2010 (12) TMI 957 - HC - Income Tax

High Court rules in favor of appellant on Section 12AA interpretation

The High Court of Madras ruled in favor of the appellant in a case concerning the interpretation of Section 12AA of the Income-tax Act. The Court ... Registration under Section 12AA seeked - Form 10G for grant of approval under Section 80G - appellant, by one line order, rejected the stand of the respondent, the appellant merely lodged the application of the respondent - Held that:- There is a statutory mandate imposed on the appellant to pass an order in writing either registering the trust/institution or refusing to register the trust/institution. There cannot be any order in between like lodging the application, there was no deemed registration under Section 12AA(2) the orders of the Tribunal as well as that of the appellant are set aside and the matter is remitted back to the appellant for fresh disposal on merits. The appellant is directed to take up the application for registration of the respondent and pass orders, one way or the other, question of law is answered in favour of the appellant. Issues:1. Interpretation of Section 12AA of the Income-tax Act regarding the deemed grant of registration to a charitable trust.2. Examination of the activities of the respondent trust to determine their charitable nature for registration under Section 12AA.Analysis:1. The High Court of Madras addressed the issue of interpreting Section 12AA of the Income-tax Act in this case. The Tribunal had held that the registration of the respondent trust should be deemed to have been granted due to the expiry of the six-month period mentioned in Section 12AA(2) of the Act. However, the High Court disagreed with this interpretation. The Court clarified that the order passed by the appellant within the stipulated time limit of six months did not violate Section 12AA. The Court emphasized that the Tribunal's conclusion on the deemed grant of registration was unsustainable, as the appellant's order was timely. The High Court set aside the Tribunal's decision on this point.2. Regarding the charitable nature of the respondent trust's activities, the Court found that the appellant had merely lodged the application for registration without granting or rejecting it. The Court highlighted that Section 12AA of the Act mandates the appellant to pass a clear order either registering or refusing to register the trust. The Court emphasized that leaving the application in a suspended animation was not permissible. The High Court set aside the orders of both the Tribunal and the appellant and remitted the matter back to the appellant for fresh consideration on the merits. The appellant was directed to conduct a proper examination, provide an opportunity of hearing to the respondent, and issue a clear decision within two months from the date of the Court's order. The Court ruled in favor of the appellant on this issue, emphasizing the need for a proper decision on the registration application.