Itta/90/2008 Of Maheswara Educational Society v. Director Of Income Tax (Exemptions)

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD WEDNESDAY, THE NINTH DAY OF APRILTWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHYANDTHE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA INCOME TAX TRIBUNAL APPEAL NO: 90 OF 2008 lncome Tax Tribunal Appeal Under Section 260A of the Income Tax Act,1961against the Order dated 31-10-2007 passed in ITA No.270iHydl2005 for theAssessment Year 2004-2OO5 on the file of the lnmme Tax Appellate Tribunal,Hyderabad Bench 'A', Hyderabad. Between: Maheswara EducationalSociety,, Maheswaram, Narasampet Mandal,Warangal District. ...Appellant AND Director of Income Tax (Exemptions), Basheerbagh, Hyderabad -500 029. ...Respondent Counsel forthe Appellant: SRI C V NARASIMHAM, ADVOCATE Counsel for the Respondent: SRI A RAMAKRISHNA REDDY, SC FOR INCOMETAX The Court made the following: JUDGMENT THE HON[,BLE ]SRI JUSTICE[P.SAM ] ANDTHE HON 'BLE SRI JUS ONANDIKONDAINCOME TAX TRIBUNALPPEAL No.90 0F 2008 JUDG MENT:(per the Hon'ble Sn lustice P.Sam Kashy) The instant is an appeal under [Section ][2604 ][of ][the ][Income] Tax Act, 1961 (for short'the [Act') ][preferred Dy ][the ][appellant]assailing the order dated [31.10.2007, ][in ][ITA. ][llo.27)/Hyd/2005,]passed by the Income Tax Appellate [Tribunal, ][Hyrlerabad ][Bench 'A']Hyderabad (for short, ['the ][ITAT') ][for ][the ][assessmerlt ][year ][2004-05'] 2. Heard Mr. C.V.Narasimham, [learned ][counsel ][for the ][appellant,]and Mr. A.Ramakrishna [Reddy, learned ][Standing ][Ccunsel ][for ][Income]Tax Department appearing on [behalf ][of ][the ][responlent.] 3. Vide the said impugned [order, ][the ][ITAT has ][dismissed ][an]appeal filed by the appellant [against the ][order ][of [lirector ][of ][income]Tax (Exemptions), Hyderabad [dated ][25.01.2005, refusing ][to ][grant]registration under section 12A of [the ][Act ][from ][inception ][of ][the]appellant's institution and [grant ][registration ][only ][prospectively'] 4. The facts of the case in brief [are ][that ][the ][appellant ][is ][an]educational society formed [in ][the year ][1989 ][anc ][running a ][junior]college in the name of Maheshwara [Junior ][college. ][Down ][the ][line,] the appellant applied to All India Council for Technical Education(AICTE) seeking permission for starting an engineering collegewhich was accorded and established in the name of Balaji Instituteof Technology and Science with effect from the academic year 2001-02. After having successfully established two educationalinstitutions, the appellant society further thought of starting a B.Edcollege and, accordingly applied to National Council for TechnicalEducation, New Delhi. Upon getting the permission, started aninstitution for B.Ed in the name of Maheshwara College of Educationfrom the year 2003-04. However, in between the operation of theseeducational institutions, the appellant society claims to haveinadvertently forgotten to seek registration under Section 124 of theAct. According to the appellant, this was not either intentional ordeliberate but was only due to inadvertence. It was also thecontention of the appellant that the gross receipts of the appellantsociety suddenly went up and crossed Rs.1 crore after successfulstafting of B.Ed college and this could be noticed only during theaudit that was aonducted in July, 2004. 5. Immediately, thereafter steps were taken and an applicationwas filed seeking for grant of registration under Section 124 of theAct. The application upon being duly scrutinized by the Director of ll{l,l* i: I 5. Immediately, thereafter steps were taken and an applicationwas filed seeking for grant of registration under Section 124 of theAct. The application upon being duly scrutinized by the Director of ll{l,l* i: I Income Tax (Exemptions), it was noticed that though the appellantsociety was formed in the year 1989, the applicati()n for registrationunder Section 12A of the Act was filed only on 30.08.2004. TheDirector of Income Tax (Exemptions) finally vlde order dated25.01.2005 granted registration only from financial year 0t.O4.2004in which the application was made and did not grant any registrationfor previous years/ as according to the Director of Income Tax(Exemptions), the appellant could not satisfactrtrily explain thereasons for delay in filing of the application for registration underSection 72A of the Act. It was this order which'ruas subjected tochallenge before the ITAT where it was registered asITA. No.270/Hyd/2OO5. The ITAT also affirming the order passed bythe Director of Income Tax (Exemptions) dismissed the appeal ofthe appellant, leading to filing of the present appea . 