2026-27, there was no need for the petitioner to make a fresh application on 30 September, 2022 under which the impugned order has been passed. It obviously appears to be a mistake on the part of the petitioner as it was quite illogical, that once the petitioner was possessing registration for five years, and before such registration would come to an end, there could be no need for the petitioner in the very year i.e. on 30 September, 2022 to make a fresh application for any registration. Further considering the purport of the relevant provisions, we also find that the primary reason as set out in the impugned order, to reject the application of the petitioner, is itself not supported by the provision. Even assuming that the application of the petitioner was a valid independent application, and the reason as furnished in the impugned order that as the earlier provisional registration was not submitted by the petitioner, the petitioner would not be entitled for issuance of a registration, was not a valid and justifiable reason to reject the application. We may not be required to delve on the illegality of the order dated 31 March, 2023, for the reason that Mr. Naniwadekar, on instructions, submits that his client would intend to withdraw the application dated 30 September, 2022 on which the impugned order dated 31 March, 2023 has been passed. In the peculiar facts of the case, we are inclined to accept such request as made by Mr. Naniwadekar. This would obviously render the impugned order inconsequential. We also accept the contention as made on behalf of the petitioner that the order dated 04 April, 2022 would continue to operate to the benefit of the petitioner as there is nothing on record to show that such order is not legal, valid and non-subsisting as on date. Order - The application dated 30 September, 2022 filed by the petitioner for registration under Section 12A (1) (ac) (i) of the Act is permitted to be withdrawn. As a consequence thereof, the impugned order dated 31 March, 2023 is rendered inconsequential. ii. It is noted that the registration dated 04 April, 2022 as granted to the petitioner under the provisions in question as on date is legal and valid from assessment year 2022-23 to 2026-27.

Summary

Issues Involved:
1. Validity of the impugned order dated 31 March 2023.
2. The petitioner's entitlement to the benefit of registration granted on 04 April 2022.
3. The legal implications of "deemed registration" under Section 12AA of the Income Tax Act.

Detailed Analysis:

1. Validity of the Impugned Order Dated 31 March 2023:
The petitioner, a Public Charitable Trust, challenged the order dated 31 March 2023, which rejected their application for registration under Section 12AB of the Income Tax Act. The petitioner argued that the impugned order was passed on a mistaken application made on 30 September 2022, despite the petitioner already having a valid registration granted on 04 April 2022, which was valid for five years. The court found substance in the petitioner's contention that the fresh application was unnecessary and illogical, given the existing valid registration. The primary reason for rejecting the application was deemed invalid and unjustifiable. Consequently, the petitioner was allowed to withdraw the application dated 30 September 2022, rendering the impugned order inconsequential.

2. The Petitioner's Entitlement to the Benefit of Registration Granted on 04 April 2022:
The court acknowledged that the petitioner had been granted registration on 04 April 2022 under Section 12A (1) (ac) (ii) read with Section 12AB (1) (a) of the Act, valid for five years from the assessment year 2022-23 to 2026-27. This registration continued to operate to the petitioner's benefit, and there was no record indicating its invalidity. The court emphasized that the order dated 04 April 2022 remained legal and valid, thereby protecting the petitioner’s interests.

3. The Legal Implications of "Deemed Registration" Under Section 12AA of the Income Tax Act:
The petitioner cited the Supreme Court's decision in Commissioner of Income-tax, Kanpur v. Society for Promn. of Edn., Allahabad, which held that non-response to an application for registration within six months would result in "deemed registration." However, another Supreme Court decision in Harshit Foundation Sehmalpur Jalalpur Jaunpur v. Commissioner of Income-tax took an opposite view, stating that non-response would not lead to deemed registration. The court noted that the former decision, being a judgment on an appeal, declared the law under Article 141 of the Constitution and thus held precedence. The court also referenced the principles from Kunhayammed and Ors. Vs. State of Kerala & Anr., which clarified that an order refusing special leave to appeal does not attract the doctrine of merger and does not substitute the order under challenge.

Conclusion:
The court allowed the petitioner to withdraw the application dated 30 September 2022, rendering the impugned order dated 31 March 2023 inconsequential. The registration granted on 04 April 2022 remained valid and continued to benefit the petitioner. The court kept all contentions open for any future actions by the Department and disposed of the petition accordingly.