2013 (8) TMI 982 - AT - Income Tax

Tribunal orders grant of registration u/s 12AA and approval u/s 80G in favor of assessee

Indira Gramin Swayamsevi Versus CIT

The Tribunal held that non-consideration within the specified time would result in deemed grant of registration under section 12AA of the Income-tax Act, ... - ISSUES PRESENTED AND CONSIDERED 1. Whether failure of the Commissioner of Income-tax to pass an order within the six-month period prescribed by section 12AA(2) results in a deemed grant of registration under section 12AA. 2. Whether denial of approval under section 80G which is predicated upon denial of registration under section 12AA remains tenable where registration is deemed to have been granted for non-disposal within the statutory period. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of non-disposal within six months under section 12AA(2) Legal framework: Section 12AA(2) prescribes that the Commissioner shall, after such inquiry as deemed necessary, allow or refuse registration and, where it refuses, communicate the grounds of refusal; the statutory period for disposal is six months from receipt of the order of the Tribunal restoring the matter for reconsideration. Precedent treatment: The Tribunal (Special Bench) and the jurisdictional High Court have held that where the Commissioner fails to decide the application within the six-month period, the effect is a deemed grant of registration, applying purposive interpretation of fiscal statute and protection of applicants from departmental delay. Interpretation and reasoning: The Court accepted the purposive approach: the object of section 12AA is to enable genuine charitable institutions to obtain registration and associated tax benefits, and to prevent prejudice to an applicant caused by administrative delay. The alternative (treating silence as mere delay without substantive consequence) would unjustly penalize the applicant for the Department's failure to act. The respondent's contention that the statute contains no express deeming provision was considered and rejected on the ground that purposive construction and binding precedent justify treating non-disposal as deemed grant in order to give practical efficacy to the statutory scheme and to avoid absurd or unjust results. The Tribunal therefore followed earlier authorities that applied the doctrine of purposive interpretation in fiscal statutes to effectuate parliamentary intent. Ratio vs. Obiter: The holding that non-disposal within six months operates as a deemed grant is treated as the operative ratio of the decision; reliance on prior decisions and purposive interpretation is part of the essential ratio. Observations contrasting plain text arguments by the Department are explanatory reasoning and may be regarded as necessary to the ratio rather than mere obiter. Conclusions: The Tribunal sustained the preliminary objection raised by the assessee and directed that registration under section 12AA be treated as granted where the Commissioner failed to pass an order within the statutory six-month period. The Tribunal declined to decide other factual issues rendered unnecessary by this legal conclusion. Issue 2 - Consequence for section 80G approval where registration under section 12AA is deemed granted Legal framework: Approval under section 80G is contingent on institutional registration and compliance with conditions; a denial of 12AA registration is commonly the basis for denying 80G approval. Precedent treatment: The decision follows the logical corollary of the precedent on section 12AA non-disposal: if registration is deemed granted, any denial of section 80G premised solely on absence of 12AA registration falls away. Interpretation and reasoning: Because the Commissioner's denial of 80G approval was expressly founded on the prior denial of registration under section 12AA, once the Tribunal concluded that registration must be deemed granted for non-disposal within six months, the legal foundation for the 80G denial ceased to exist. The Tribunal therefore directed the Commissioner to grant approval under section 80G without engaging the other factual issues which had been raised only in the alternative. Ratio vs. Obiter: The direction to grant section 80G approval flows directly from the primary ratio concerning deemed grant of registration and is an integral and consequential part of the operative decision rather than obiter. Conclusions: The Tribunal directed the Commissioner to grant approval under section 80G in consequence of the deemed grant of registration under section 12AA; the appeals were allowed on these grounds. Cross-references and ancillary points 1. The Tribunal relied on the doctrine of purposive interpretation as applied in fiscal statutes to resolve ambiguity resulting from absence of an express deeming clause; this approach was dispositive in preferring practical efficacy and protection of applicants over a strictly literal reading urged by the Department. 2. Where a departmental order denying relief is passed after expiry of the statutory period fixed under section 12AA(2), the Tribunal treats such non-compliance with the time limit as resulting in a deemed grant, and consequent rights (including section 80G approval) flow from that deemed grant; further factual inquiries rendered moot by this legal conclusion need not be adjudicated.