6. Perusal of the records would show that tl- e appellant hadinitially obtained an exemption under Section 10(2.1C) (iii ad) of theAct. The said exemption is applicable only in tespect of thoseassessees whose income does not exceed Rs.1 crrtre in a year. Inthe instant case, according to the appellant, they crossed the grossincome of Rs.1 crore in the year 2003-04 i.e. after the B.Ed collegewas established and it was then that the necessity for getting \]-\ \ registration under section [124 ][of ][the ][Act ][was ][felt ][and ][an application]was thereafter filed and, [which stood allowed ][from ][01.04.2004 ][only.]Whereas, according to the appellant, [the ][exemption ought ][to ][have]been granted from the date [the ][establishment ][came ][into ][force ][i.e']15.05.1989. According to [the ][appellant, ][the ][fact ][that the ][gross]income of the appellant [had ][neve-r ][crossed ][Rs.1 ][crore, ][it ][never]thought of seeking registration [under Section ][12A ][of ][the Act and, ][in]any case there has been [no ][default ][as ][suclr committed ][by ][the]appellant since they already [had ][an ][exemption ][under ][Section]10(23C) (iii ad) of the [Act and ][admittedly ][the ][income ][of ][the]appellant also for all [these ][periods ][was ][less ][than ][Rs'1 ][crore' ][This]being the bona fide and [genuine ground ][of ][the ][appellant, ][the]Director of Income Tax [(Exemptions) ][could ][not ][have ][rejected ][the]claim of the appellant [for ][granting registration ][with ][effect ][from ][the]date the appellant society [was ][established.] 7. Though the learned counsel [for the ][appellant ][raised ][various]grounds to assail the impugned order, the [primary ][challenge ][was]non-consideration of the fact that appellant [already was ][enjoying]exemption under Section 10(23C) [(iii ][ad) ][and ][that ][the ][gross ][receipts]of the appellant had never [crossed Rs.1 ][crore ][till ][2OO3-O4 ][and that]the Department if at all [was ][not ][inclined ][to ][grant ][exemption ][for] whole 14 years period, but definitely could had granted registrationw.e.f. 01.04.2003 i.e. the previous financial year during which thegross income of the appellant for the First time crossed the limit ofRs.1 crore so far as exemption that could be avai ed under Section10(23C) (iii ad) of the Act is concerned. 8. Learned counsel for the appellant further contended that theDirector of Income Tax (Exemptions) as also the ITAT ought to haveallowed the appeal and condoned the delay considering the bonafide and reasonable grounds explained by the app,eltant. Accordingto the learned counsel for the appellant, the order cf the Director ofIncome Tax (Exemptions) as also the ITAT does not record anysufficient reasons in not conceding to the request of the appellantfor registration from a back date and also in nct giving properreasons and justification for rejection of the application forcondonation of delay. 8. Learned counsel for the appellant further contended that theDirector of Income Tax (Exemptions) as also the ITAT ought to haveallowed the appeal and condoned the delay considering the bonafide and reasonable grounds explained by the app,eltant. Accordingto the learned counsel for the appellant, the order cf the Director ofIncome Tax (Exemptions) as also the ITAT does not record anysufficient reasons in not conceding to the request of the appellantfor registration from a back date and also in nct giving properreasons and justification for rejection of the application forcondonation of delay. 9. In support of the aforesaid contentions, the rearned counsel forthe appellant placed reliance on the following decisions: a) Commissioner of Income Tax vs. Bar Council ofMaharashtralMaharashtral '1tsar1 r:o rn za b) Bar Counci! of Uttar Pradesh vs. Commissioner [of] Income-tax, Lucknow2 c) Seimens Engineering & Manufacturing [Co. ][of India ][Ltd.] vs. Union of India and Another3 d) Woolcombers of India [Ltd. ][vs. ][Woolcombers Union ][and] Anothera e) Commissioner of Income-Tax Village Life vs. Improvement Foundations f) Shrimanta Shankar Academy [vs. ][Income-Tax ][Officer6] g) Commissioner of Income-tax vs. Shrimanta [Shankar] AcademyT h) Commissioner of Income-tax vs. [Mahasabha ][Guruku!] Vidyapeet Haryana8 1O. Per contra, the learned [Standing ][Counsel ][for ][Income ][Tax] Department contended that since [the ][application ][for ][registration]itself for the first time was [made ]on 30.08.2004, [the ][appellant ][could]not had been [granted ]registration [with ][a ][retrospective effect ][from]1989 onwards or even from the [previous ][financial ][year.] ' 1r9s:1 [tal ][rtn ][saa]311976) 2 Supreme Court Cases 981311976) 2 Supreme Court Cases 981 4 (1974) 3 Supreme Court Cases 318'5 [2010] [320 rrR 188 ][(P&H)]'5 [2010] [320 rrR 188 ][(P&H)] u lzoor] zgz [a (lr) 226 (Gauhati] '1zoro1 [:zs ][trR ][zor] '(zoro) [gzs ][trn ][zs] I 11. According to the learned Standing Counsel for Income TaxDepartment, no justifiable reasons have been ilssigned by theappellant to show the reasons which prevented th,:m from seekingregistration earlier. According to him, the stand tlrat the appellanthas taken before the Director of Income Tax (t:xemptions) andbefore the ITAT are in itself in self-contradiction inasmuch as at onestage they contend that because of the rush of wo-k and ignoranceof the provisions and also not getting proper advice from theAccountant they could not seek for registratior early. On thecontrary, they have now taken a stand that they did not applyearlier for the reason that their income itself was ltelow Rs.1 croreand, until and unless the income had crossed Rs.1 crore, they werenot required to seek registration before gross incorne crossed Rs.1crore because that itself would disentitle them from claiming forregistration for the previous period and that the ar-thorities on dueconsideration have granted the registration from tleginning of thefinancial year in which the application was made w.e.f. 01.04.2004. 12. According to the learned Standing Counsel for income TaxDepartment, the two orders i.e. one passed by the Director ofIncome Tax (Exemptions) and the other passed try the ITAT arestrictly in accordance with the provisions of law and does not -warrant any interference and the present appeal deserves to bedismissed. 13. Having heard the contentions put forth on either side and onperusal of records, some of the admitted factual matrix as isreflected from the proceedings, are that: a) The appellant's society got its registration under the PublicSocieties Registration Act w.e.f. 15.05.1989;Societies Registration Act w.e.f. 15.05.1989; b) Initially the appellant had started with a junior college and,subsequently, expanded and started an engineering collegeand later also started B.Ed college;subsequently, expanded and started an engineering collegeand later also started B.Ed college; -warrant any interference and the present appeal deserves to bedismissed. 13. Having heard the contentions put forth on either side and onperusal of records, some of the admitted factual matrix as isreflected from the proceedings, are that: a) The appellant's society got its registration under the PublicSocieties Registration Act w.e.f. 15.05.1989;Societies Registration Act w.e.f. 15.05.1989; b) Initially the appellant had started with a junior college and,subsequently, expanded and started an engineering collegeand later also started B.Ed college;subsequently, expanded and started an engineering collegeand later also started B.Ed college; c) The appellant from the beginning had sought for an exemptionunder Section 10(23C) (iii ad) of the Act;under Section 10(23C) (iii ad) of the Act; d) The appellant had applied for exemption under Section L2A ofthe Act on 30.08.2004; andthe Act on 30.08.2004; and e) The gross income of the appellant crossed the Rs.1 crore Iimitas is prescribed under Section 10(23C) (iii ad) of the Act in thefinancial year 2003-04 and the application for registration wasfiled by the appellant only in the financial year 2004-05as is prescribed under Section 10(23C) (iii ad) of the Act in thefinancial year 2003-04 and the application for registration wasfiled by the appellant only in the financial year 2004-05 .l \ L4. From perusal of the pleadings there seems to be only twogrounds that the appellant have raised seeking for condonation ofdelay and for grant of registration w.e.f. 15.05.11)89. One being,because of inadvertence of the appellant society's Accountant and,second belng that the gross income of the appellan: having crossedRs.1 crore limit only w.e.f. 2003-04, therefore they did not thoughtit fit for moving a registration application earlier. 