COMMISSIONER INCOME TAX Vs. MUZAFAR NAGAR DEVELOPMENT AUTHORITY

JUDGEMENT

(1.) IN this appeal the following substantial question of law has been made in the memorandum of appeal : -

(2.) BRIEFLY stated the facts of the present case are that the assessee, Muzaffarnagar Development Authority (hereinafter referred to as 'MDA') was created by an enactment of Uttar Pradesh Urban Planning and Development Act, 1973 vide notification (G.O.) No. 4521/9 Awas -5 -96 -1 -Gathan -96, dated 21.11.1996 for the objects of planning, Development and Improvement of cities, towns and villages for general public utility. The assessee had applied for registration under Section 12A(a) of the Income Tax Act, 1961 on 31.3.2003 but the same has not been disposed of within the time prescribed under Section 12AA(2) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). The assessee claimed exemption under Sections 11 and 12 of the Act and exercised the option available under clause (2) of the Explanation to Section 11(1) of the Act for the receipts / income remained unutilized during the previous year relevant to the Assessment Year 2004 -05. The assessee filed the return of income in the status of "Local Authority" on 30.10.2004 declaring the total income of Rs. Nil. The assessment under Section 143(3) of the Act was completed assessing income of Rs.27,78,060/ - in the status of "Artificial Juridical Person". In the process, the assessing authority denied all the benefits of Registration. The assessee being aggrieved with the assessment order and the order passed by the Commissioner of Income Tax( Appeals) on the issue of CIT's failure to dispose of the application of the assessee under section 12A(A) preferred the I.T.A. No. 981/Del.2007 before the Income Tax Appellate Tribunal, Delhi Bench "I", New Delhi. Before the I.T.A.T. The counsel for the assessee submitted that when the Commissioner has not passed an order granting or refusing the registration under Section 12AA(2) within six months from the end of the month in which the application for registration under Section 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) of the Act. He relied on the special appeal decision in the case of Bhagwad Swarup Shri Shri Devraha Baba Memoral Shri Parmarth Dham Trust Vs. CIT Dehradun (2007) 17 SOT 281 (Delhi) (SB). The I.T.A.T. Considered the submissions of the parties and directed the assessing officer to assess the assessee as having been registered under Section 12A of the Act in the light of said Special Bench judgment 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. Aggrieved with the aforesaid decision of the ITAT dated 19.2.2008 the Revenue has preferred the present appeal.

(3.) SRI Sri Dhanajnay Awasthi, learned counsel for the appellant submits that Section 12AA of the Act provides for procedure for registration so as to avail the benefits of exemption under Sections 11 and 12 of the Act. Section 12A of the Act provides the condition for applicability of Sections 11 and 12 of the Act. Section 12A provides that the person in receipt of income has to make an application for registration in the prescribed form and manner to the Commissioner. He submits 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. He submits that the aforesaid Special Bench judment as well as the Division Bench judgment of this Court in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment Vs. Commissioner of Income Tax, Central, Kanpur (2008) 171 Taxman 113 (All.) does not lay down the correct law. He submits that such provision are directory and not passing the order within the time specified shall not result in deemed grant of registration. He submits that there is nothing in Section 12AA(2) of the Act which provides for deemed grant of registration and as such the aforesaid two judgments holding that when an order under Section 12AA is not passed within the period specified under sub -section (2), then the registration shall be deemed to have been granted, would amount to legislation by the Court which power is not conferred on the Court. He submits that this 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. Sri Dhanajnay Awasthi has also submitted that the Hon'ble Madras High Court has held that non disposal of application within the time prescribed under Section 12AA(2) of the Act would not result in deemed grant of registration. He relied on the following judgment : - (i) 32 Taxman, 2013, 242 ( Commissioner of Income Tax -1, Salem Vs. Sheela Christian Charitable Trust. (ii) 32 Taxman, 2013, 292 ( Commissioner of Income Tax Vs. Karimangalam Onriya Pengal Semipu Amaipur Ltd.). (iii) 11 Taxman, 2011, 354 (Director of Income Tax ( Exemption), Chennai Vs. Anjuman -e -Khyrkhah - e -Aam). (iv) (2003) 2 SCC 455 paras 11 to 14 ( Unique Butyle Tube Industries(P) Ltd. Vs. U.P. Financial Corporation and Others) (v) AIR 2002 SC 1334 paras 8 -A and 14 (Padmasundara Rao Vs. State of T.N.). (vi) AIR 1992 SC 96 para 14 (Union of India and another Vs. Deoki Nandan Aggarwal). (vii) AIR 2003 SC 2917 paras 18, 19, 20 and 23 ( Union of India Vs. Rajiv Kumar). (viii) AIR 1981 SC 653 para 6 (Chet Ram Vashist Vs. Municipal Corporation of Delhi and another). (ix) AIR 1975 SC 1012 para 9 ( Dhoom Singh Vs. Prakash Chandra Sethi and others). (x) AIR 1961 SC 609 paras 5 and 6 ( C.A. Abraham Vs. Income Tax Officer, Kottayam and another). (xi) AIR 1993 SC 1048 para 66( Hotel Balaji and others Vs. State of Andhra Pradesh and others) (xii) (2003) 5 SCC 531 para 16 ( Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya and another). (xiii) AIR 1967 SC 135 para 18( Yashwant Rao Ghorpade Vs. Commissioner of Wealth Tax Bangalore). (xiv) AIR 1975 SC 1871 para 26 ( State of Tamil Nadu Vs. M.K. Kandaswami). (xv) (1998) 3 SCC 234 para 4( State of Gujarat and others VS. Dilipbhai Nathjibhai Patel and another). Submission on behalf of Respondent