C/Taxap/783/2019 Judgment v. Muzafar Nagar Development Authority Which Has Distinguished The Decision Of The Hon’ble Supreme Court In The Case Of Society For Promotion Of Education (2016) I

C/TAXAP/783/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 783 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALASd/-andHONOURABLE MR. JUSTICE BHARGAV D. KARIASd/-================================================================1Whether Reporters of Local Papers may be allowedYESto see the judgment ?2To be referred to the Reporter or not ?YES3Whether their Lordships wish to see the fair copyNOof the judgment ?4Whether this case involves a substantial questionNOof law as to the interpretation of the Constitutionof India or any order made thereunder ?================================================================THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) VersusADDOR FOUNDATION ================================================================Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1MR SUDHIR M MEHTA(2058) for the Opponent(s) No. 1MS SHAILEE S MEHTA(5873) for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAandHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 04/02/2020 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.This Tax Appeal was ordered to be admitted on thefollowing substantial questions of law : “(A) Whether the Appellate Tribunal is justified in allowingregistration to the assessee disregarding the fact that theassessee trust is not a charitable organization, as the trusthas not fulfilled the condition laid down for registration insection 12AA of the Income Tax Act, 1961 and Rule 17A ofthe Income Tax Rules, 1962 ? (B) Whether the Appellate Tribunal is correct in holding thatnon-disposal of application for registration by granting orrefusing registration before the expiry of six months asprovided U/s.12AA(2) of the I.T.Act, 1961 would result indeemed grant of registration, particularly in view of thedecision of Allahabad High Court in the case of CIT vsMuzafar Nagar Development Authority which hasdistinguished the decision of the Hon’ble Supreme Court inthe case of Society for Promotion of Education (2016) inwhich the Supreme Court had not decided this question ?” 2.The short question that falls for our consideration is,whether the Tribunal could have allowed the Appeal filed by therespondent - assessee on the ground of not deciding theapplication for deemed registration filed under Section 12AA ofthe Income Tax Act, 1961 (for short 'the Act, 1961') within thestipulated period of time as specified in sub-section (2) of Section12AA of the Act, 1961. 3.The brief facts of the present case are as under : 3.1The respondent - assessee made an online application forregistration under Section 12AA of the Act, 1961, on 23.01.2017 in Form No.10A under Rule 11AA of the Income TaxRules, 1961, along with the Registration Certificate issued by theCharity Commissioner. 3.2The Commissioner of Income Tax (Exemption), Ahmedabad(for short, 'CIT(E)'), by letter dated 05.02.2018, called for thedetails of the various activities actually carried out by therespondent - assessee. 3.3The CIT(E), after considering the details submitted by therespondent-Trust, rejected the application for registration. 3.The brief facts of the present case are as under : 3.1The respondent - assessee made an online application forregistration under Section 12AA of the Act, 1961, on 23.01.2017 in Form No.10A under Rule 11AA of the Income TaxRules, 1961, along with the Registration Certificate issued by theCharity Commissioner. 3.2The Commissioner of Income Tax (Exemption), Ahmedabad(for short, 'CIT(E)'), by letter dated 05.02.2018, called for thedetails of the various activities actually carried out by therespondent - assessee. 3.3The CIT(E), after considering the details submitted by therespondent-Trust, rejected the application for registration. 3.4Being aggrieved by such decision of rejecting theapplication for registration, the respondent - Trust preferred anappeal before the Income Tax Appellate Tribunal. The Tribunaltook note of the fact that while passing the order rejecting theapplication for registration, the CIT(E) has wrongly mentionedthe date of the receipt of the application for registration as23.01.2018 instead of 23.01.2017. The Tribunal, relying onsub-section (2) of Section 12AA of the Act, 1961, has held that asthe application for registration is not decided within a period ofsix months from the date of filing, the registration is deemed tohave been granted. In this regard, the Tribunal placed relianceon the decision of the Supreme Court in the case of CIT vs.Society for Promotion of Education, (2016) 238 taxmann 0330(SC). Accordingly, the Tribunal allowed the appeal filed by therespondent - assessee. 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 andcircumstances of the present case. It is true that the issueraised before the Supreme Court in the case of Society forPromotion of Education (supra) was quite similar to the issue onhand, i.e. with regard to grant of deemed registration of anapplication under Section12AA of the Act. However, theSupreme Court has decided the said issue in favour of theassessee and against the Revenue only on the basis of thestatement made by the learned Additional Solicitor General,keeping all the questions of law open. It is, therefore, submittedthat on plain reading of sub-section (2) of Section 12AA of theAct, 1961, it cannot be said that merely not deciding theapplication by the Income Tax Commissioner within thestipulated period of six months, deemed registration is to begranted. In such circumstances, referred to above, Ms. Bhattprays that there being merit in this Appeal, the same be allowed. 