15. Both these grounds are self-contradictory in itself. If therewould have been an ignorant and bona fide lapse orr the part of theappellant in applying, the second ground would not be available tothem. At the same time, if the second ground is to be accepted,then the first ground would become an afterthought and the factthat they had applied only for after their income crossed Rs.1 croregoes to show that they had deliberately not sought for registrationearlier because their income was less than Rs.1 crore. This wouldalso amount to having deliberately not applied for registrationbecause their income was less than Rs.1 crore. In that event thefirst ground of ignorance or inadvertence would not lte acceptable ortenable. 16. Another fact which is glaringly visible is that tle appellant hadobtained exemption under Section 10(23C) (iii ad) of the Act from the beginning which [goes ]to [show ][that ][they ][were ][aware ][of ][the]statutory requirement, and in spite of [that, ][they ][did ][not ][thought ][it]necessary for seeking registration [under ]Section [12A ][of ][the ][Act. ][This]again would amount to an [intentional ][act ][in ][not ][filing ][of ][an]application considering the [fact ][that ][there ][income was ][less ][than]Rs.1 crore. Thus, we are of the [considered ][opinion ][that the ][findings]given by the Director of Income Tax [(Exemptions) ][as also by ][the]ITAT does not seem to be in any [manner erroneous ][or ][contrary ][to]law. 16. Another fact which is glaringly visible is that tle appellant hadobtained exemption under Section 10(23C) (iii ad) of the Act from the beginning which [goes ]to [show ][that ][they ][were ][aware ][of ][the]statutory requirement, and in spite of [that, ][they ][did ][not ][thought ][it]necessary for seeking registration [under ]Section [12A ][of ][the ][Act. ][This]again would amount to an [intentional ][act ][in ][not ][filing ][of ][an]application considering the [fact ][that ][there ][income was ][less ][than]Rs.1 crore. Thus, we are of the [considered ][opinion ][that the ][findings]given by the Director of Income Tax [(Exemptions) ][as also by ][the]ITAT does not seem to be in any [manner erroneous ][or ][contrary ][to]law. L7. Upon [perusal ]of the factual [matrix ][of ][the ][each ][of ][the]judgments relied upon by the learned counsel for the appellant, [and]the principles laid down all those [cases, ][one can easily ][reach ][to ][the]conclusion that the assessees therein [had made application ][seeking]registration under Section 12A of [the Act ][belatedly ][giving ][cogent]and [justifiable ]reasons in the [delay ][that ][took ][place ][in ][applying ][for]registration. However, when [we look ][into the ][facts ][of the ][present]case, what can be visualized is that [in ][the ][present ][case ][though ][the]appellant has tried to [give ]certain explanation, [but ][what ][is ][required]to be considered is whether the [grounds raised ][were ][cogent ][and]strong enough to [justify ]the [delay ][in ][seeking ][for ][registration. ][As]would be seen from the order [passed ][by ][the ][Director ][of ][Income ][Tax] (Exemptions) [so ][also ][the order ][passed ][by ][the ][ITAT' ][it ][clt:arly ][reflects]that the [appellant ][has ][taken ][contradictory ][stand ][justifyirlg ][the ][delay']The appellant, [on ][the ][one ][hand' ][submits ][that ][because ][cf the ][rush ][of]work on [account ][of ][frequent ][expansion ][of the ][educational ][society]they [were ][not ][able ][to ][apply ][for ][registration under Sectitln ][12A ][of the]Act. At [the ][same ][time, they ][also ][try ][to ][take ][a ][stand ][that ][since ][they]had an [exemption ][under ][Section 10(23C) ][(iii ][ad) ][of ][the ][Act']therefore [they ][were ][not ][required ][to ][seek ][another ][regisitration ][under]Section [12-A ][of ][the ][Act ][and' ][once when ][they ][crossed ][the limit ][that]was [prescribed ][under ][section 10(23c) ][(iii ][ad) ][of ][the ][Act, ][they ][had]immediately [moved an application' ][This ][again is not-sttstainable ][and]acceptable [as ][compared ][to ][the ][first ][ground ][giving ][explanation for]the delay; [as ][the ][two do ][not ][match each ][other and are ][self-]contradictory [in ][itself' ][Further' ][the ][aforesaid ][judgnrents have ][all]been decided [under ][an ][entirely different ][contextual backdrop ][and]the [principles ][laid ][down ][in ][those ][judgments ][can be ][d ][stinguished ][on]its factual [basis ][itself ]['] 18.The instant [appeal ][therefore fails ][and ][is accordingly ][dismissed'] I 19. As a sequel, [miscellaneous ][applications ][pending ][if ][any, ][shall]stand closed. However, [there ][shall be ][no ][order ][as ][to ][costs'] SD/- M. VIJAYA JOINT REGISTRAR//TRUE COPY//SECTW HIGH COURT DATED: 0910412025 JUDGMENTITTA.No.90 of 2008 DISMISSING THE ITTA WITHOUT COSTS?g el 1 0 iEi [.ul5]\..',:.'',. >7