TaxTMI 
TaxTMI 
2024 (10) TMI 1159
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.... a period of six months as prescribed under Section 12AA (2) of the I.T. Act, the assessee is deemed to have been granted a registration. The Tribunal accordingly held that the order of CIT refusing registration was a nullity requiring it to be quashed and set aside. The assessment year in question is A.Y. 2005-06. 2. By an order dated 6 June, 2011, the present appeal came to be admitted on the following question of law: "Whether on the facts and in the circumstances of the case and in law, the ITAT is justified in granting the assessee a deemed registration under section 12AA of I.T. Act, 1961, when there is no such specific deeming provision in the I.T. Act, 1961." 3. The relevant facts are required to be noted. The assessee is a public trust running a pediatric hospital at Pune. On 6 February, 2006, the assessee filed an application in Form No. 10A requesting registration of the assessee under Section 12A of the I.T. Act. On such application of the assessee, the CIT-IV, Pune passed an order under Section 12AA on 15 September, 2006 refusing registration to the assessee. Being aggrieved by the said order, the assessee preferred an appeal before the Tribunal. The Tri....
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....within the time-limit provided is not and it can be done at any time. Therefore, it was to be held that in a case where the Commissioner does not pass the order granting or refusing of registration of trust within the period laid down in section 12AA (2), i.e., 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 expiry of period specified in section 12AA (2). Therefore, the order of the Commissioner refusing registration was a nullity and was, to be quashed. The registration to the assessee would be deemed to have been granted as applied for by the assessee. Up-to this stage, the issue appears to be covered, however, by the decision of the Special Bench, ld. A.R. has also fairly placed on record that though the Trust was created earlier but the application was moved on 6.2.2006, therefore, in terms of Section 12A(i)(a)(ii) registration can only be granted from the first day of the Financial Year in which the application is made. This aspect was not considered by the ld. Commissioner and requires ....
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....omotion of Education, Adventure Sport & Conservation of Environment vs. Commissioner of Income-tax. (2015) 372 ITR 222 (All.) wherein the Division Bench had recognized the applicability of a deeming fiction under Section 12AA (2). It is submitted that, however, the Division Bench observed that the decision of the Division Bench in Society for Promotion of Education (supra) was declared to be not a good law by the Full Bench of the Allahabad High Court in Muzafar Nagar Development Authority (supra). Mr. Saxena submits that the Division Bench of the Allahabad High Court also considered the assessee's submission that the decision of the Division Bench in Society for the Promotion of Education (supra) was carried to the Supreme Court, which was confirmed by the Supreme Court while disposing of the appeal. Hence, a contention was raised before the Division Bench that such orders of the Supreme Court need to be considered recognizing a position in law that a provision of deemed grant of registration is inherent in Section 12AA (2). Mr. Saxena would submit that, however, such contention on the part of the assessee was not accepted by the Division Bench on the premise that the Supreme Cour....
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....be taken that the application is registered under the said provision. It is hence Mr. Mundhra's submission that the view taken by the Supreme Court in Society for the Promotion of Education (supra) being a prior view and although not expressly considered by the Supreme Court in the subsequent decision in Harshit Foundation Sehmalpur (supra), it would be binding on the revenue being the law of the land. It is also his submission that the Court needs to apply the prior decision of the Supreme Court in Society for the Promotion of Education (supra) and not the subsequent decision in Harshit Foundation Sehmalpur (supra) is the settled position in law. In support of such contention, Mr. Mundhra has placed reliance on the decisions of the Supreme Court in Sundeep Kumar Bafna vs. State of Maharashtra (2014) 16 SCC 623, National Insurance Company Ltd. vs. Pranay Sethi (2017) 16 SCC 680 and in Union Territory of Ladakh vs. Jammu and Kashmir National Conference 2023 SCC OnLine SC 1140. 9. Mr. Mundhra would therefore submit that this is a clear case where there are two diametrically opposite views of the Supreme Court, one in the case of Society for the Promotion of Education (supra) and o....
