The Learned Counsel Appearing For The v. Ita

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 20TH DAY OF JULY 2018 / 29TH ASHADHA, 1940 ITA.No. 54 of 2009 ------------------- AGAINST THE ORDER/JUDGMENT IN ITA 238/2008 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 10-09-2008 APPELLANT(S)/APPELLANT ---------------------- THE COMMISSINER OF INCOME TAX, COCHIN BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENTS: ------------ TBI EDUCATION TRUST ENANALLOOR, MUVATTUPUZHA. R1 BY ADV. SRI.N.J.MATHEWS R1 BY ADV. SRI.SHYSON P.MANGUZHA THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20-07-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO. 54/2009 APPENDIX APPELLANT'S ANNEXURES: ANNEXURE A: TRUE COPY OF THE ORDER OF THE COMMISSIONER DT 29.11.2007 ANNEXURE B: TRUE COPY OF THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL DT 10.09.2008 TRIBUNAL DT 10.09.2008 RESPONDENTS ANNEXURES: NIL TRUE COPY P.A TO JUDGE jma K. VINOD CHANDRAN & ASHOK MENON, JJ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T Appeal No. 54 of 2009 - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 20[th] day of July, 2018 J U D G M E N T Vinod Chandran, J The only issue arising in the aforesaid case is whetherthere could be a deemed registration under Section 12A of theIncome Tax Act, 1961. The question of law framed in thememorandum is as follows: Whether, on the facts and in the circumstances of the case the Tribunal is right in law and withjurisdiction in deeming the application as beingcondoned and in directing the CIT to condonedelay and to grant registration under Section 12Aof the I.T Act? ITA No.54/2009 ::2:: 2. The learned Standing Counsel, Government ofIndia, (Taxes) points out that there was a detailed consideration inAnnexure A as to the respondent being not a charitable trustespecially with reference to the clause in the trust deed whichenabled collection of fee, deposits, contributions etc., from thestudents and their parents. Though the trust was essentially forsetting up of an educational institution, there was no charityinvolved is the specific finding. The applicant had constituted atrust in the year 2002, the creation of the deed being on27.05.2002 and filed an application only on 10.10.2006. There wasconsiderable delay in filing such application and there were notsufficient reasons stated for condoning such delay. Challengingthe order of the Tribunal, it is also pointed out that though aperiod of six months is provided under Section 12AA(2), there isno deeming provision as such in the statute and in such ITA No.54/2009 ::3:: circumstance, there could not be a deemed registration underSection 12A. 3. The learned Counsel appearing for the respondent submits that the very same Commissioner, who filed the appealhas given effect to the order of the Tribunal and in suchcircumstance, the Income Tax Appeal is infructuous. It is alsosubmitted that the Tribunal had relied on the decision of theSpecial Bench of the Income Tax Appellate Tribunal, Delhireported in [2008] 111 ITD 175 (Delhi) (SB) (Bhagwad SwarupShri Shri Devraha Baba Memorial Shri Hari Parmarth DhamTrust v. Commissioner of Income-tax, Dehradun) which foundthe limitation as provided under sub-section (2) of Section 12AAto be a mandatory provision; failure to comply with which wouldresult in there being a deeming registration under the Act. Thelearned Counsel would also refer to the circular of the CBDT ITA No.54/2009 3. The learned Counsel appearing for the respondent submits that the very same Commissioner, who filed the appealhas given effect to the order of the Tribunal and in suchcircumstance, the Income Tax Appeal is infructuous. It is alsosubmitted that the Tribunal had relied on the decision of theSpecial Bench of the Income Tax Appellate Tribunal, Delhireported in [2008] 111 ITD 175 (Delhi) (SB) (Bhagwad SwarupShri Shri Devraha Baba Memorial Shri Hari Parmarth DhamTrust v. Commissioner of Income-tax, Dehradun) which foundthe limitation as provided under sub-section (2) of Section 12AAto be a mandatory provision; failure to comply with which wouldresult in there being a deeming registration under the Act. Thelearned Counsel would also refer to the circular of the CBDT ITA No.54/2009 which again mandated that the application should be consideredand either allowed or rejected within the period of six months, asprovided under Section 12AA. Reliance is placed on the decisionof the Hon'ble Supreme Court