Delhi High Court
Delhi Golf Club Ltd.* vs Director Of Income Tax (Exemptions) on 28 April, 2006
Equivalent citations: [2006]9SOT191(NULL)
ORDER
G.S. Pannu, A.M. This is an appeal by the assessed against the order of the Director of Income Tax (Exemptions) in refusing to grant registration under section 12A with effect from 1-4-1989, as prayed for by the assessed.
2. The background and facts leading up to the present proceedings can be summarized as follows. The assessed-company was incorporated in the year 1950 for the promotion of the game of golf. It applied for registration under section 12A in the prescribed Form No. 10A with Director (Exemption) on 31-3-1999 seeking registration with effect from 1-4-1989. In response, the Director of Income Tax (Exemption) vide its order dated 9-6-1999 granted registration with effect from 1-4-1998. The DIT(E) did not grant registration from the date applied for, i.e., 1-4-1989 on the ground that the assessed could not reasonably explain the delay in seeking registration after a delay of 49 years one month and seven days. The matter was carried in appeal before the Tribunal. The Tribunal by way of its order in ITA Nos. 4024, 4025.Del. 2000 and by way of a common order 4024, 4025/D/2000 and ITA No. 3370/Del./99 dated 3-12-2001 disposed of the issue by remitting it back to the file of the DIT(E) noticing the absence of any cogent reasons by DIT(E) for denying registration as sought for by the assessed. While remitting the issue, the Tribunal also observed that the issue shall be decided in the light of the. decision of Honble Madhya Pradesh High Court in the case of Society of Divine Providence v. Union of India (1999) 235 ITR 339 (MP). As a consequence, the DIT(E) has passed the impugned order dated 25-6-2003 whereby the earlier order has been sustained. DIT(E) has concluded that he was not satisfied that the assessed was prevented by a sufficient cause from making the application seeking registration before the expiry of the prescribed period. DIT(E) has made a detailed order. However, the conclusion arrived at by him can be understood from the concluding paragraph of the order which reads as follows :
"27. For the specific reasons given by me in the preceding paragraphs, I am not satisfied that the applicant was prevented by sufficient cause from making the application before the expiry of the prescribed period within the meaning of the judgment of Honble M.P. High Court in Divine Providence case 235 ITR 339 (MP).
The delay has not been properly explained. There is no sufficiency of reasons which prevented the applicant from making the application during the prescribed period. As such, I am satisfied that there are no reasons beyond the control of the applicant that the delay had occurred in filing the application.
Therefore, on very careful consideration of all the facts and circumstances and the material placed on record as per aforesaid discussion and also in careful consideration of merits of the case, judicial decisions and law applicable, the condensation of delay is not granted. As a result, the application filed by the applicant for the condensation of delay is rejected."
3. In the aforesaid light, we have heard the submissions of the learned counsels. The counsel for the appellant Shri Y.K. Kapur has argued that the assessed has been enjoying exemption under section 10(23) of the Act with effect from 3-6-1967. That consequent to amendment in section 10(23) with effect from 1-4-1990, the Central Government was hereinafter required to issue notification for exemption which shall, at any one time, have effect for such assessment year or years not exceeding three. That thereafter the assessed filed an application seeking exemption under section 10(23) for assessment year 1990-91 and also for assessment years 1991-92 to 1993-94 and for assessment years 1994-95 to 1996-97 and 1997-98 to 1999-2000. For these facts, the learned counsel has taken us through the order of the Tribunal dated 3-12-2001 (supra). The learned counsel pointed out that since the assessed was enjoying exemption up to the assessment year 1989-90 and its subsequent applications have not been turned down by the competent authority even till today, the assessed was under a bona fide impression that the exemption would continue. That therefore it did not seek exemption outlined under sections 11 and 12 of the Act. Our attention has been specifically invited to paras 14 to 23 of the order of the Tribunal dated 3-12-2001 in this regard. Learned counsel further reiterated that the registration under section 12A was necessitated only to claim under sections 11 and 12 and that such registration was not a pre-condition for claiming exemption under section 10(23). Since the assessed continued to enjoy exemption under section 10(23), there did not arise occasion to seek registration under section 12A. That in the course of his submissions, the learned counsel relied on various decisions i.e., CIT v. Bishwanath Khirwal (1986) 161 ITR 382 (Pat) and Lachman Chaturbhui Jawa v. R.G. Nitsure (1981) 132 ITR 631 (Bom). He, therefore, submitted that the registration be granted to the assessed with effect from 1-4-1989 as prayed for in the application.
