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TMI Blog2020 (3) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... y principle of law. In such circumstances, deemed registration cannot be granted on the ground that the application filed by the Trust under Section 12AA is not decided, for any good reason, within a period of six months from the date of filing. In the result, the Appeal is allowed. - R/TAX APPEAL NO. 783 of 2019 - - - Dated:- 4-2-2020 - HONOURABLE MR. JUSTICE J.B. PARDIWALA AND HONOURABLE MR. JUSTICE BHARGAV D. KARIA Mrs Mauna M Bhatt for the Appellant Mr Sudhir M Mehta And Ms Shailee S Mehta for the Opponent ORAL JUDGMENT PER: HONOURABLE MR. JUSTICE BHARGAV D. KARIA 1. This Tax Appeal was ordered to be admitted on the following substantial questions of law : (A) Whether the Appellate Tribunal is justified in allowing registration to the assessee disregarding the fact that the assessee trust is not a charitable organization, as the trust has not fulfilled the condition laid down for registration in section 12AA of the Income Tax Act, 1961 and Rule 17A of the Income Tax Rules, 1962 ? (B) Whether the Appellate Tribunal is correct in holding that non-disposal of application for registration by granting or refusing registration before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 4. Ms.Bhatt, the learned counsel appearing for the Revenue, submitted that the dictum of law as laid down by the Supreme Court in the case of Society for Promotion of Education (supra) is of no avail to the respondent - assessee in the facts and circumstances of the present case. It is true that the issue raised before the Supreme Court in the case of Society for Promotion of Education (supra) was quite similar to the issue on hand, i.e. with regard to grant of deemed registration of an application under Section12AA of the Act. However, the Supreme Court has decided the said issue in favour of the assessee and against the Revenue only on the basis of the statement made by the learned Additional Solicitor General, keeping all the questions of law open. It is, therefore, submitted that on plain reading of sub-section (2) of Section 12AA of the Act, 1961, it cannot be said that merely not deciding the application by the Income Tax Commissioner within the stipulated period of six months, deemed registration is to be granted. In such circumstances, referred to above, Ms. Bhatt prays that there being merit in this Appeal, the same be allowed. 5. On the other hand, this App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in writing refusing to register the trust or institution, 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. (1A) All applications, pending before the 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 Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (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) or clause (aa) [or clause (ab)] of sub-section (1) of Section 12A. (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 Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agar Development Authority, 372 ITR 209. The Full Bench of the Allahabad High Court relying on the decisions of the Madras High Court in the case of Commissioner of Income-tax-I Salem vs. Sheela Christian Charitable Trust, (2013) 214 Taxman 551 and CIT vs. Karimangalam Annya Pangal Semipu Amaipur Ltd., (2013) 354 ITR 483 (Mad) has held as under : The mere fact that in sub-section (1) of Section 12AA, the legislature has used the expression 'may' while providing that the Commissioner may make such inquiry as he may deem necessary to satisfy himself about the genuineness of the activities of the trust or institution, is not by itself reason enough to hold that the use of the expression 'shall' in sub-section(2) must, as a necessary consequence or corollary, be regarded as mandatory in nature. In Ganesh Prasad Sah Kesari and another vs. Lakshmi Narayan Gupta5, the Supreme Court held as follows : ....Obviously where the legislature uses two words 'may' and 'shall' in two different parts of the same provision prima facie it would appear that the legislature manifested its intention to make one part directory and another mandatory. But that by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the department; (ii) On the other hand, taking a contrary view and, if a deemed grant of registration is not read into the statute, the assessee would be left at the mercy of the income tax authorities since no remedy has been provided in the Act against a failure to decide; (iii) An irreversible situation is not created by the grant of a deemed registration because it is always open to the revenue to cancel the registration under sub-section (3) of Section 12AA prospectively. The only adverse consequence is a loss of revenue if the deemed registration is cancelled subsequently with prospective effect; and (iv) a purposive interpretation of the statute should be adopted. We are not inclined to accept this line of reasoning which has found favour with the Division Bench. For one thing, it would be inappropriate for the Court to accept, as a first principle of law, a proposition that there is no public element involved in the collection of revenue as legislated upon by Parliament or by the State Legislature. Proper collection of the revenues of the State is a matter of public interest since public revenues are utilized for public purposes. But such general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Act or the Rules requiring an Income Tax Officer to pass an order on an application filed by the assessee subsequent to the time given to him for filing his return pursuant to a notice under sub-section (2) of Section 139. The Supreme Court held that merely because a specific provision was absent for authorising an Income Tax Officer to entertain an application made beyond time, it was not proper to hold that it was not open to the assessee to make an application under Section 139(2) for extension of time, after the time allowed had expired. In consequence, the Supreme Court held that the application made by the assessee under Section 139(2) for extension of time after the expiry of the time allowed was maintainable and therefore valid. That was the point which was decided by the Supreme Court. This decision would be of no assistance to the assessee. We may also note at this stage, that the provisions of sub-section (2) of Section 12AA of the Act have been construed in a judgment of a Division Bench of the Madras High Court in Commissioner of Income-tax-I Salem vs. Sheela Christian Charitable Trust. The Division Bench in that case has held that the Tribunal was not rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conservation of Environment (supra) does not lay down the correct position of law. The reference is, accordingly, answered. The appeal shall now be placed before the regular bench in accordance with the roster for final disposal in terms of the questions so answered. 