reported in (2017) 11 SCC 480(Commissioner of Income-Tax v. Society for the promotion ofEducation, Adventure Sport & Conservation of Environment) 4. The learned Standing Counsel, Government ofIndia(Taxes), in counter has referred to the decision of the FullBench of the Allahabad High Court reported in [2015] 372 ITR209 (All)(FB) (Commissioner of Income-Tax v. Muzafar NagarDevelopment Authority), wherein it is specifically held that therecould be no deemed registration merely for reason ofnon-disposal, within six months, of an application for registrationfiled under Section 12AA. On a reading of the Full Benchdecision, which has a persuasive power and also the decision of ITA No.54/2009 ::5:: the Special Bench of the Tribunal, we are inclined to follow theFull Bench decision of the Allahabad High Court. Without aspecific deeming provision there can be no grant of deemedregistration under Section 12AA (2002) 9 SCC 1 [Appollo Tyres v.CIT, Kochi]. There can be no fiction created by mere inference, inthe absence of a specific provision deeming something to beother than what actually it is. Then, the fact assume significanceas to what was the view of the Department insofar as themandatory provision of consideration of application and an orderbeing issued within a period of six months. 5. It cannot but be noticed that Section 12AA(2)specifically provides that on an application, an order granting orrefusing registration shall be passed before the expiry of the sixmonths of the date on which the application was received. Wealso directed the revenue to produce the files, which are before ITA No.54/2009 us. We see from the files that the application was filed on10.10.2006. A report was called for from the Income-Tax officerwhich was submitted only on 24.07.2007, after almost ninemonths. The communication of the Commissioner ofIncome-Tax based on which such report was made also is seen tobe dated 12.01.2006 referred to in the report of the Income-TaxOfficer. The Income-Tax Officer has recommended theregistration under Section 12AA(2). However an adverse report isseen authored by the Joint Commissioner of Income-Tax dated31.07.2007 addressed to the Commissioner of Income-Tax. Therehas been some adjournments later and eventually the orderimpugned before the Tribunal dated 29.11.2007 was passed. Wecannot but notice that there was unreasonable delay insofar ascomplying with the mandatory provision under Section 12AA(2).6. In this context, we have to notice the directions of ITA No.54/2009 the CBDT issued as Instruction No.16/2015(F.No.197/38/2015-ita-1) DATED 06.11.2015 which we extract hereunder:- ITA No.54/2009 the CBDT issued as Instruction No.16/2015(F.No.197/38/2015-ita-1) DATED 06.11.2015 which we extract hereunder:- “Sub-section (2) of Section 12AA of the Income-TaxAct, 1961 prescribes that every order granting orrefusing registration under clause (b) of sub-section(1) of that section shall be passed before the expiryof six months from the end of the month in whichthe application was received under clause(a) orclause(aa) of the sub-section (1) thereof. Thuswhile processing the application under Section 12AA of the Act, the time limit of six months has tobe adhered to by the Commissioner of IncomeTax(Exemptions). However, it has been brought tothe notice of the Board that the said time limit hasnot been observed in some cases. ITA No.54/2009 ::8:: 2.The undersigned is directed to convey that the aforesaid time limit of six months is to be strictly followed by the Commissioner of Income Tax (Exemptions) while passing order under section 12AA. The CCIT(Exemptions) may monitor the adherence of prescribed time limit and initiate suitable administrative action in case any laxity in adhering to the same is noticed.” 7. The CBDT has thought it fit, obviously from experience of dealing with delayed applications, that themandatory provision has to be complied with in letter and spirit. The officers of the Department are necessarily bound by thedirections so issued by the CBDT; which in the present case is areiteration of the mandate statutorily prescribed. In the presentcase, we see failure to comply with the mandatory provision as ITA No.54/2009 provided under section 12AA(2); the circular having come laterto the impugned order. 