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TMI Blog2024 (10) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the applicability of the decision of the Supreme Court in Society for Promotion of Education [ 2016 (2) TMI 672 - SC ORDER ] We find ourselves in agreement with the observations made in Harshit Foundation Sehmalpur [ 2022 (5) TMI 179 - SC ORDER ] including to distinguish the applicability of the decision, the Supreme Court in Society for Promotion of Education [ 2016 (2) TMI 672 - SC ORDER ] On a reading of the decision of the Supreme Court in Harshit Foundation Sehmalpur (supra) it is clear that the Supreme Court has considered the legal effect which emanated from Section 12AA (2) of the IT Act and as considered by the Full Bench of the Allahabad High Court in Muzaffar Nagar Development Authority [ 2015 (3) TMI 99 - ALLAHABAD HIGH COURT (LB) ] when it upheld the decision of the Division Bench in Harshit Foundation Sehmalpur [ 2022 (5) TMI 179 - SC ORDER ] while approving the decision of the Full Bench. In this view of the matter, considering the reasoned orders passed by the Supreme Court although in dismissing the SLP applying the principles as laid down in Kunhayammed and others vs. State of Kerala Anr. [ 2000 (7) TMI 67 - SUPREME COURT (LB) ] it would be required to be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of six months as prescribed under Section 12AA (2) of the I.T. Act, the assessee is deemed to have been granted a registration. The Tribunal accordingly held that the order of CIT refusing registration was a nullity requiring it to be quashed and set aside. The assessment year in question is A.Y. 2005-06. 2. By an order dated 6 June, 2011, the present appeal came to be admitted on the following question of law: Whether on the facts and in the circumstances of the case and in law, the ITAT is justified in granting the assessee a deemed registration under section 12AA of I.T. Act, 1961, when there is no such specific deeming provision in the I.T. Act, 1961. 3. The relevant facts are required to be noted. The assessee is a public trust running a pediatric hospital at Pune. On 6 February, 2006, the assessee filed an application in Form No. 10A requesting registration of the assessee under Section 12A of the I.T. Act. On such application of the assessee, the CIT-IV, Pune passed an order under Section 12AA on 15 September, 2006 refusing registration to the assessee. Being aggrieved by the said order, the assessee preferred an appeal before the Tribunal. The Tribunal by an impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can be done at any time. Therefore, it was to be held that in a case where the Commissioner does not pass the order granting or refusing of registration of trust within the period laid down in section 12AA (2), i.e., within six months from the end of the month in which the application for registration under section 12A was filed, the registration would be deemed to have been granted to the trust or institution automatically on expiry of period specified in section 12AA (2). Therefore, the order of the Commissioner refusing registration was a nullity and was, to be quashed. The registration to the assessee would be deemed to have been granted as applied for by the assessee. Up-to this stage, the issue appears to be covered, however, by the decision of the Special Bench, ld. A.R. has also fairly placed on record that though the Trust was created earlier but the application was moved on 6.2.2006, therefore, in terms of Section 12A(i)(a)(ii) registration can only be granted from the first day of the Financial Year in which the application is made. This aspect was not considered by the ld. Commissioner and requires proper legal adjudication. For this limited purpose, we hereby revert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax. (2015) 372 ITR 222 (All.) wherein the Division Bench had recognized the applicability of a deeming fiction under Section 12AA (2). It is submitted that, however, the Division Bench observed that the decision of the Division Bench in Society for Promotion of Education (supra) was declared to be not a good law by the Full Bench of the Allahabad High Court in Muzafar Nagar Development Authority (supra). Mr. Saxena submits that the Division Bench of the Allahabad High Court also considered the assessee s submission that the decision of the Division Bench in Society for the Promotion of Education (supra) was carried to the Supreme Court, which was confirmed by the Supreme Court while disposing of the appeal. Hence, a contention was raised before the Division Bench that such orders of the Supreme Court need to be considered recognizing a position in law that a provision of deemed grant of registration is inherent in Section 12AA (2). Mr. Saxena would submit that, however, such contention on the part of the assessee was not accepted by the Division Bench on the premise that the Supreme Court in its judgment in Commissioner of Income Tax vs. Society for Promotion of Education, Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion that the view taken by the Supreme Court in Society for the Promotion of Education (supra) being a prior view and although not expressly considered by the Supreme Court in the subsequent decision in Harshit Foundation Sehmalpur (supra), it would be binding on the revenue being the law of the land. It is also his submission that the Court needs to apply the prior decision of the Supreme Court in Society for the Promotion of Education (supra) and not the subsequent decision in Harshit Foundation Sehmalpur (supra) is the settled position in law. In support of such contention, Mr. Mundhra has placed reliance on the decisions of the Supreme Court in Sundeep Kumar Bafna vs. State of Maharashtra (2014) 16 SCC 623, National Insurance Company Ltd. vs. Pranay Sethi (2017) 16 SCC 680 and in Union Territory of Ladakh vs. Jammu and Kashmir National Conference 2023 SCC OnLine SC 1140. 