5.On the other hand, this Appeal has been vehementlyopposed by Mr.Sudhir Mehta, the learned counsel appearing forthe respondent - assessee. He placed reliance on the decision ofthe Kerala High Court in the case of Commissioner of IncomeTax, Cochin vs. TBI Education Trust, reported in (2018) 96taxmann.com 356 (Kerala), as well as the decision of theRajasthan High Court in the case of Commissioner of IncomeTax vs. Sahitya Sadawart Samiti jaipur, reported in (2017) 88taxmann.com 703 (Rajasthan), to submit that an identical issuewas raised before the Kerala High Court as well as the RajasthanHigh Court, wherein both the Courts took the similar view thatthe registration is deemed to have been granted automatically on expiry of the period of six months as specified in sub-section(2) of Section 12AA of the Act, 1961. 6.With regard to grant of deemed registration, reliance isplaced on the following decisions : (i)In the case of Commissioner of Income Tax, Cochinvs. TBI Education Trust, (2018) 96 taxmann.com 356(Kerala); (ii)In the case of Commissioner of Income Tax vs.Sahitya Sadawart Samiti Jaipur, (2017) 88 taxmann.com703 (Rajasthan); on expiry of the period of six months as specified in sub-section(2) of Section 12AA of the Act, 1961. 6.With regard to grant of deemed registration, reliance isplaced on the following decisions : (i)In the case of Commissioner of Income Tax, Cochinvs. TBI Education Trust, (2018) 96 taxmann.com 356(Kerala); (ii)In the case of Commissioner of Income Tax vs.Sahitya Sadawart Samiti Jaipur, (2017) 88 taxmann.com703 (Rajasthan); (iii)In the case of Commissioner of Income Tax, Kanpurvs. Society for Promotion of Education, Allahabad, (2016)67 taxmann.com 264 (SC). 7.Having heard the learned counsel appearing for the partiesand having gone through the orders passed by the CIT(A) as wellas the Tribunal, we are of the view that in order to adjudicate thecontroversy involved in this Appeal, we must look into theprovision of Section 12AA of the Act, 1961, which reads thus; “12AA.Procedure for registration: (1) The PrincipalCommissioner or Commissioner, on receipt of an applicationfor registration of a trust or institution made under clause (a)or clause (aa) [or clause (ab)] of sub-section (1) of section12A, shall— (a)call for such documents or information from the trustor institution as he thinks necessary in order to satisfyhimself about the genuineness of activities of the trust orinstitution and may also make such inquiries as he maydeem necessary in this behalf; and (b)after satisfying himself about the objects of the trust orinstitution and the genuineness of its activities, he— (i)shall pass an order in writing registering thetrust or institution; (ii)shall, if he is not so satisfied, pass an order inwriting 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 passedunless the applicant has been given a reasonableopportunity of being heard. (1A) All applications, pending before the Principal ChiefCommissioner or Chief Commissioner on which no order hasbeen passed under clause (b) of sub-section (1) before the1st day of June, 1999, shall stand transferred on that dayto the Principal Commissioner or Commissioner and thePrincipal Commissioner or Commissioner may proceed withsuch applications under that sub-section from the stage atwhich 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 sixmonths from the end of the month in which the applicationwas 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 grantedregistration under clause (b) of sub-section (1) or hasobtained registration at any time under Section 12A as itstood before its amendment by the Finance (No. 2) Act, 1996(33 of 1996) and subsequently the Principal Commissioneror Commissioner is satisfied that the activities of such trustor institution are not genuine or are not being carried out inaccordance with the objects of the trust or institution, as thecase may be, he shall pass an order in writing cancellingthe registration of such trust or institution: Providedthat no order under this sub-section shall bepassed unless such trust or institution has been given areasonable opportunity of being heard. (4) Without prejudice to the provisions of sub-section (3),where a trust or an institution has been granted registrationunder clause (b) of sub-section (1) or has obtainedregistration at any time under Section 12A [as it stoodbefore its amendment by the Finance (No. 2) Act, 1996 (33 of1996)] and subsequently it is noticed that the activities ofthe trust or the institution are being carried out in a mannerthat the provisions of Sections 11 and 12 do not apply toexclude either whole or any part of the income of such trust Providedthat no order under this sub-section shall bepassed unless such trust or institution has been given areasonable opportunity of being heard. (4) Without prejudice to the provisions of sub-section (3),where a trust or an institution has been granted registrationunder clause (b) of sub-section (1) or has obtainedregistration at any time under Section 12A [as it stoodbefore its amendment by the Finance (No. 2) Act, 1996 (33 of1996)] and subsequently it is noticed that the activities ofthe trust or the institution are being carried out in a mannerthat the provisions of Sections 11 and 12 do not apply toexclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of Section13, then, the Principal Commissioner or the Commissionermay by an order in writing cancel the registration of suchtrust or institution: Provided that the registration shall not be cancelled underthis sub-section, if the trust or institution proves that therewas a reasonable cause for the activities to be carried out inthe said manner.” 