TMI Blog2007 (8) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... end of time. If we hold that the application must be deemed to have been refused, obviously the assessee must be in a position to file an appeal against the refusal to the Tribunal but it will not be able to do so in the absence of a written order containing the reasons for refusal; the appeal remedy would be rendered illusory. That consequence cannot be countenanced. Therefore, by a process of exclusion, we are inclined to accept the conclusion that the CIT must be deemed to have allowed the registration if he has not passed any order within the time prescribed. That way, the rights of the department are also protected in the sense that it would be open to the CIT to cancel the deemed registration by invoking sub-section (3) to section 12AA, if it is otherwise permitted and the procedure prescribed therefor is followed. The assessee, if aggrieved by the cancellation of registration, has a right to appeal to the Tribunal u/s 253(1)(c). We find that DLF Universal Ltd.'s case [ 2000 (5) TMI 2 - SUPREME COURT] , helps the assessee the most. In that case the provisions of section 269UD of the Act, appearing in Chapter XXC of the Act, providing for pre-emptive purchase of a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opose to examine the merits of the claim for registration. - R.V. EASWAR VICE PRESIDENT, P.M. JAGTAP A.M. AND R.C. SHARMA A.M. For the Appellant : Dr. Rakesh Gupta Ashwani Taneja Tarun Kumar Ms. Poonam Ahuja For the Respondent : Durga Charan Das ORDER R.V. EASWAR, VICE PRESIDENT 1. The appeal has been referred to the Special Bench and the following question has been posed for decision: Whether in a case where the CIT does not pass the order granting or refusing registration of trust within the period laid down in Section 12AA(2) registration would be deemed to have been granted to the trust or institution automatically on expiry of the period specified in Section 12AA(2) of the Act? 2. A few basic facts may be stated now. The assessee is a charitable institution. It applied to the CIT for registration under Section 12A of the IT Act on 23rd Oct., 2001. Under Section 12AA(2) every order granting or refusing registration shall be passed by the CIT before the expiry of six months from the end of the month in which the application was received by him. In the case before us the CIT ought to have passed an order granting or refusing registration on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igious trust or institution is available only if the conditions specified in that section are satisfied. One of these conditions is that the person in receipt of the income shall make an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief CIT or the CIT for processing of such an application and granting or refusal of registration to the concerned trust or institution. 19.2 Hence the Finance (No. 2) Act, 1996, now provides for a procedure to be followed for grant of registration to a trust or institution. According to this procedure, the Chief CIT or CIT shall call for documents and information and conduct enquiries to satisfy about the genuineness of the trust or institution. After he is satisfied about the charitable or religious nature of the objects and genuineness of the activities of the trust or institution, he will pass an order granting registration. If he is not so satisfied, he will pass an order refusing registration. However, an opportunity of being heard shall have to be provided to the applicant before an order of refusal to grant registration is passed by the Chief CIT or the CIT. The reasons fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of limitation for passing the order gets extended for which there is no power vested in any authority. He therefore commends for acceptance of the consequence that the application must be deemed to be allowed. 5. Two reasons are given by Dr. Gupta, the learned Counsel for the assessee, as to why the application for registration must be deemed to be accepted. The first is that there is no inconvenience caused to the Department, because it would still be open to the CIT to invoke Sub-section (3) of Section 12AA to cancel the registration deemed to have been allowed and the assessee would not be prejudiced because of the cancellation as it would get a right to appeal against the cancellation of registration to the Tribunal in terms of Section 253(1)(c). Secondly, even if no order is passed by the CIT cancelling the registration, it would be open to the AO to examine the charitable nature of the activities actually carried on by the assessee while examining the return in the course of the assessment proceedings and he is also empowered to verify the application of the monies of the trust for charitable object, investment of the funds, etc. and thus no prejudice would be caused to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be passed after a period of... is the same. He also contrasted the above sections with the language used in Sections 250(6A) and 254(2A), under which the CIT(A) and the Tribunal, respectively, have been directed to dispose of the appeals within a particular time frame where it is possible . He submitted that whereas the language employed in the first set of sections is mandatory and has to be strictly adhered to, the language employed in the second set of sections is merely directory and merely because the CIT(A) or the Tribunal has not found it possible to dispose of an appeal within the set time limit it will not be deemed that the appeal is allowed. Where the language is mandatory, according to Dr. Gupta, the result would be that the failure to pass an order within the period provided would result in the position that the application or return would be deemed to have been accepted. 