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....of Education (supra) to the effect that Section 12AA (2) would be required to be read to contain a deeming provision of the application for registration being granted, if the same is not decided within the prescribed period of six months from the date of making of the application. Analysis 14. In the aforesaid circumstances, as according to the parties, there are two diametrically opposite decisions rendered by the Supreme Court, the question before the Court is whether the revenue would be correct in its contention relying on the decision of the Supreme Court in Harshit Foundation Sehmalpur (supra) or whether the prior decision in Society for the Promotion of Education (supra) would be required to be applied needs to be decided in answering the question of law which has fell for consideration in the present proceedings. 15. At the outset, we may refer to the decision of the Full Bench of this Court in Kamleshkumar Ishwardas Patel (supra) wherein the Court was confronted with a conflict in two decisions (of the two Judges Bench's) of the Supreme Court in Santosh Anand v. Union of India (1981) 2 SCC 420 and the decision in Raj Kishore Prasad v. State of Bihar [1982] 3 SCC 1....
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.... v. Madanmohan, AIR 1988 Cal 1 at p. 5-7, on the question as to the course to be followed by the High Court when confronted with contrary decisions of the Supreme Court emanating from Benches of co-equal strength, as hereunder:- ".... When contrary decisions of the Supreme Court emanate from Benches of equal strength, the course to be adopted by the High Court is, firstly, to try to reconcile and to explain those contrary decisions by assuming, as far as possible, that they applied to different sets of circumstances. This in fact is a course which was recommended by our ancient Jurists - "Srutirdwaidhe Smritirdwaidhe Sthalaveda Prakalapate" - in case there are two contrary precepts of the Sruties or the Smritis, different cases are to be assumed for their application. As Jurist Jaimini said, contradictions or inconsistencies are not to be readily assumed as they very often be not real but only apparent resulting from the application of the very same principle to different sets of facts - "Prayoge Hi Virodha Syat". But when such contrary decisions of co-ordinate Benches cannot be reconciled or explained in the manner as aforesaid, the question would arise as to which one th....
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....minority consisting of two of the learned Judges speaking through Jagannatha Shetty, J. also took the same view (supra, at p. 95) and in fact the same has been referred to with approval by Sandhawalia, C.J. in the Full Bench decision in Indo-Swiss Time (supra)." "This later view appears to us to be in perfect consonance with what our ancient Jurist Narada declared - Dharmashastra Virodhe Tu Yuktiyukta Vidhe Smrita - that is, when the Dharmashastras or Law Codes of equal authority conflict with one another, the one appearing to be reasonable, or more reasonable is to be preferred and followed. A modern Jurist, Seervai, has also advocated a similar view in his Constitutional Law of India, which has also been quoted with approval by Sandhawalia, C.J. in Indo-Swiss Time (supra, at p. 220) and the learned Jurist has observed that "judgments of the Supreme Court, which cannot stand together, present a serious problem to the High Courts and Subordinate Courts" and that "in such circumstances the correct thing is to follow that judgment which appears to the Court to state the law accurately or more accurately than the other conflicting judgment." "It appears that the Full....
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....ing one view to another." "... We are, however, inclined to think that no blanket proposition can be laid down either in favour of the earlier or the later decision and, as indicated hereinbefore, and as has also been indicated by the Supreme Court in Atma Ram (supra), the subordinate Court would have to prefer one to the other and not necessarily obliged, as a matter of course, to follow either the former or the later in point of time, but must follow that one, which according to it, is better in point of law. As old may not always be the gold, the new is also not necessarily golden and ringing out the old and bringing in the new cannot always be an invariable straight-jacket formula in determining the binding nature of precedents of co-ordinate jurisdiction." (emphasis supplied) 16. It is seen from the observations of the Full Bench that the Court adverted to the law as enunciated by the Constitution Bench of the Supreme Court in Atma Ram vs The State Of Punjab And Ors. (supra) in which the Constitution Bench held when there arises conflict created by two decisions, a situation arises that both the decisions become binding. In such circumstances, the Courts c....