8. The instruction by CBDT gives us a clear picture of how the Board expected the Officers to treat the mandatoryprovision under section 12AA(2) as being scrupulously relevantand significant insofar as a consideration of an application filedunder section 12AA within the time stipulated in sub-section (2).We have to look at the present case also in the light of theSupreme Court decision in (2017) 11 SCC 480. The learnedStanding Counsel, Government of India, (Taxes) would takeserious objection insofar as pointing out that there is nodeclaration of law as found in the decision of the Hon'bleSupreme Court and a mere concession made by the learnedCounsel appearing for the Department. It cannot be taken as aconcession on behalf of the Department or being the opinion of ITA No.54/2009 the Department is the argument. It is also urged that this Courtshould be concerned with the interpretation of the provision toadvance the course of law and not a mere concession by aCounsel before the Hon'ble Supreme Court in a solitary instance.9. On a reading of the order passed in (2017) 11 SCC480, we are not convinced that there was any concession made by the learned Additional Solicitor General who appeared in thematter for the Income-Tax Department. As we discern from theorder, the Commissioner of Income-Tax, Kanpur had filed anappeal from the deemed registration granted under Section 12Afor reason solely of an application under Section 12AA of theAct having not been acted upon for six months. The appeal arosefrom the judgment dated 03.04.2008 of the High Court ofJudicature, Allahabad. When the matter was considered by theHon'ble Supreme Court, the Full Bench decision of the Allahabad ITA No.54/2009 the learned Additional Solicitor General who appeared in thematter for the Income-Tax Department. As we discern from theorder, the Commissioner of Income-Tax, Kanpur had filed anappeal from the deemed registration granted under Section 12Afor reason solely of an application under Section 12AA of theAct having not been acted upon for six months. The appeal arosefrom the judgment dated 03.04.2008 of the High Court ofJudicature, Allahabad. When the matter was considered by theHon'ble Supreme Court, the Full Bench decision of the Allahabad ITA No.54/2009 High Court cited, herein above, by the Revenue was passed andwe do not see the said decision having been placed before theHon'ble Supreme Court. Rather than a concession, the learnedAdditional Solicitor General specifically informed the Hon'bleSupreme Court that the only apprehension of the Departmentwas regarding the date on which the said deemed registration,would be effected; whether it is on the date of application or onthe expiry of six months. The Civil Appeal before the Hon'bleSupreme Court was disposed of expressing the apprehension tobe unfounded, but all the same clarifying that the registration ofthe application under Section 12AA would only take effect fromthe date of expiry of six months from the date of application.The effect of disposal of a Civil Appeal as has been laid down inKunhayammed v. State of Kerala [(2000)245 ITR 360 (SC)] henceassumes significance.The Hon'ble Supreme Court in 2017(11) ITA No.54/2009 ::12:: SCC 480;in a Civil Appeal, approved the judgment of theAllahabad High Court allowing deemed registration underSection 12AA; but applicable only from the date of expiry of thesix month period as mandated in sub-section(2) of Section 12AA.The judgment of the High Court merges in the judgment of theHon'ble Supreme Court. The opinion as expressed by theAllahabad High Court, regarding deemed registration underSection 12A for reason only of non consideration of anapplication under Section 12AA within a period of six monthsfrom the date of filing, having not been differed from by theHon'ble Supreme Court in the Civil Appeal; the declaration bythe High Court assumes the authority of a precedent by theHon'ble Supreme Court on the principles of doctrine of merger.Despite the compelling persuasion of the learned Senior Counselto interpret the provision as has been interpreted by the Full ITA No.54/2009 ::13:: Bench of the High Court of Allahabad we find ourselves,incapacitated so to do and obliged to respectfully follow (2017) 11SCC 480. In such circumstance, respectfully following thedecision of the Hon'ble Supreme Court we answer the questionin favour of the assessee and against the revenue and reject theappeal. The registration however is applicable only from the dateof expiry of the six months from the date of application. Thereshall be no order as to costs. Sd/- K. Vinod Chandran, Judge Sd/- Ashok Menon, Judge jma