8.On perusal of the aforesaid provision, more particularly,sub-section (2) thereof provides the time limit for deciding theapplication filed for registration by any trust. Sub-section (2)further provides that every order, granting or refusingregistration under clause (b) of sub-section (1) shall be passedbefore the expiry of six months from the end of the month inwhich the application was received under clause (a) or clause(aa) [or clause (ab)] of sub-section (1) of Section 12A. Thus,Section 12AA provides for the procedure for registration of theapplication filed under Section 12AA of the Act. 9.The decision of the Division Bench of the Allahabad HighCourt in the case of Society for Promotion of Education (supra) isof no avail to the case on hand as the correctness of the saiddecision was questioned before the Full Bench of the AllahabadHigh Court in the case of CIT vs. Muzafar Nagar DevelopmentAuthority, 372 ITR 209. The Full Bench of the Allahabad HighCourt relying on the decisions of the Madras High Court in thecase of Commissioner of Income-tax-I Salem vs. Sheela ChristianCharitable Trust, (2013) 214 Taxman 551 and CIT vs. Karimangalam Annya Pangal Semipu Amaipur Ltd., (2013) 354ITR 483 (Mad) has held as under : “The mere fact that in sub-section (1) of Section 12AA, thelegislature has used the expression 'may' while providingthat the Commissioner may make such inquiry as he maydeem necessary to satisfy himself about the genuineness ofthe activities of the trust or institution, is not by itself reasonenough to hold that the use of the expression 'shall' insub-section(2) must, as a necessary consequence orcorollary, be regarded as mandatory in nature. In GaneshPrasad Sah Kesari and another vs. Lakshmi NarayanGupta5, the Supreme Court held as follows : “....Obviously where the legislature uses two words'may' and 'shall' in two different parts of the sameprovision prima facie it would appear that thelegislature manifested its intention to make one partdirectory and another mandatory. But that by itself isnot decisive. The power of the court still to ascertainthe real intention of the Legislature by carefullyexamining the scope of the statute to find out whetherthe provision is directory or mandatory remainsunimpaired even where both the words are used in thesame provision. In Govindlal Chagganlal Patel v.Agricultural Produce Market Committee Godhra (1976)1 SCR 451: (AIR 1976 SC 263) Chandrachud, C.J.,speaking for the Court approved the following passagein Crawford on 'Statutory Construction' (Ed. 1940 Art.261, p. 516): “....Obviously where the legislature uses two words'may' and 'shall' in two different parts of the sameprovision prima facie it would appear that thelegislature manifested its intention to make one partdirectory and another mandatory. But that by itself isnot decisive. The power of the court still to ascertainthe real intention of the Legislature by carefullyexamining the scope of the statute to find out whetherthe provision is directory or mandatory remainsunimpaired even where both the words are used in thesame provision. In Govindlal Chagganlal Patel v.Agricultural Produce Market Committee Godhra (1976)1 SCR 451: (AIR 1976 SC 263) Chandrachud, C.J.,speaking for the Court approved the following passagein Crawford on 'Statutory Construction' (Ed. 1940 Art.261, p. 516): “The question as to whether a statute ismandatory or directory depends upon the intentof the legislature and not upon the language inwhich the intent is clothed. The meaning andintention of the legislature must govern, andthese are to be ascertained, not only from thephraseology of the provision, but also whileconsidering its nature, its design and theconsequences which would follow fromconstruing it the one way or the other.” Applying this well-recognised canon of constructionthe conclusion is inescapable that the word 'shall'used in the provision is directory and not mandatoryand must be read as 'may'.” In that case, the Supreme Court was construing theprovisions of Section 11A of the Bihar Buildings (Lease, Rentand Eviction) Control Act 1947 relating to the deposit of rentby a tenant in a suit for ejectment. The Supreme Courtobserved that the expression 'shall' must be construed asbeing directory and not mandatory having due regard to thelegislative intent. We are unable to accept the line of reasoning which weighedwith the Division Bench of this Court in Society for thePromotion of Education Adventure Sport & Conservation ofEnvironment (supra). The Division Bench, in holding that the consequence of the non-consideration of an application forregistration within the time fixed by Section 12AA(2), wouldbe a deemed grant of registration, placed reliance