By TIOL News Service

ALLAHABAD, SEPT 13, 2013: THE only issue before the Bench is - whether when the CIT is yet to decide the application filed u/s 12AA, the registration would be deemed as granted to the trust. And the issue goes to the Larger Bench.

Facts of the case

Assessee was created by an enactment of UP urban planning and development Act. for the objects of planning, Development and Improvement of cities, towns and villages for general public utility. Assessee applied for registration u/s 12A but the same was not disposed of within the time prescribed under Section 12AA(2). Assessee claimed exemption u/s 11 & 12 and exercised the option under clause (2) of Explanation to section 22(1) for the receipts / income remained unutilized during the previous year. Return was filed under the status of Local authority declaring nil income. Assessment was completed in the status of "Artificial Juridical Person". AO denied benefits of registration. CIT (A) confirmed the order of AO. Assessee contended before ITAT that when CIT had not passed an order granting or refusing the registration u/s 12AA(2) within six months from the end of the month in which the application for registration u/s 12A was filed, the registration would be deemed to have been granted to the trust or institution automatically on the expiry of period specified in Section 12AA(2). ITAT allowed the appeal and directed AO to assess the assessee as having been registered u/s 12A of the Act in the light of the Special Bench judgment in the case of Bhagwad Swarup Shri Shri Devraha Baba Memoral Shri Parmarth Dham Trust Vs. CIT Dehradun and allow the claims / benefits of Sections 11, 12 and 13 of the Act, subject to satisfaction of other conditions laid down in these section.

Revenue contended that Section 12AA(2) of the Act merely provides that order granting or refusing to registration shall be passed before the expiry of six month from the end of the month in which the application was received but it does not mean that if the order granting or refusing to grant registration could not be passed then the registration shall be deemed to have been granted. The question of deemed grant of registration under Section 12AA(2) of the Act after expiry of the period of six months of filing of the application, requires reconsideration.
Assessee contended that the question of deemed grant of registration after expiry of the period provided in sub-section 2 of Section 12AA of the Act is concluded by the Division Bench of this Court in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment, which should be followed.

After hearing both the parties, the High Court held that,

++ there is nothing in Section 12AA(2) of the Act which provides for deemed grant of registration, if the application for registration is not decided within six months. This sub-Section provides that every order granting or refusing registration shall be passed before expiry of six months from the end of the month in which the application was received. Thus, this provision prescribes the period of six months to pass an order either granting or refusing registration. Therefore, if an order is not passed within the period of six months, the grant cannot be deemed leaving the words 'refusing registration'. One of the most important condition for availing the exemption under section 11 and 12 of the Act is the grant of registration under Section 12AA of the Act and as such an order is necessarily required to be passed by the Commissioner either granting or refusing the registration. In case after considering the facts and circumstances the C.I.T. Comes to the conclusion that the person applying for registration is not entitled to registration under Section 12A of the Act then he may refuse registration and the consequence would be that such a person shall not be entitled to the benefits provided in Section 11 and 12 of the Act. Thus no presumption of grant of registration can be inferred from the plain words of Section 12AA (2) of the Act which requires the order to be passed in writing by the competent authority either granting or refusing the registration. Construing Section 12AA(2) of the Act to mean deemed grant of registration on the expiry of period of six months would attribute redundancy to the words "refusing registration" and therefore such a construction can not be accepted as per settled principle of law. The expiry of the period without more confers no right unless the statute by legal fixation or otherwise confers a right. There is nothing in Section 12AA(2) of the Act which provides that the authority concerned shall have no power to pass order either granting or refusing registration after expiry of six months. Thus, when the legislature itself has not provided so and the authority concerned has not been made functus officio on expiry of the prescribed period then it is not within the powers of the Court to legislate and provide for deemed grant of registration;

++ matter is referred to Larger Bench for opinion on whether non disposal of application for registration by granting or refusing registration before the expiry of six months as provided under Section 12AA(2) of the Income Tax Act, 1961 would result in deemed grant of registration. Whether the Division Bench judgment of this Court in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment holding that the effect of non consideration of the application for registration within the time fixed by Section 12AA(2) would be deemed grant of registration, is legally correct.

(See 2013-TIOL-689-HC-ALL-IT)