Court : IN THE ITAT NEW DELHI BENCH ‘B’ (Special Bench)
Brief : : Section 12AA, read with section 12A, of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure - Whether it is mandatory for Commissioner to dispose of application for registration under section 12A within six months from end of month in which application was filed - Held, yes - Whether in a case where Commissioner does not pass order, granting or refusing registration of trust within period laid down in section 12AA(2) (i.e., within period of six months from end of month in which application for registration under section 12A was filed) then registration would be deemed to have been granted to Trust or Institution automatically on expiry of period specified in section 12AA(2) - Held, yes
CIRCULARS AND NOTIFICATIONS
Circular No. 762, dated 18-2-1998
The assessee, a charitable trust/institution, applied to the Commissioner for registration under section 12A on 23-10-2001. The Commissioner, however, passed the order under section 12AA refusing registration to the assessee-trust on 26-5-2003 which was beyond the period laid down in section 12AA(2) (i.e., not within the period of six months from the end of the month in which the application for registration was filed). He had, however, initiated certain enquiries by letter dated 3-4-2002, which was well within the period of six months, to which the assessee responded by furnishing the relevant details. The enquiry continued well beyond 30-4-2002. But, finally order was passed under section 12AA refusing registration on 26-5-2003. Aggrieved by the said order the assessee filed the instant appeal before the Tribunal and contended that once the time-limit fixed by section 12AA(2) expired without the Commissioner having passed any order, it must be deemed that the registration had been granted. However, since a contrary view had been expressed by two co-ordinate Benches of the Tribunal, on said issue the matter was referred to the Special Bench, for decision.
Citation : Bhagwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham Trust
Commissioner of Income-tax, Dehradun
The statutory authorities have no option but to obey the mandate of the law. Unless the statute provides for exceptions, the order must be passed by statutory authorities in accordance with the time-limit set by the law. The sub-section (2) of section 12AA does not admit of any exception to the rule. Therefore, it is mandatory for the Commissioner to dispose of the application for registration made under section 12A within six months from the end of the month in which the application was filed. [Para 11]
If the application for registration under section 12A is to abate because the Commissioner did not pass an order thereon and the assessee is asked to file another application again that would be putting the assessee to the grind all over again for no fault of his. That consequence should be avoided. If the application is to be treated as pending, then again the Commissioner would be getting an extended period of limitation which section 12AA does not allow. Further it would be uncertain as to how long the period can be extended. If it is concluded that the application must be deemed to have been refused obviously the assessee must be in a position to file an appeal against the refusal to the Tribunal but it would not be able to do so in the absence of a written order containing the reasons for refusal; the appeal remedy would be rendered illusory. Therefore, the Commissioner must be deemed to have allowed the registration under section 12A if he has not passed any order under section 12AA within the time prescribed. That way, the rights of the department are also protected in the sense that it would be open to the Commissioner to cancel the deemed registration by invoking sub-section (3) of section 12AA, if it is otherwise permitted and the procedure prescribed therefore is followed. The assessee, if aggrieved by the cancellation of registration, has a right to appeal to the Tribunal under section 253(1)(c). [Para 12]
Further the object of introducing section 12AA was to provide for the processing of the application for registration, registration being a condition for obtaining exemption of the income of the trust or charitable institution under section 11. It would be incongruous to hold that while the condition that the trust or charitable institution must be registered with the Commissioner is mandatory or absolute, the provision that the Commissioner shall pass an order thereon within six months from the end of the month in which the application was filed is merely directly, leaving it to the convenience of the Commissioner to pass the order at any time he likes disregarding the time-limit prescribed. That would introduce an element of uncertainty and confusion in the administration of the Act and may even compel trusts or institutions claiming exemption under section 11 to invoke article 226 of the Constitution. Such consequences have to be avoided. The assessments of the trust or charitable institution may in the meantime be completed rejecting the claim for exemption on the ground that it is not registered, even though the trust/charitable institution is found by the Assessing Officer to satisfy the other conditions such as application of income, investment of the funds and so on. In other words, by not passing the order under section 12AA within the time-limit, the claim of the trust/charitable institution can be frustrated, albeit unintentionally. Therefore, it could not be said that the time-limit within which the Commissioner has to pass an order under section 12AA on the application for registration of the trust or institution is merely directory. [Para 13]
In the instant case, the order refusing registration was ultimately passed on 26-5-2003, more than a year after the expiry of the time-limt. The entire chronology showed that no action was taken on the application till the time -limit for passing the order was about to come to an end. When the enquiry was started at a very late stage, it was found that there were many things to be enquired into and so the enquiry could not be completed and an order, was passed on 30-4-2002. The time-limit prescribed was given a go-by, the enquiry was continued and finally an order was passed refusing the registration. [Para 14]
Section 12AA was introduced to provide for the procedure for registration, enquiry into the claim and a time-limit for passing the order. Therefore, while exercising such an important power the Commissioner should also pass an order within the time-limit provided. It would be incongruous to hold that conducting an enquiry into the claim for registration is an important excise of the power whereas passing of the order within the time-limit provided is not and it can be done at any time. [Para 16]
Therefore, it was to be held that in a case where the Commissioner does not passed 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 section12A was filed) then registration would be deemed to have been granted to the trust as 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. [Para 19]