Commissioner Of Income Tax I,Salem v. Sheela Christian Charitable Trust,12

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 27.02.2013CORAM:THE HON'BLE MRS.JUSTICE R.BANUMATHIANDTHE HON'BLE MR.JUSTICE K.RAVICHANDRABAABUT.C.(A) No.315 of 2010 Commissioner of Income Tax I,Salem. .... Appellant Vs. Sheela Christian Charitable Trust,12-3/34, South Car street,New 12[th] Ward, Taramangalam P.O.,Omalur Taluk, Salem District. .... Respondent Prayer:Tax Case Appeal is filed under Section 260A of theIncome Tax Act, 1961 against the Order dated 24.07.2009 made inI.T.A.No.339/Mds/09 on the file of Income Tax Appellate TribunalChennai Bench “B”, Chennai against the order dated 03.02.2009 andmade in C.No.9755 [14]/CIT-1/SLM/ 2007-08 on the file of theCommissioner of Income Tax, Salem For Appellant : Mr.J.NarayanasamyFor Respondent: Mr.D.Balachander forJUDGMENT MR.S.Sridhar Being aggrieved by the order of the Tribunal holding that therewas “assumed registration for the Respondent Trust”, the Revenue haspreferred this appeal. The appeal was admitted on the followingsubstantial questions of law:- “1. Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal was right inholding that it could be assumed that the registrationhad been granted to the Trust if the application was noteither accepted or rejected within a period of six monthsfrom the end of the month in which such application wasfiled by the applicant Trust? 2. Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was right inadjudicating on the issue that has not been raised by the https://hcservices.ecourts.gov.in/hcservices/ applicant Trust either in the grounds of appeal filed bythe Trust in Form 36 or at the time of hearing by filingadditional grounds? 2. Respondent Trust was created on 04.08.2003. It had made anapplication for registration under Section 12AA of Income Tax Act on31.8.2005. As per Section 12AA of the Act, application forregistration of the Trust or Institution in the prescribed form andin the prescribed manner shall be made to the Commissioner before1.7.1973 or before the expiry of a period of one year from the dateof creation of the Trust or establishment of the Institution.Application for registration of Respondent Trust was not accompaniedby any request for condonation of delay. The Trust claimed that thedelay was attributed due to the death of A.Palaniappa Devasagyam, whoexpired on 07.01.2004. Since the Respondent Trust did not file thedetails of activities and copy of accounts since its inception, thethen Commissioner of Income Tax (for short “CIT”) lodged theapplication. 3. Appellant filed another application dated 25.4.2007 in Form10A for registration under Section 12AA of the Act and Appellantrequested for granting of registration with retrospective effect from01.04.2005. By order dated 24.10.2007, the said application wasdismissed by the Commissioner of Income Tax, Salem. As against thesaid order, Respondent preferred appeal before the Income TaxAppellate Tribunal, Chennai in I.T.A.No.2498 of 2007. By the orderdated 30.10.2008, the Tribunal set aside the order of CIT, Salem andremitted the matter back to CIT, Salem to decide the matter afresh,after giving opportunity to the Respondent. 4. After the matter was remitted back to the CIT, Salem, theCIT, Salem gave opportunity to the Respondent and considered thematter afresh. After referring to the number of decisions, by theorder dated 03.02.2009, the CIT rejected the request of theRespondent to grant registration with effect from 01.04.2005 and heldthat there was no just and reasonable cause for the delay in filingthe application. 4. After the matter was remitted back to the CIT, Salem, theCIT, Salem gave opportunity to the Respondent and considered thematter afresh. After referring to the number of decisions, by theorder dated 03.02.2009, the CIT rejected the request of theRespondent to grant registration with effect from 01.04.2005 and heldthat there was no just and reasonable cause for the delay in filingthe application. 5. In the appeal preferred by the Respondent, Tribunal held thatin the matter of condonation of delay, a pragmatic approach should beadopted and substantial cause or justice should not be deviatedmerely on pedantic reasons. Tribunal further held that the originalapplication dated 31.8.2005 was to be treated as accepted andregistration under Section 12AA was to be assumed to have beengranted to the Trust. Tribunal also held that as per Section 12AA(2) of the Act, when the application for registration is filed, theorder granting or refusing registration shall be passed before theexpiry of six months from the end of the month in which theapplication was received. Observing that CIT kept the application for registration pending beyond the permitted time under Section 12AA(2) of the Act, the Tribunal held that it could be assumed thatregistration had been granted to the Trust if the same was not eitheraccepted or rejected within the period of six months. Reliance wasplaced on 216 CTR 167(All) (Society for the Promotion of Education,Sport and Conservation of the Environment v. Commissioner of IncomeTax). 6. Learned counsel for Appellant submitted that Tribunal erredin holding that the original application filed before the CIT oughtto be treated as having been accepted as per the decision in 216 CTR167 (All). It was submitted that the Tribunal ought to have heldthat Respondent could not agitate its earlier application in asubsequent application filed by the Trust for registration underSection 12AA of the Act and that Tribunal erred in holding that therewas an “assumed registration”. Placing reliance upon 2006 (II) OLR75 [Srikhetra, A.C. Bhakti-Vedanta Swami Charitable Trust v. TheAssistant Commissioner of Income Tax and another] and (2011) 237 CTR(Mad) 509 [Director of Income Tax (Exemption) v. Anjuman-E-Khyrkhah-E-Aam], it was submitted that there was no deemed registration underSection 12AA(2) of the Act. 7. We have heard Mr.S.Sridhar, learned counsel appearing for theRespondent. 