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....4, both three Judges Bench decisions, was considering an issue in the context of computation of compensation under Section 163-A and 166 of the Motor Vehicles Act, 1988 and the methodology for computation of future prospects. The Constitution Bench referring to the decision in Jaisri Sahu Vs. Rajdewan Dubey AIR 1962 SC 83 approved the practice that the earlier decision to be followed and not the later. The relevant observations of the Supreme Court are required to be noted which read thus :- "16. In State of Bihar v. Kalika Kuer, (2003) 5 SCC 448, it has been held : (SCC p. 454, para 10) "10. ... an earlier decision may seem to be incorrect to a Bench of a coordinate jurisdiction considering the question later, on the ground that a possible aspect of the matter was not considered or not raised before the court or more aspects should have been gone into by the court deciding the matter earlier but it would not be a reason to say that the decision was rendered per incuriam and liable to be ignored. The earlier judgment may seem to be not correct yet it will have the binding effect on the later Bench of coordinate jurisdiction. ..." The Court has further rul....
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....AIR 1955 AP 215] it has been held by the Andhra High Court that under the circumstances aforesaid the Bench is free to adopt that view which is in accordance with justice and legal principles after taking into consideration the views expressed in the two conflicting Benches, vide also the decision of the Nagpur High Court in D.D. Bilimoria v. Central Bank of India [D.D. Bilimoria v. Central Bank of India, 1943 SCC OnLine MP 97 : AIR 1943 Nag 340] . The better course would be for the Bench hearing the case to refer the matter to a Full Bench in view of the conflicting authorities without taking upon itself to decide whether it should follow the one Bench decision or the other. We have no doubt that when such situations arise, the Bench hearing cases would refer the matter for the decision of a Full Court." 19. Though the aforesaid was articulated in the context of the High Court, yet this Court has been following the same as is revealed from the aforestated pronouncements including that of the Constitution Bench and, therefore, we entirely agree with the said view because it is the precise warrant of respecting a precedent which is the fundamental norm of judicial disciplin....
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....foresaid decisions is required to be noted which we discuss hereinafter. 22. In such context, we would first note the relevant provisions of law, around which the controversy in the present proceedings would revolve namely Section 12A of the IT Act which provides for "conditions as to registration of trusts, etc." and Section 12AA which provides for the "procedure for registration" being the provisions around which the controversy revolves in the present proceedings: 12A. Conditions as to registration of trusts, etc.- The provisions of Section 11 and Section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the[* * *] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under Section 12-AA: Provided that where an applicati....
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....n which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of Section 12-A. (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." (emphasis supplied) 23. Before the Allahabad High Court, in the case of Socie....
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....cept the line of reasoning which weighed with the Division Bench in Society for Promotion of Education (supra), in holding that the consequence of the non-consideration of an application for registration, within the time fixed by Section 12AA (2), would confer a deemed grant of registration on the assessee. The Full Bench accordingly answered the reference, by holding that the non-disposal of the application for registration by granting or refusing registration, before the expiry of six months as provided under Section 12AA (2) of the IT Act, would not result in a deemed grant of registration. It was also held that the judgment of the Division Bench in Society for Promotion of Education (supra) did not lay down the correct position of law. The learned Chief Justice speaking for the Bench held as under: "15. We are unable to accept the line of reasoning which weighed with the Division Bench of this court in Society for the Promotion of Education Adventure Sport and Conservation of Environment (supra). The Division Bench in holding that the consequence of the non-consideration of an application for registration within the time fixed by section 12AA (2), would be a deemed gra....
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....SC) ; AIR 2002 SC 1334, paragraphs 8A and 14, Union of India v. Rajiv Kumar, AIR 2003 SC 2917, paragraph 23 and Unique Butyle Tube Industries (P.) Ltd. v. U. P. Financial Corporation (2003) 113 Comp Cas 374 (SC) ; (2003) 2 SCC 455, paragraph 14.). 17. A similar view to that of the Division Bench was adopted in a judgment of the Delhi Bench of the Income-tax Appellate Tribunal in Bhagwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham Trust v. CIT (2007) 17 SOT 281 (Delhi) [SB] ; (2008) 299 ITR (AT) 161 (Delhi) [SB]. The Tribunal, as indeed the Division Bench of this court, in the earlier decision, observed that on the balance and though the questions presented some difficulty, it was inclined to take the view supporting the plea of deemed registration, otherwise the assessee would be left without a remedy. The assessee, in our view, is not without a remedy since a delay on the part of the Commissioner to consider an application can be remedied by recourse to the jurisdiction under article 226 of the Constitution. If the Commissioner has delayed in passing an order on an application for registration under section 12AA, recourse to the remedy under article 226....