9. Mr. Mundhra would therefore submit that this is a clear case where there are two diametrically opposite views of the Supreme Court, one in the case of Society for the Promotion of Education (supra) and other in the case of Harshit Foundation Sehmalpur (supra), and as per the position in law as canvassed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application for registration being granted, if the same is not decided within the prescribed period of six months from the date of making of the application. Analysis 14. In the aforesaid circumstances, as according to the parties, there are two diametrically opposite decisions rendered by the Supreme Court, the question before the Court is whether the revenue would be correct in its contention relying on the decision of the Supreme Court in Harshit Foundation Sehmalpur (supra) or whether the prior decision in Society for the Promotion of Education (supra) would be required to be applied needs to be decided in answering the question of law which has fell for consideration in the present proceedings. 15. At the outset, we may refer to the decision of the Full Bench of this Court in Kamleshkumar Ishwardas Patel (supra) wherein the Court was confronted with a conflict in two decisions (of the two Judges Bench s) of the Supreme Court in Santosh Anand v. Union of India (1981) 2 SCC 420 and the decision in Raj Kishore Prasad v. State of Bihar [1982] 3 SCC 10 . The issue before the Full Bench had arisen under the provisions of Section 11 of the The Conservation of Foreign Exchange and Pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court emanating from Benches of co-equal strength, as hereunder: . When contrary decisions of the Supreme Court emanate from Benches of equal strength, the course to be adopted by the High Court is, firstly, to try to reconcile and to explain those contrary decisions by assuming, as far as possible, that they applied to different sets of circumstances. This in fact is a course which was recommended by our ancient Jurists Srutirdwaidhe Smritirdwaidhe Sthalaveda Prakalapate in case there are two contrary precepts of the Sruties or the Smritis, different cases are to be assumed for their application. As Jurist Jaimini said, contradictions or inconsistencies are not to be readily assumed as they very often be not real but only apparent resulting from the application of the very same principle to different sets of facts Prayoge Hi Virodha Syat . But when such contrary decisions of co-ordinate Benches cannot be reconciled or explained in the manner as aforesaid, the question would arise as to which one the High Court is obliged to follow. One view is that in such a case the High Court has no option in the matter and it is not for the High Court to decide which one it would foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .J. in the Full Bench decision in Indo-Swiss Time (supra). This later view appears to us to be in perfect consonance with what our ancient Jurist Narada declared Dharmashastra Virodhe Tu Yuktiyukta Vidhe Smrita that is, when the Dharmashastras or Law Codes of equal authority conflict with one another, the one appearing to be reasonable, or more reasonable is to be preferred and followed. A modern Jurist, Seervai, has also advocated a similar view in his Constitutional Law of India, which has also been quoted with approval by Sandhawalia, C.J. in Indo-Swiss Time (supra, at p. 220) and the learned Jurist has observed that judgments of the Supreme Court, which cannot stand together, present a serious problem to the High Courts and Subordinate Courts and that in such circumstances the correct thing is to follow that judgment which appears to the Court to state the law accurately or more accurately than the other conflicting judgment. It appears that the Full Bench decision of the Madras High Court in R. Rama Subbarayalu v. Rengammal, AIR 1962 Mad 450 , would also support this view where it has been observed (at p. 452) that where the conflict is between two decisions pronounced by a Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), the subordinate Court would have to prefer one to the other and not necessarily obliged, as a matter of course, to follow either the former or the later in point of time, but must follow that one, which according to it, is better in point of law. As old may not always be the gold, the new is also not necessarily golden and ringing out the old and bringing in the new cannot always be an invariable straight-jacket formula in determining the binding nature of precedents of co-ordinate jurisdiction. (emphasis supplied) 16. It is seen from the observations of the Full Bench that the Court adverted to the law as enunciated by the Constitution Bench of the Supreme Court in Atma Ram vs The State Of Punjab And Ors. (supra) in which the Constitution Bench held when there arises conflict created by two decisions, a situation arises that both the decisions become binding. In such circumstances, the Courts can prefer one view to another, as both the decisions are equally binding on it. 17. In Indian Petrochemicals Corporation Ltd. Vs. Shramik Sena (supra) the Supreme Court held that when the High Court was facing diametrically two opposite decisions of the Supreme Court, it is expected of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 SC 83 approved the practice that the earlier decision to be followed and not the later. The relevant observations of the Supreme Court are required to be noted which read thus :- 16. In State of Bihar v. Kalika Kuer, (2003) 