on thefollowing considerations: (i) Unlike the decision of the Supreme Court in ChetRam Vashist (supra) which dealt with the sanctioningof a lay-out plan where an element of public interest isinvolved, no such public element or public interest isinvolved and reading a breach of Section 12AA(2) asleading to a deemed grant of registration may, "at theworst", cause some loss of revenue to the department; (ii) On the other hand, taking a contrary view and, if adeemed grant of registration is not read into thestatute, the assessee would be left at the mercy of theincome tax authorities since no remedy has beenprovided in the Act against a failure to decide; (iii) An irreversible situation is not created by the grantof a deemed registration because it is always open tothe revenue to cancel the registration undersub-section (3) of Section 12AA prospectively. The onlyadverse consequence is a loss of revenue if thedeemed registration is cancelled subsequently withprospective effect; and (iv) a purposive interpretation of the statute should beadopted. (ii) On the other hand, taking a contrary view and, if adeemed grant of registration is not read into thestatute, the assessee would be left at the mercy of theincome tax authorities since no remedy has beenprovided in the Act against a failure to decide; (iii) An irreversible situation is not created by the grantof a deemed registration because it is always open tothe revenue to cancel the registration undersub-section (3) of Section 12AA prospectively. The onlyadverse consequence is a loss of revenue if thedeemed registration is cancelled subsequently withprospective effect; and (iv) a purposive interpretation of the statute should beadopted. We are not inclined to accept this line of reasoning whichhas found favour with the Division Bench. For one thing, itwould be inappropriate for the Court to accept, as a firstprinciple of law, a proposition that there is no public elementinvolved in the collection of revenue as legislated upon byParliament or by the State Legislature. Proper collection ofthe revenues of the State is a matter of public interest sincepublic revenues are utilized for public purposes. But suchgeneral considerations cannot override the duty of the Courtto give plain meaning and effect to the language used in ataxing statute. The duty of the Court first and foremost is toconstrue the words of the taxing statute in question as theystand and the intention of the legislature has to beconstrued with reference to the language of the words used.While interpreting the provision, the Court cannot legislate anew provision or introduce a deeming fiction where nonehas been provided. Similarly, even as a matter of firstprinciple, a casus omissus cannot be supplied by the Courtunless there is a case of clear necessity and when reason isfound within the statute itself (Padmasundara Rao (Dead)and others vs. State of T.N. and others, Union of India vs.Rajiv Kumar and Unique Butyle Tube Industries (P) Ltd. vs.U.P. Financial Corporation and others) A similar view to thatof the Division Bench was adopted in a judgement of theDelhi Bench of the Income Tax Appellate Tribunal inBhgwad Swarup Shri Shri Devraha Baba Memorial ShriHari Parmarth Dham Trust vs. Commissioner of Income-tax,Dehradun. The Tribunal, as indeed the Division Bench ofthis Court, in the earlier decision, observed that on the balance and though the questions presented some difficulty,it was inclined to take the view supporting the plea ofdeemed registration, otherwise the assessee would be leftwithout a remedy. The assessee, in our view, is not withouta remedy since a delay on the part of the Commissioner toconsider an application can be remedied by recourse to thejurisdiction under Article 226 of the Constitution. If theCommissioner has delayed in passing an order on anapplication for registration under Section 12AA, recourse tothe remedy under Article 226 is always available to orderan expeditious decision thereon. A considerable amount of reliance was placed on behalf ofthe assessee in the present case on a judgement of theSupreme Court in Commissioner of Income-Tax vs. AjantaElectricals. In that case, the Supreme Court construed theprovisions of Section 139(2) of the Act prior to its deletionwith effect from 1989. The proviso to Section 139(2)conferred a discretion on the Income Tax Officer to extendthe date for the furnishing of a return. The revenue hadrelied upon a judgement of the Andhra Pradesh High Courtin which it had been held that there was no provision in theAct or the Rules requiring an Income Tax Officer to pass anorder on an application filed by the assessee subsequent tothe time given to him for filing his return pursuant to a noticeunder sub-section (2) of Section 139. The Supreme Courtheld that merely because a specific provision was absent forauthorising an Income Tax Officer to entertain an applicationmade beyond time, it was not proper to hold that it was notopen to the assessee to make an application under Section 139(2) for extension of time, after the time allowed hadexpired. In consequence, the Supreme Court held that theapplication made by the assessee under Section 139(2) forextension of time after the expiry of the time allowed wasmaintainable and therefore valid. That was the point whichwas decided by the Supreme Court. This decision would beof no assistance to