4. On the other hand, learned Departmental Representative has defended the orders of the DIT(E).
5. We have considered the rival submissions, the material on record and the order of the income-tax authorities. The factual aspect of the matter has already been noted by us in the earlier part of our order and is not repeated for the sake of brevity. However, it will be sufficient to notice that the DIT(E) vide its order dated 9-6-1999 granted registration with effect from 1-4-1998 but rejected to grant the same from the earlier period up to 31-3-1998. The moot question is as to whether the said action can be considered as justified or not. Section 12A which deals with the conditions as to registration of trusts, etc. provides that the provisions of sections 11 and 12 shall not apply unless the conditions mentioned therein are fulfillled. The condition which is relevant for our consideration, prescribed therein is with respect to the requirement of registration of the trust or institution with the Commissioner. Provisions of section 12A read with section 12A(A) authorize the Commissioner for reasons to be recorded in writing to pass an order registering the trust or institution. The period within which the trust or institution is required to apply for registration has also been prescribed. The proviso to clause (a) to section 12A reads as under :
"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 trusts or institution,
(i) from the date of creation of the trust or the establishment of the institution if the 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 Commissioner is not so satisfied." (Emphasis italicised in print, supplied)
6. For our purposes, it is sufficient to deduce from the reading of the proviso that it provides that in case where the application for registration of the trust or institution is made after the expiry of the period mentioned in clause (a) of section 12A, the provisions of sections 11 and 12 shall apply from the date of creation of the trust or establishment of the institution only in case the Commissioner, for reasons to be recorded in writing, is satisfied that the person in receipt of the income was prevented from making the application before the expiry of period aforesaid for sufficient reasons.
7. The meaning of the expression "before the expiry of the period" in the proviso above has been considered by the Honble High Court of Madhya Pradesh in the case of Society of Divine Providence (supra). It is explained that the said expression requires an appellant to show sufficiency of reasons which prevented him from making the application within the period as required and not the reasons for the period beyond the period so prescribed. In other words, it requires the Commissioner to be satisfied as to whether or not there were sufficient reasons which prevented the applicant from making the application within the prescribed period alone and that the reasons for the period beyond the date prescribed and up to the date of actual application are required to be examined. Now, considered in this light, we go back to the facts of the instant case and examine as to what was the period within which the assessed was required to have furnished his application seeking registration under section 12A of the Act and what were the reasons, if any, which prevented it from furnishing such application. The assessed-company was incorporated in the year in 1950. Section 12A providing for registration of trusts, was introduced on the statute with effect from 1-4-1973 by the Finance Act, 1972. The section, as it stood originally, provided that the trust or institution shall make an application seeking registration before the 1-7-1973 or before the expiry of the period of one year from the date of creation of the trust or establishment of the institution, whichever was later. Ostensibly, the provisions for registration were applicable in cases where the applicant chose to avail of the exemption provided under sections, 11 and 12 of the Act. In this light, the assessed having been created in the year 1950 was required to seek registration by furnishing an application before the 1-7-1973. The reasons which have been explained by the assessed for its belated application for registration have been noted by us in the earlier background. The assessed applied for registration on 31-3-1999 seeking registration with effect from 1-4-1989. The reasons were that its entire income was exempted in terms of section 10(23) and that such exemption was based on the notification by the CBDT in this regard. There is no dispute that up to the date of the period prescribed for seeking registration, the assessed was enjoying exemption from taxation under section 10(23) of the Act. Under such circumstances, there was no occasion for the assessed to have claimed any exemption under sections 11 and 12 of the Act. The aforesaid facts are not in dispute as borne out from the record. We are also satisfied that the reasons are bona fide and consequently they constitute sufficiency, which prevented the assessed from making the application before the expiry of the period as laid down in the statute. Under such circumstances, we are of the view that the Commissioner should have exercised his discretion and allowed registration to the assessed, as provided in law. On this, we find that the assessed sought registration not from the date of its establishment but with effect from 1-4-1989 although in our view, the reason prevailing with the assessed in not filing application before 1-7-1973 was sufficient and it was entitled for registration from the earlier date. Having noted so, as the assessed itself has sought registration with effect from 1-4-1989, we, therefore, modify the order of the DIT(E) to the extent that registration under section 12A be understood to have accorded to the assessed with effect from 1-4-1989 as prayed for by the assessed.
8. In the result, the appeal of the assessed is allowed as above.