5 SCC 448, it has been held : (SCC p. 454, para 10) 10. an earlier decision may seem to be incorrect to a Bench of a coordinate jurisdiction considering the question later, on the ground that a possible aspect of the matter was not considered or not raised before the court or more aspects should have been gone into by the court deciding the matter earlier but it would not be a reason to say that the decision was rendered per incuriam and liable to be ignored. The earlier judgment may seem to be not correct yet it will have the binding effect on the later Bench of coordinate jurisdiction. The Court has further ruled : (SCC p. 454, para 10) 10. Easy course of saying that earlier decision was rendered per incuriam is not permissible and the matter will have to be resolved only in two ways either to follow the earlier decision or refer the matter to a larger Bench to examine the issue, in case it is felt that earlier decision is not correct on merits. 18. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, 1943 SCC OnLine MP 97 : AIR 1943 Nag 340] . The better course would be for the Bench hearing the case to refer the matter to a Full Bench in view of the conflicting authorities without taking upon itself to decide whether it should follow the one Bench decision or the other. We have no doubt that when such situations arise, the Bench hearing cases would refer the matter for the decision of a Full Court. 19. Though the aforesaid was articulated in the context of the High Court, yet this Court has been following the same as is revealed from the aforestated pronouncements including that of the Constitution Bench and, therefore, we entirely agree with the said view because it is the precise warrant of respecting a precedent which is the fundamental norm of judicial discipline. 20. In a recent decision of Union Territory of Ladakh Vs. Jammu and Kashmir National Conference 2023 SCC OnLine SC 1140 , the aforesaid position in law was reiterated by the two Judges Bench of the Supreme Court when it was held that in any case when faced with conflicting judgments by Benches of equal strength of the Supreme Court, it was the earlier one which is to be followed by the High Courts as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sy revolves in the present proceedings: 12A. Conditions as to registration of trusts, etc. The provisions of Section 11 and Section 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[* * *] 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 12-AA: 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, (i) from the date of the creation of the trust or the establishment of the institution if the[* * *] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er clause (b) of sub-section (1) and subsequently the 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: 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. (emphasis supplied) 23. Before the Allahabad High Court, in the case of Society for Promotion of Education Vs. Commissioner of Income Tax (supra) the Division Bench of the Allahabad High Court held that non consideration of the application for registration within the time fixed by Section 12AA (2) would amount to a deemed grant of registration. The Division Bench made the following observations in paragraph 19 of its judgment which read thus: 19. Considering the pros and cons of the two views, we are of the opinion that by far the better interpretation would be to hold that the effect of non-consideration of the application for registration within the time fixed by section 12AA (2) would be a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety for Promotion of Education (supra) did not lay down the correct position of law. The learned Chief Justice speaking for the Bench held as under: 15. We are unable to accept the line of reasoning which weighed with the Division Bench of this court in Society for the Promotion of Education Adventure Sport and Conservation of Environment (supra). The Division Bench in holding that the consequence of the non-consideration of an application for registration within the time fixed by section 12AA (2), would be a deemed grant of registration, placed reliance on the following considerations: (i) Unlike the decision of the Supreme Court in Chet Ram Vashist (supra) which dealt with the sanctioning of a lay-out plan where an element of public interest is involved, no such public element or public interest is involved and reading a breach of section 12AA (2) as leading to a deemed grant of registration may, at the worst , cause some loss of revenue 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take the view supporting the plea of deemed registration, otherwise the assessee would be left without a remedy. The assessee, in our view, is not without a remedy since a 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. If the Commissioner has delayed in passing an order on an application for registration under section 12AA, recourse to the remedy under article 226 is always available to order an expeditious decision thereon. 19. 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 CIT v. Sheela Christian Charitable Trust (2013) 354 ITR 478 (Mad) ; (2013) 32 taxman.com 242 (Mad). The Division Bench in that case has held that the Tribunal was not right in holding that the failure to pass an order in an application under section 12AA within the stipulated period of six months would automatically result in granting registration to the trust. The same view has been reiterated by a Division Bench of the Madras High Court in CIT v. Karimangalam Onriya Penga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration of an application under Section 12AA of the Income Tax Act. The High Court has taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision. 