the assessee. We may also note at this stage, that the provisions ofsub-section (2) of Section 12AA of the Act have beenconstrued in a judgment of a Division Bench of the MadrasHigh Court in Commissioner of Income-tax-I Salem vs.Sheela Christian Charitable Trust. The Division Bench inthat case has held that the Tribunal was not right in holdingthat the failure to pass an order in an application underSection 12AA within the stipulated period of six monthswould automatically result in granting registration to thetrust. The same view has been reiterated by a DivisionBench of the Madras High Court in Commissioner ofIncome-tax vs. Karimangalam Onriya Pengal SemipuAmaipu Ltd.. There can be no dispute about the basic principle of law thatwhere a legal fiction has been created, it must be given fullforce and effect. As Lord Asquith,J observed in East EndDwellings Co. Ltd. vs. Finsbury Borough Council, "where thestatute says that you must imagine a certain state of affairs;it does not say that having done so, you must cause orpermit your imagination to boggle when it comes to theinevitable corollaries of that state of affairs". The point, however, in this matter is that Section 12AA(2) does notprovide for a legal fiction at all. Parliament has carefully andadvisedly not provided for a deeming fiction to the effect thatan application for registration would be deemed to havebeen granted, if it is not disposed of within six months.Legislative fictions are what they purport to be : acts of thelegislating body. The Court cannot create one, where thelegislature has not provided a deeming fiction. In Bhavnagar University vs. Palitana Sugar Mill (P) Ltd. andothers, the Apex Court held as follows: “We are not oblivious of the law that when a publicfunctionary is required to do a certain thing within aspecified time, the same is ordinarily directory but it isequally when settled that when consequence forinaction on the part of the statutory authorities withinsuch specified time is expressly provided, it must beheld to be imperative.” Significantly, in the present case, Parliament has notlegislated a consequence of a failure to decide anapplication within a period of six months. In the circumstances, we answer the questions referred tothe Full Bench for reference in the following terms: (i) Non disposal of an application for registration, bygranting or refusing registration, before the expiry of six months as provided under Section 12AA (2) of theIncome Tax Act 1961 would not result in a deemedgrant of registration; and (ii) the judgment of the Division Bench of this Court inSociety for the Promotion of Education Adventure Sport& Conservation of Environment (supra) does not laydown the correct position of law. The reference is, accordingly, answered. The appeal shallnow be placed before the regular bench in accordance withthe roster for final disposal in terms of the questions soanswered.” 10.The principles discernible from the above referred FullBench decision of the Allahabad High Court may be summarisedthus : (1)The court should first construe the words of thetaxing statute as they stand and the intention of thelegislature should be construed with reference to thelanguage of the words used. (2)The court, while interpreting the provision, shouldnot legislate a new provision or introduce a deeming fictionwhere none has been provided. (3)The casus omissus cannot be supplied by the courtunless there is a case of clear necessity and when reason is The reference is, accordingly, answered. The appeal shallnow be placed before the regular bench in accordance withthe roster for final disposal in terms of the questions soanswered.” 10.The principles discernible from the above referred FullBench decision of the Allahabad High Court may be summarisedthus : (1)The court should first construe the words of thetaxing statute as they stand and the intention of thelegislature should be construed with reference to thelanguage of the words used. (2)The court, while interpreting the provision, shouldnot legislate a new provision or introduce a deeming fictionwhere none has been provided. (3)The casus omissus cannot be supplied by the courtunless there is a case of clear necessity and when reason is found within the statute itself. If the statutory mandate aslaid in Section 12AA of the Act is flouted, then the assesseecannot be said to be without a remedy. The delay on thepart of the Commissioner to consider an application can beremedied by recourse to the jurisdiction under Article 226of the Constitution of India. (4)Section 12AA(2) of the Act does not provide for a legalfiction. The Parliament has carefully and advisably notprovided for a deeming fiction to the effect that anapplication for registration would be deemed to have beengranted, if it is not disposed of within six months. (5)The non-disposal of an application for registration bygranting or refusing registration before the expiry of sixmonths as provided under Section 12AA(2) of the Actwould not result in a deemed grant of registration. 