Section 12A read with sections 11 and 12 of the Income-tax Act, 1961

Last updated: 24 September 2007

Court :
IN THE ITAT BANGALORE BENCH ‘B’

Brief :
Section 12A read with sections 11 and 12 of the Income-tax Act, 1961 – Charitable or religious trust – Registration of – Assessee-trust was created on 21-9-1988 – Assessee after omission of section 10(22), with effect from 1-4-1999 applied for registration under section 12A belatedly on 9-11-2001 and sought condonation of delay occurred in filing application for registration giving certain reason – Commissioner rejected application for condonation of delay and hence did not grant registration to assessee-trust from its inception – Whether since it had not been established that trustees or persons who were managing affairs of trust were aware of filing application under section 12A, it was a fit case for condonation of delay in filing application for registration – Held, yes – Whether, therefore, provisions of sections 11 and 12 would not be made applicable in respect of assessee-trust from its inception – Held, yes FACTS The assessee-trust was created on 21-9-1988. The assessee after omission of section 10(22), with effect from 1-4-1999 applied for registration under section 12A belatedly on 9-11-2001 and sought condonation of delay occurred in filing the application for registration giving certain reasons. The Commissioner rejected the application for condonation of delay holding, inter alia, that the explanation for condoing the delay must cover the whole period of delay, and that a couple of trustees were advocates and they were presumed to possess definite knowledge about the necessity to register a deed in time to claim recognition under section 12A. The Commissioner, therefore, did not grant registration to the assessee-trust from its inception. On appeal to the Tribunal:

Citation :
Kadur Vidhya Pratishtana v Commissioner of Income-tax,Mysore Gopal Chowdhury, Judicial Member And N. L. Kalra, Accountant Member IT Appeal No. 162(Bang.) of 2005

If the assessee is able to show that there were sufficient reasons for not being able to file the application for registration in time, then the provisions of sections 11 and 12 would not be applicable. [Para 9] The expression ‘before the expiry of the period’ in proviso (i) of clause (a) of section 12A requires sufficiency of reasons which prevented the person from making the application within one year as required and not the reasons for the period beyond the prescribed period of one year. Hence, total period of delay is not to be explained and the authority is required to examine whether sufficient reasons existed for not making the application within the prescribed period of one year. [Para 12] In the instant case, the trust was existing for educational purposes and income was exempt under section 10(22). Such belief was true and no proceedings were ever taken against the assessee by the revenue. Section 10(22) was omitted, with effect from 1-4-1999 and the assessee-trust in order to avail benefit of exemption was required to apply for registration under section 12A. It had been contended by the assessee that persons managing the trust were not aware of section 12A. After becoming aware, the trust applied for registration. The Commissioner had heavily relied on the fact that some of the trustees were advocates. It had not been established that such advocates were dealing with income-tax matters and were also in charge of the management of the trust. [Para13] It is well settled that it is not a correct statement that everyone is presumed to know the law. Hence to apply the maxim that ignorance of law is no excuse, one should establish as a fact that persons were having knowledge or were being assisted by persons, who was having such knowledge. In the instant case, this aspect had not been established. [Para 15] The trust receives voluntary contributions from the persons for a charitable cause. The payments are not received by the trust for diverting towards payment of taxes. The spirit with which the payments are made are also to be considered and if there is a bona fide reason for filing the application for registration belatedly then the delay should be condoned so that the purposes for which contributions have been received is achieved. If the trust knowingly ignores the provisions of law then necessarily it has to bear the burden. In the instant case, it had not been established that the trustees or the persons who were managing the affairs of the trust were aware of filing the application under section 12A. Therefore, the Commissioner should have condoned the delay. Therefore, the delay in filing the application for registration was condoned and it was also directed that the provisions of sections 11 and 12 would not be made applicable in respect of the assessee-trust from its inception. [Para 17] Hence, the appeal was allowed.