4. The learned Additional Solicitor General appearing for the appellants, has raised an apprehension that in the case of the respondent, since the date of application was of 24.02.2003, at the worst, the same would operate only after six months from the date of the application. 5. We see no basis for such an apprehension since that is the only logical sense in which the Judgment could be understood. Therefore, in order to disabuse any apprehension, we make it clear that the registration of the application under Section 12AA of the Income Tax Act in the case of the respondent shall take effect from 24.08.2003. 6. Subject to the above clarification and leaving all other questions of law open, the appeal is disposed of with no order as to costs. 27. As urged on behalf of the revenue as also apparent from the orders passed by the Supreme Court, the decision of the Full Bench of the Allahabad Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l sense in which the judgment could be understood. Therefore, in order to disabuse any apprehension, we make it clear that the registration of the application under section 12AA of the Income-tax Act in the case of the respondent shall take effect from 24-8-2003. 6. Subject to the above clarification and leaving all other questions of law open, the appeal is disposed of with no order as to costs. (Emphasis Added) 10. Leaned counsel for the appellant submitted that since judgment of this Court in Society for the Promn. of Edn.(supra) has been confirmed by Supreme Court while disposing appeal, therefore, it must be now taken that law of deemed grant of registration has been confirmed by Supreme Court. However, we find that Supreme Court in the judgment dated 16-2-2016, has held that all other questions of law are left open, meaning thereby question of law raised in appeal by C.I.T. has not been decided, but left open, hence, it cannot be said that judgment of this Court has merged with the judgment of Supreme Court on the above question of law, which was decided by this Court in Society for the Promotion of Education(supra). (emphasis supplied) 29. Thus, the Division Bench following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Allahabad High Court in its decision in the case of CIT v. Muzafar Nagar Development Authority* (I. T. A. 348 of 2008). 4. After considering in detail the provisions of section 12AA (2) of the Act and having found that there is no specific provision in the Act by which it provides that on non-deciding the registration application under section 12AA (2) within a period of six months there shall be deemed registration, the Full Bench of the High Court has rightly held that even in a case where the registration application under section 12AA is not decided within six months, there shall not be any deemed registration. 5. We are in complete agreement with the view taken by the Full Bench of the High Court. 6. The special leave petition stands dismissed. (emphasis supplied) 30. It is clear from the reading of the aforesaid orders passed by the Supreme Court, that the Supreme Court considered the question which fell for consideration of the High Court, namely whether on non-disposal of application for registration under Section 12AA (2) of IT Act within a period of six months, would result in deemed grant of registration or not. Referring to the decision of the Full Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the orders passed by the Supreme Court on the appeal. He thus submits that the decision of the Supreme Court in Society for Promn. Of Edn .(supra) being a judgment of the Supreme Court on an appeal, it declares law as laid down by the Supreme Court, within the meaning of Article 141 of the Constitution, and hence, such decision is a binding precedent. In such context as to what would be the legal position which would emerge from an order passed by the Supreme Court on an appeal and the orders passed rejecting the Special Leave to Appeal, we usefully refer to a recent decision of the Supreme Court in Sangita Vs. The State of Maharashtra Anr. [Civil Appeal Nos.4609-4610 of 2024 arising out of SLP(C)Nos.25654-25655 of 2023) Decision Dt. 1/4/2024] wherein the Supreme Court considering the relevant decisions in such context enunciated that when the Supreme Court refuses to grant Special Leave to Appeal, be it even by way of a reasoned order, it was held that such order passed by the Supreme Court, would not attract the Doctrine of Merger. The Supreme Court referring to the three Judge Bench decision of the Supreme Court in Kunhayammed and Ors. Vs. State of Kerala Anr. [(2000)6 SCC 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties. (vi) Once leave to appeal has been granted and appellate jurisdiction of the Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.. (emphasis supplied) 32. Having considered the legal position, we find, that there is much substance in the contention as urged by Mr. Saxena on behalf of the Revenue that the decision of the Supreme Court in Harshit Foundation Sehmalpur (supra) would be required to be held to be the law declared by the Supreme Court under Article 141 of the Constitution, on the interpretation of the interplay between Section 12A and Section 12AA (2) of the I.T. Act on the issue whether sub-section (2) of Section 12AA conceives any deemed grant of registration, if the assessee s application is not decided within six months. This decision considers the applicability and interpretation of the said provisions and accords an approval to the view taken by the Full Bench of the Allahabad High Court in Muzafar Nagar Development ..... X X X X Extracts X X X X X X X X Extracts X X X X
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