11.Mr.Mehta, the learned counsel appearing for therespondent, would submit that although the legislature hasthought fit not to incorporate the word 'deemed' in Section12AA(2) of the Act, yet having regard to the language and theintention, it can be said that legal fiction has been created. Assuch, it is not necessary for us to deal with such submissioncanvassed by Mr.Mehta on behalf of the respondent. However, asthis is the principal argument of Mr.Mehta, we propose toanswer the same. We, for the purpose of answering thesubmission of Mr.Mehta, proceed on the footing that thelegislature has used the word 'deemed' in Section 12AA(2) of theAct. Whether that by itself would make any difference or whether that by itself would create a legal fiction having regard to theprovision of law we are dealing with. 12.The word 'deemed' is used in various senses. Sometimes, itmeans 'generally regarded'. At other time, it signifies 'takenprima facie to be', while in other case, it means, 'takenconclusively'. Its various meanings are, - 'to deem' is 'to hold inbelief, estimation or opinion'; to judge; adjudge; decide;considered to be; to have or to be of an opinion; to esteem; tosuppose, to think, decide or believe on considerations; toaccount, to regard; to adjudge or decide; to conclude uponconsideration. (see Major Law Lexicon by P.Ramanatha Aiyar,4th Edition 2010 Vol.2) 13.A deeming fiction is a supposition of law that the thing istrue without inquiring whether it be so or not, that it may havethe effect of truth so far as it is consistent with justice. Adeeming provision is made to include what is obvious or what isuncertain or to impose, for the purpose of statute, an ordinaryconstruction of a word or phrase that would not otherwiseprevail but, in each case, it would be a separate question as tothat what object the Legislature has made on such a deemingfiction. 14.Ruth Sullivan (Sullivan on the Construction of Statutes, 5[th]ed.) classifies deeming rules into four broad categories accordingto their purpose : (1)To create a legal fiction by declaring that something exists or has occurred regardless of the truth of the matter;exists or has occurred regardless of the truth of the matter; (2)To declare the law; 14.Ruth Sullivan (Sullivan on the Construction of Statutes, 5[th]ed.) classifies deeming rules into four broad categories accordingto their purpose : (1)To create a legal fiction by declaring that something exists or has occurred regardless of the truth of the matter;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; andcertain 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 alegal fiction had been created by use of the word 'deemed'. It isfruitful to reproduce what has been exposited by TheirLordships: “A deeming provision might be made to include what isobvious or what is uncertain or to impose for the purpose ofa statute an artificial construction of a word or phrase thatwould not otherwise prevail, but in each case it would be aquestion as to with what object the legislature has madesuch a deeming provision. In St. Aubyn and Ors. v/s.Attorney General, 1952 A.C. 15 at p.53 Lord Radcliffeobserved thus: “The word 'deemed' is used a great deal in modernlegislation. Sometimes it is used to impose for thepurposes of a statute an artificial construction of aword or phrase that would not otherwise prevail.Sometimes it is used to put beyond doubt a particularconstruction that might otherwise be uncertain. Sometimes it is used to give a comprehensivedescription that includes what is obvious, what isuncertain and what is, in the ordinary sense,impossible.”” 16.In State of Tamil Nadu v. M/s. Arooran Sugars Ltd.,reported in AIR 1997 SC 1815, a Constitution Bench, whiledealing with the deeming provision in a statute, opined that therole of a provision in a statute creating legal fiction is wellsettled. Their Lordships referred to the decisions in East EndDwellings Co. Ltd. v. Finsbury Borough Council, 1952 AC 109,Chief Inspector of Mines v. Karam Chand Thapar, AIR 1961 SC838, J.K. Cotton Spinning and Weaving Mills Ltd. v. Union ofIndia, AIR 1988 SC 191, M.Venugopal v. Divisional Manager, LifeInsurance Corporation of India, AIR 1994 SC 1343 and HarishTandon v. Addl. District Magistrate, Allahabad, AIR 1995 SC676, and came to hold that when a statute creates a legal fictionsaying that something shall be deemed to have been done whichin fact and truth has not been done, the Court has to examineand ascertain as to for what purpose and between which personssuch a statutory fiction is to be resorted to and thereafter thecourts have to give full effect : “6. ... It is a well known principle of construction that ininterpreting a provision creating a legal fiction, the Court isto ascertain for what purpose the fiction is created, and afterascertaining this, the Court is to assume all those facts andconsequences which are incidental or inevitable corollariesto giving effect to the fiction. But in so construing the fictionit is not to be extended beyond the purpose for which it is created, or beyond the language of the Section by which it iscreated....” 17.From the aforesaid pronouncements, the principlediscernible is that, it is the bounden duty of the court toascertain for what purpose the legal fiction has been created. Itis also the duty of the Court to imagine the fiction with all realconsequences and instances unless prohibited from doing so.That apart, the use of the term deemed has to be read in itscontext and further the fullest logical purpose and import are tobe understood. It is because in modern legislation, the termdeemed has been used for manifold purposes. The object of theLegislature has to be kept in mind. (See Andaleeb Sehgal v.Union of India and another, AIR 2011 Delhi 29 (FB)) created, or beyond the language of the Section by which it iscreated....” 