10. The principles discernible from the above referred Full Bench decision of the Allahabad High Court may be summarised thus : (1) The court should first construe the words of the taxing statute as they stand and the intention of the legislature should be construed with reference to the language of the words used. (2) The court, while interpreting the provision, should not legislate a new provision or introduce a deeming fiction where none has been provided. (3) The casus omissus cannot be supplied by the court unless there is a case of clear necessity and when reason is found within the statute itself. If the statutory mandate as laid in Section 12AA of the Act is flouted, then the assessee cannot be said to be without a remedy. The delay on the part of the Commissioner to consider an application can be remedied by recourse to the jurisdiction under Article 226 of the Constitution of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a separate question as to that what object the Legislature has made on such a deeming fiction. 14. Ruth Sullivan (Sullivan on the Construction of Statutes, 5th ed.) classifies deeming rules into four broad categories according to their purpose : (1) To create a legal fiction by declaring that something exists or has occurred regardless of the truth of the matter; (2) To declare the law; (3) To create a legal presumption by declaring that certain facts are to be taken as established; and (4) To confer discretion. 15. In Consolidated Coffee Ltd. v. Coffee Board, Bangalore, reported in AIR 1980 SC 1468, the purpose of the word 'deemed' occurring in Section 5(3) of the Central Sales Tax Act, 1956, came for consideration. The issue that emanated was whether a legal fiction had been created by use of the word 'deemed'. It is fruitful to reproduce what has been exposited by Their Lordships: A deeming provision might be made to include what is obvious or what is uncertain or to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail, but in each case it would be a question as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term deemed has to be read in its context and further the fullest logical purpose and import are to be understood. It is because in modern legislation, the term deemed has been used for manifold purposes. The object of the Legislature has to be kept in mind. (See Andaleeb Sehgal v. Union of India and another, AIR 2011 Delhi 29 (FB)) 18. In Lt. Col. Prithi Pal Singh Bedi v. Union of India and Ors., reported in AIR 1982 SC 1413, the Supreme Court has expressed the view as follows: The dominant purpose in construing a statute is to ascertain the intention of the Parliament. One of the well recognised canons of construction is that the legislature speaks its mind by use of correct expression and unless there is any ambiguity in the language of the provision the Court should adopt literal construction if it does not lead to an absurdity. The first question to be posed is whether there is any ambiguity in the language used in Rule 40. If there is none, it would mean the language used speaks the mind of Parliament and there is no need to look somewhere els ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing commercial crops but not for industrial purposes or for building purposes. Deemed permission would not be a free licence to use the land for any other purpose defeating the object of the grant. The public policy behind the grant is to augment agricultural production so as to enable the tiller of the soil economic empowerment and social and economic justice assured in the Preamble to the Constitution of India and Articles 38 and 46 to minimise inequalities in income and status. The State distributes under Article 39(b), its material resources to subserve the said purpose. Having obtained the grant or permission, the grantee-appellants cannot convert the land into non-agricultural use as well as for building houses. The sale of government land for nominal amount was for the avowed constitutional purposes. After the conversion, sale of the lands for building purposes would be a windfall. Obviously, the public purpose of the grant and the constitutional goals would be defeated by this method of circumvention. The Government, therefore, is justified in cancelling the grant. Under the above circumstances, the Government was entitled to revoke the grant in respect of the entire exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Regulations. It is for him to carry out the construction as per the Building Regulations and Bye-laws and particularly keeping in mind the FSI. The person who constructs the building as per the Rules and Regulations can say that he has constructed the building as per the requirement of law but not otherwise. The deemed permission can be said to have been attracted in case where a person has carried out construction in accordance with the existing Rules, Bye-laws and Building Regulations and not otherwise. It is required to be noted that likewise the case of Calcutta Municipal Corporation before the Apex Court, Rule 3 of Chapter XII of Appendix IV of the Act provides that if within 30 days there is no disapproval, subject to the Rules one may commence the work of erection of a building but not so as to contravene any provisions of the Act or any Rule or bye-laws. Under the Act before the commencement, notice is required to be given as contemplated in Chapter XII of Appendix IV. In our opinion, therefore, one has to submit a plan for erection of a building keeping in mind all the Building Regulations and if any one constructs contrary to that, the same being illegal must be demol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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