Madhya Pradesh High Court
Society Of Divine Providence vs Union Of India (Uoi) And Anr. on 22 October, 1997
Equivalent citations: [1999]235ITR339(MP)
JUDGMENT S.K. Kulshreshtha, J.
1. In this petition, the petitioner-society has challenged the order dated November 3, 1993 (annexure P-6 to the petition), passed by the Commissioner of Income-tax, Bhopal, by which the learned Commissioner has declined to grant benefit of the provisions of Section 11 of the Income-tax Act, 1961, for the period earlier to April 1, 1993. The petitioner applied for registration under Section 12A of the Income-tax Act, 1961, by application dated July 13, 1993, which was granted to the petitioner by the impugned order dated November 3, 1993, only with effect from April 1, 1993, and not from the date of its establishment. As condonation of delay in making the application was refused, the petitioner-society filed an application for review, which remained undecided with the result the petitioner has filed this petition.
2. Section 12A of the Income-tax Act, 1961, reads as under :
"12A. 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 Chief Commissioner or 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 :
Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of Sections 11 and 12 shall apply in relation to the income of such trust or institution,--
(i) from the date of the creation of the trust or the establishment of the institution if the Chief Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons ;
(ii) from the 1st day of the financial year in which the application is made, if the Chief Commissioner or Commissioner is not so satisfied ;
(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below Sub-section (2) of Section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed."
3. The learned Commissioner of Income-tax has rejected the request of the petitioner for benefit of the provisions from the date of the registration of the society on the ground that the application was filed in the prescribed pro forma after one year and six months and the reasons furnished were not satisfactory. It is this part of the order that the petitioners have challenged.
4. Learned counsel for the petitioner submitted that the society was registered under the Madhya Pradesh Societies Registration Act, 1973, on October 51, 1991, and therefore, the petitioner-society was required to make an application for registration in the prescribed pro forma by October 31, 1992. The application, even as per the impugned order, is said to have been made by the society on August 18, 1993, and, therefore, it cannot be said by any stretch of imagination that the application had been made after one year and six months of the prescribed period. It was made after about nine months of the prescribed period and, therefore, the rejection of the prayer for grant of benefit from the date of registration of the society on the ground that the application was made out of time by one year and six months, is vitiated on account of the said factual error.
5. Section 12A authorises the Chief Commissioner or the Commissioner, for reasons to be recorded in writing, to make the provisions of Sections 11 and 12 applicable from the date of creation of the trust or the establishment of the institution on satisfaction that the person making the application was prevented by sufficient cause from making the application before the expiry of the period. The expression "before the expiry of the period" in proviso (i) of Clause (a) of Section 12A requires sufficiency of reasons which prevented the person from making the application within one year as required and not the reasons for the period beyond the prescribed period of one year. What the authority has to see is whether or not there were sufficient reasons which prevented the person from making the application within the prescribed period and not the total period after which the application was made. The learned Commissioner was, therefore, required to examine whether sufficient reasons existed for not making the application in the prescribed pro forma within the prescribed period of one year and not with reference to the total period that elapsed before making the application. It is, thus, clear that the learned Commissioner has not approached the matter from its correct perspective.
6. The learned Commissioner has recorded that the reasons furnished were not satisfactory. "Not satisfactory" is a conclusion and cannot be a reason by itself and it was necessary for the learned Commissioner to have given reasons why the explanation for not making the application in time was not satisfactory. It is clear from the impugned order that in so far as the entitlement to registration under Section 12A is concerned, the same has been granted though with prospective effect from April 1, 1993. The eligibility of the petitioner having thus been concluded, it was necessary that cogent reasons were assigned to indicate why the reasons furnished by the petitioner were not satisfactory.
7. The grievance of the petitioner is also that the petitioner was not granted any opportunity of hearing. Learned counsel for the Department has pointed nut that after the application was received, the petitioner was sent the communication dated August 18, 1993 (annexure P-4), to furnish information including the reasons for delay in making the application beyond the period of one year, to which the petitioner had reported compliance under its letter dated September 29, 1993 (annexure P-5). Learned counsel for the Department, therefore, contends that no further opportunity was necessary especially when the provision does not contemplate the granting of hearing to the party concerned. It is not disputed that refusal to condone the delay in making the application entails the consequence of denial of the benefit of the provisions of Sections 11 and 12 from a date anterior to the date from which benefit is granted in the financial year in which the application is made. Since the consequence of refusal has the effect of denial of benefit, the principles of natural justice require an opportunity of hearing before an order in this behalf is passed on the ground that the reasons furnished by the applicant were not satisfactory. Thus, examined from any angle, the impugned order, in so far as it denies the benefit for the period prior to April 1, 1993, cannot be sustained and the matter deserves to be remitted back to the learned Commissioner for decision in accordance with law.
8. Accordingly, this petition is partly allowed. The matter is remitted back to the learned Commissioner to consider the application for grant of benefit under Section 11 with effect from the date of registration of the petitioner-society and for decision in accordance with law. There shall, however, be no order as to costs.