17.From the aforesaid pronouncements, the principlediscernible is that, it is the bounden duty of the court toascertain for what purpose the legal fiction has been created. Itis also the duty of the Court to imagine the fiction with all realconsequences and instances unless prohibited from doing so.That apart, the use of the term deemed has to be read in itscontext and further the fullest logical purpose and import are tobe understood. It is because in modern legislation, the termdeemed has been used for manifold purposes. The object of theLegislature 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 hasexpressed the view as follows: “The dominant purpose in construing a statute is toascertain the intention of the Parliament. One of the wellrecognised canons of construction is that the legislaturespeaks its mind by use of correct expression and unlessthere is any ambiguity in the language of the provision theCourt should adopt literal construction if it does not lead toan absurdity. The first question to be posed is whether thereis any ambiguity in the language used in Rule 40. If there isnone, it would mean the language used speaks the mind ofParliament and there is no need to look somewhere else todiscover the intention or meaning. If the literal construction leads to an absurdity, external aids to construction can beresorted to. To ascertain the literal meaning it is equallynecessary first to ascertain the juxtaposition in which therule is placed, the purpose for which it is enacted and theobject which it is required to subserve and the authority bywhich the rule is framed. This necessitates examination ofthe broad features of the Act.” 19.In Reserve Bank of India v. Peerless General Finance andInvestment Co. Ltd. and others, reported in AIR 1987 SC 1023,Their Lordships have ruled thus: “Interpretation must depend on the text and the context.They are the bases of interpretation. One may well say if thetext is the texture, context is what gives the colour. Neithercan be ignored. Both are important. That interpretation isbest which makes the textual interpretation match thecontextual. A statute is best interpreted when we know whyit was enacted. With this knowledge, the statute must beread, first as a whole and then section by section, clause byclause, phrase by phrase and word by word. If a statute islooked at, in the context of its enactment, with the glasses ofthe statute- maker, provided by such context, its scheme,the sections, clauses, phrases and words may take colourand appear different than when the statute is looked atwithout the glasses provided by the context. With theseglasses we must look at the Act as a whole and discoverwhat each section, each clause, each phrase and each wordis meant and designed to say as to fit into the scheme of theentire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed sothat every word has a place and everything is in its place...” 20.The Supreme Court in Kalidas Umedram and others v.State of Gujarat and another, (1996)7 SCC 635, took the viewthat a deemed provision would not be a free licence to make useof the same defeating the object with which such provision ismade. The Supreme Court made the following observations asunder : be construed in isolation. Statutes have to be construed sothat every word has a place and everything is in its place...” 20.The Supreme Court in Kalidas Umedram and others v.State of Gujarat and another, (1996)7 SCC 635, took the viewthat a deemed provision would not be a free licence to make useof the same defeating the object with which such provision ismade. The Supreme Court made the following observations asunder : “It is true that the proviso envisages deemed permission ifthe Collector does not grant permission within three monthsfrom the date of the receipt of the application excluding thetime as specified taken thereunder. But the condition is thatland should be used for raising commercial crops but not forindustrial purposes or for building purposes. Deemedpermission would not be a free licence to use the land forany other purpose defeating the object of the grant. Thepublic policy behind the grant is to augment agriculturalproduction so as to enable the tiller of the soil economicempowerment and social and economic justice assured inthe Preamble to the Constitution of India and Articles 38 and46 to minimise inequalities in income and status. The Statedistributes under Article 39(b), its material resources tosubserve the said purpose. Having obtained the grant orpermission, the grantee-appellants cannot convert the landinto non-agricultural use as well as for building houses. Thesale of government land for nominal amount was for theavowed constitutional purposes. After the conversion, sale ofthe lands for building purposes would be a windfall. Obviously, the public purpose of the grant and theconstitutional goals would be defeated by this method ofcircumvention. The Government, therefore, is justified incancelling the grant. Under the above circumstances, theGovernment was entitled to revoke the grant in respect ofthe entire extent of land.” 21.In Mansingbhai Kahalsingbhai v. Surat MunicipalCorporation, AIR 2001 Guj. 44, the issue before the DivisionBench of this Court was, whether the