9. Our attention was drawn by Dr. Gupta to pp. 145 and 382 of G.P. Singh's Interpretation of Statutes (2006 Edition) as to the effect of a friction or uncertainty in the statute. It may be recalled that he had earlier submitted that Section 12AA did not provide for a situation where no or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order could not be passed before 30th April, 2002 and that so long as the assessee's rights are not prejudiced and a right of appeal against the refusal to register the trust or institution is available to it, no grievance can be made out of the fact that the refusal order was passed after the period of limitation prescribed in the sub-section. 11. We think that there is a good deal of force in the arguments of Dr. Gupta. The question whether the CIT should pass an order within 6 months from the end of the month in which the application for registration is filed does not present much difficulty. In our opinion, he has no option but to obey the mandate of the law, as we all must. Unless the statute provides for exceptions, the order must be passed by statutory authorities in accordance with the time-limit set by the law. The Sub section (2) of Section 12AA does not admit of any exception to the rule. Wherever the time-limit for passing an order was meant only to be directory, the IT Act has taken care of the same by providing, for instance, in Section 250(6A) and Section 254(2A) that the CIT(A) and the Tribunal shall dispose of the appeals where it is possible within a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11 (see the circular cited supra). It would be incongruous to hold that while the condition that the trust or charitable institution must be registered with the CIT is mandatory or absolute, the provision that the CIT shall pass an order thereon within six months from the end of the month in which the application was filed is merely directory, leaving it to the convenience of the CIT to pass the order at any time he likes disregarding the time-limit prescribed. That would introduce an element of uncertainty and confusion in the administration of the Act and may even compel trusts or institutions claiming exemption under Section 11 to invoke Article 226 of the Constitution. Such consequences have to be avoided. The assessments of the trust or charitable institution may in the meantime be completed rejecting the claim for exemption on the ground that it is not registered, even though the trust/charitable institution is found by the AO to satisfy the other conditions such as application of income, investment of the funds and so on. In other words, by not passing the order within the time-limit, the claim of the trust/charitable institution can be frustrated, albeit unintentionally. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed and an order passed on or before 30th April, 2002. The time-limit prescribed was given a go-by, the enquiry was continued and finally an order was passed refusing the registration. 15. We are highlighting the above facts only to show that it could not have been the intention of the law that the CIT could pass the order granting or refusing registration at any time. Any provision has to be so interpreted as to advance the cause and suppress the mischief. The interpretation suggested by Dr. Gupta, in our humble opinion, would conform to this rule. In Dalchand v. Municipal Corporation AIR 1983 SC 303 it was observed that there are no ready or invariable formulae to determine whether a provision is mandatory or directory. The broad purpose of the statute is important. The object of the particular provision must be considered. The link between the two is most important. The weighing of the consequence of holding a provision to be mandatory or directory is vital and, more often than not, determinative of the very question whether the provision is mandatory or directory...the negligence of those to whom public duties are entrusted cannot by statutory interpretation be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the Tribunal against the same. The matter would be thrashed out before the Tribunal. Apprehensions were expressed before us on behalf of the Department that even a trust whose objects were not charitable would get registration by such deeming. The apprehension is not fully justified, because there is nothing in law to prevent the CIT from making his own enquiries even after the expiry of the time-limit and making use of the results thereof to cancel the registration under Sub-section (3). The consequence would outweigh the uncertainty or confusion which the non-passing of the order within the time-limit would introduce into the working of the system. Lord Shaw's dictum which we have quoted earlier would cover the case. 18. Among the several authorities cited on behalf of the assessee, we find that DLF Universal Ltd. v. Appropriate Authority (supra) helps the assessee the most. In that case the provisions of Section 269UD of the Act, appearing in Chapter XX-C of the Act, providing for pre-emptive purchase of a property by the Government came up for consideration. A statement in Form No. 37-1 was filed before the appropriate authority. It was found to be in order, It was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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