8. Section 12AA(2) of Income Tax Act reads as under:-“Every order granting or refusing registration under clause(b) of sub-section (1) shall be passed before the expiry ofsix months from the end of the month in which theapplication was received under clause (a) [or clause (aa)of sub-section (1)] of Section 12A.”As per the above provision, the Authority is expected to pass anorder in the application for registration either by granting or byrefusing before the expiry of six month from the end of the month inwhich application was received. 9. In 2006 (II) OLR 75 [Srikhetra, A.C. Bhakti-Vedanta SwamiCharitable Trust v. The Assistant Commissioner of Income Tax andanother], the Orissa High Court took the view that period of sixmonths as provided under sub-section (2) of Section 12AA of IncomeTax Act is not mandatory and held as follows:-“5. We are unable to uphold such contention. In ourview the period of six months as provided in Sub-section(2) of Section 12AA is not mandatory. Though the word“shall” has been used but it is well known that toascertain whether a provision is mandatory or not, theexpression 'shall' is not always decisive. It is also wellknown that whether a statutory provision is mandatory ordirectory has to be ascertained not only from the wording 9. In 2006 (II) OLR 75 [Srikhetra, A.C. Bhakti-Vedanta SwamiCharitable Trust v. The Assistant Commissioner of Income Tax andanother], the Orissa High Court took the view that period of sixmonths as provided under sub-section (2) of Section 12AA of IncomeTax Act is not mandatory and held as follows:-“5. We are unable to uphold such contention. In ourview the period of six months as provided in Sub-section(2) of Section 12AA is not mandatory. Though the word“shall” has been used but it is well known that toascertain whether a provision is mandatory or not, theexpression 'shall' is not always decisive. It is also wellknown that whether a statutory provision is mandatory ordirectory has to be ascertained not only from the wording of the statute but also from nature and design of theStatute and the purpose which it seeks to achieve. Hereinthe time frame under Sub-section (2) of Section 12AA of theAct has been so provided to exclude any delay or lethargicapproach in the matter of dealing with such application.Since the consequence for non-compliance with the said timeframe has not been spelt out in the statute, this Courtcannot hold that the said time limit is mandatory in naturenor the period of six months has been couched in negativewords. Most of the time negative words indicate amandatory intent. This Court is also of the opinion thatwhen public duty is to be performed by the publicauthorities, the time-limit which is granted by the Statueis normally not mandatory but is directory in the absenceof any clear statutory intent to the contrary. SeeMontreal Street Railway Company v. Normandin AIR 1917 PrivyCouncil 142 at page 144. Here there is no such expressstatutory intent, nor does it follow from necessaryimplication.” 10. We are also of the view that the time frame under sub-section (2) of Section 12AA of Income Tax Act is only directory.Tribunal was not right in holding that not passing order in theapplication within the stipulated period of six months wouldautomatically result in granting assumed registration to the Trust. 11. While considering the case of lodging assessee's applicationfor registration of Trust, in (2011) 237 CTR (Mad) 509 [Director ofIncome Tax (Exemption) v. Anjuman-E-Khyrkhah-E-Aam], this Court heldthat Section 12AA (1)(b)(i) and (ii) of Income Tax Act makes it clearthat there is a statutory mandate imposed on the Department to passan order in writing either registering the Trust/Institution orrefusing to register the Trust/Institution. This Court further heldthat the conclusion of the Tribunal in holding that registration wasdeemed to have been granted cannot be sustained and remitted thematter back to the Director of Income Tax (Exemption) to afford anopportunity of hearing to the assessee-Trust and hearing the matterafresh. 12. Learned counsel for Respondent also fairly submitted thatthere is no question of "deemed registration" and that the matter beremitted back to the Commissioner of Income Tax, Salem forconsideration of the matter afresh. Non-consideration of theregistration application would not amount to "deemed registration"and therefore, the order of the Tribunal directing "deemedregistration" cannot be sustained and the matter is to be remittedback to CIT, Salem for consideration of the matter afresh. https://hcservices.ecourts.gov.in/hcservices/ remitted back to Commissioner of Income Tax, Salem for considerationof the matter afresh and the appeal is allowed. The Commissioner ofIncome Tax, Salem shall afford sufficient opportunity to theRespondent and pass orders. The questions of law are answeredaccordingly. No costs. Sd/ Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ remitted back to Commissioner of Income Tax, Salem for considerationof the matter afresh and the appeal is allowed. The Commissioner ofIncome Tax, Salem shall afford sufficient opportunity to theRespondent and pass orders. The questions of law are answeredaccordingly. No costs. Sd/ Assistant Registrar /True Copy/ Sub Assistant RegistrarbbrTo1. The Commissioner of Income Tax,Salem.2. The Income Tax Appellate TribunalChennai Bench "B", Chennai.3 The Assistant Registrar Income Tax Appllate Tribunal Rajaji Bhavan, Besant Nagar, Chennai+ 1 C.C. TO MR.J.Narayanasamy Advocate Sr.12215Judgment inT.C.(A) No.315 of 2010 KSJ KS 13/03/2013