construction work carriedout by the petitioners of that case was in accordance with thelaw or not. In the said case also, it was pleaded that theapplication for permission to construct was submitted on 7thAugust 1999 and since there was no communication in thatregard within a period of one month, the application can be saidto have been granted by a deeming fiction. In the saidbackground, the Bench made the following observations : “Thus even after a period of one month as stated by thepetitioner is over, it is necessary that unless and until noticeis given to the City Engineer, the proposed date ofcommencement to erect a new building, the petitioners couldnot have commenced construction work. Section 263 andRule 3 of Chapter XII refers to deeming provision. Readingthe aforesaid provision assuming that the deeming provisionis applicable for construction which is otherwise legal eventhen one has to give notice of commencement of work andonly thereafter the work of erection of a building can becommenced. After completion of building within one monththereafter notice is required to be given in writing of completion accompanied by a certificate. Law also prohibitsoccupying the building in absence of any permit oroccupation certificate issued to use the building. In theinstant case, there is a flagrant violation of these provisions.No notice has been given and yet we find that persons haveoccupied the building. This speaks volume about theintention of the petitioners. The Court while exercisingjurisdiction under Article 226 of the Constitution of India hasto bear in mind that persons who are coming to the Courtwith clean hands and those who have acted in accordancewith law are required to be assisted and not the personswho are committing breach of provisions of law.” completion accompanied by a certificate. Law also prohibitsoccupying the building in absence of any permit oroccupation certificate issued to use the building. In theinstant case, there is a flagrant violation of these provisions.No notice has been given and yet we find that persons haveoccupied the building. This speaks volume about theintention of the petitioners. The Court while exercisingjurisdiction under Article 226 of the Constitution of India hasto bear in mind that persons who are coming to the Courtwith clean hands and those who have acted in accordancewith law are required to be assisted and not the personswho are committing breach of provisions of law.” “Thus, it goes without saying that deemed permissionmeans that a person is erecting building after the expiry ofthe period mentioned in Rule 3 strictly in accordance withRules, bye-laws etc. It is required to be emphasised herethat when a person moves the Commissioner for permissionof erection of a building, the person concerned knows theRules and Regulations and Bye-laws with regard toBuilding Regulations. It is for him to carry out theconstruction as per the Building Regulations and Bye-lawsand particularly keeping in mind the FSI. The person whoconstructs the building as per the Rules and Regulationscan say that he has constructed the building as per therequirement of law but not otherwise. The deemedpermission can be said to have been attracted in case wherea person has carried out construction in accordance with theexisting Rules, Bye-laws and Building Regulations and nototherwise. It is required to be noted that likewise the case of Calcutta Municipal Corporation before the Apex Court, Rule3 of Chapter XII of Appendix IV of the Act provides that ifwithin 30 days there is no disapproval, subject to the Rulesone may commence the work of erection of a building but notso as to contravene any provisions of the Act or any Rule orbye-laws. Under the Act before the commencement, notice isrequired to be given as contemplated in Chapter XII ofAppendix IV. In our opinion, therefore, one has to submit aplan for erection of a building keeping in mind all theBuilding Regulations and if any one constructs contrary tothat, the same being illegal must be demolished. Thesuggestion made by the petitioners that whatever type ofthe plan is submitted and for which no intimation is givenwithin thirty days then the person is deemed to have beengranted permission has no merit. If such a view is taken, itwill be for the benefit of wrong doers only who will carry outthe construction and will transfer the building/flats andinnocent purchasers would be in difficulty. Under thecircumstances, if one constructs building in contravention ofthe Rules and Regulations and Bye-Laws then he is awrong doer and even if permission is not granted because ofconnivance or negligence of the Officer, shelter of deemingprovision cannot be made available to him. Learned singleJudge was justified in arriving at the conclusion that thedeemed permission cannot be inconsistent with the Rulesand Regulations and no deemed permission can be againstthe relevant Rules and Regulations.” 22.We are in complete agreement with the view taken by theFull Bench of the Allahabad High Court in view of the fact that the Supreme Court, in the case of Society for Promotion ofEducation (supra), has not laid down any ratio with regard to thequestions raised before us, and on the contrary, kept thequestions of law open to be considered. 22.We are in complete agreement with the view taken by theFull Bench of the Allahabad High Court in view o