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....on of law." (emphasis supplied) 26. The aforesaid decision of the Full Bench of the Allahabad High Court was rendered on 5 February 2015. It so happened that the decision of the Division Bench in Society for Promotion of Education (supra) was carried to the Supreme Court by the Revenue in the case CIT, Kanpur Vs. Society for Promotion of Education (supra), which came for consideration before the two Judges Bench of the Supreme Court when the proceedings filed by the Revenue came to be rejected in terms of the following judgment of the Supreme Court:- "1. Leave granted. 2. There is no appearance on behalf of the sole respondent despite service of notice and adjournment sought for on a couple of occasions earlier. 3. The short issue is with regard to the deemed registration of an application under Section 12AA of the Income Tax Act. The High Court has taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision. 4. The learned Additional Solicitor General appearing for the appellants, has raised an a....
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....e that such decision of the Supreme Court would not assist the assessee on the ground that the question of law itself was kept open by the Supreme Court, as the Supreme Court had disposed of the revenue's appeal on the contention of the Revenue as recorded in paragraphs 5 and 6 of its order. The relevant observations of the Division Bench are required to be noted which read thus:- "9. Learned counsel for the appellant has also placed before us a copy of Supreme Court judgment, passed in CIT v. Society for the Promn. of Edn. [2016] 67 taxmann.com 264/238 Taxman 330/382 ITR 6 which was an appeal taken to Supreme Court against the judgment of this Court and therein appeal was decided by Supreme Court by order dated 16th February, 2016 in the following manner : "5. We see no basis for such an apprehension since that is the only logical sense in which the judgment could be understood. Therefore, in order to disabuse any apprehension, we make it clear that the registration of the application under section 12AA of the Income-tax Act in the case of the respondent shall take effect from 24-8-2003. 6. Subject to the above clarification and leaving all other questio....
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.... orders passed by the High Court, on these issues, which fell for its consideration, did not accept the assessee's case of a deemed registration under sub-section (2) of Section 12AA, as also on the applicability prior decision in Society for Promotion of Education (supra). The Supreme Court rejected the proceedings in terms of the following order:- "1. We have heard Mr. Abhinav Mehrotra, learned counsel appearing on behalf of the petitioner and Mr. N. Venkataraman, learned Additional Solicitor General appearing on behalf of the respondent. 2. The only question which is posed for consideration before the High Court was whether on non-deciding the application for registration under section 12AA (2) of the Income-tax Act, 1961 (for short "the Act") within a period of six months, there shall be deemed registration or not. 3. The aforesaid aspect has been dealt with and considered in detail by the Full Bench of the Allahabad High Court in its decision in the case of CIT v. Muzafar Nagar Development Authority* (I. T. A. 348 of 2008). 4. After considering in detail the provisions of section 12AA (2) of the Act and having found that there is no specific....
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....The Division Bench noted the decision of the Supreme Court in Sangita Vs. The State of Maharashtra & Anr. Civil Appeal Nos.4609-4610 of 2024 arising out of SLP (C) Nos 25654-25655 of 2023) dt.1/4/2024 in which the Supreme Court had referred to its decision in Kunhayammed and others vs. State of Kerala & Anr. (2000) 6 SCC 359. Considering the position in law, the Division Bench noted the legal position as arising from orders passed by the Supreme Court "in an appeal" and "on rejection of the Special Leave Petition", by a speaking order. The Division Bench in such context observed thus: "21. Mr. Naniwadekar submits that the decision of the Supreme Court in Society for Promn. Of Edn. (supra) is a decision rendered on an appeal whereas the order passed by the Supreme Court in Harshit Foundation Sehamalpur (supra) is an order rejecting a petition for Special Leave to Appeal. It is also his submission that this apart, in such decision, the orders passed by the High Court stand merged in the orders passed by the Supreme Court on the appeal. He thus submits that the decision of the Supreme Court in Society for Promn. Of Edn .(supra) being a judgment of the Supreme Court on an appe....
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.... attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order i.e. gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the ....