TMI Blog2010 (1) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be quashed. - 1791 of 2007 and others - - - Dated:- 22-1-2010 - SIKRI A. K., SIDDHARTH MRIDUL JJ. W.P. (C) Nos. 1791 of 2007 and 7481 of 2009 and C.M. Appeals Nos. 3292 of 2007 and 15279 of 2008. Ms. Sonia Mathur for respondents Nos. 1 and 2 in W.P. (C) No. 7481 of 2009. Ms. P.L. Bansal for respondent. No. 3 in W.P. (C) No. 7481 of 2009. JUDGMENT A. K. Sikri J.- Both these writ petitions involve an identical question of law which has occurred in identical circumstances as well. For this reason these petitions were heard together and are being disposed of by this common judgment. However, for the sake of brevity we shall take note of the facts of W. P. No. 1791 of 2007 and that would serve our purpose as it has the same bearing on the other writ petition as well. 2. Petitioner No. 1, in this writ petition, is "Church's Auxiliary for Social Action" and petitioner No. 2 is the director thereof. Petitioner No. 1 is a society registered under the Societies Registration Act, 1860. It was registered on February 12, 1976. The basic aim and object of the petitioner-society is to undertake, promote and assist in the upliftment of the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in sub-section (2) includes any sum or sums of the nature specified in. . . . . or in clause (d) thereof, an amount equal to the whole of the sum or, as the case may be, sums of such nature plus fifty per cent. of the balance of such aggregate ; and. . . (2) The sums referred to in sub-section (1) shall be the following, namely :-. . . (d) any sums paid by the assessee, during the period beginning on the 26 th day of January, 2001, and ending on the 30 th day of September, 2001, to any trust, institutions or fund to which this section applies for providing relief to the victims of earthquake in Gujarat. (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :-. . . (5C) This section applies in relation to amounts referred to in clause (d) of sub-section (2) only if the trust or institution or fund is established in India for a charitable purpose and it fulfils the following conditions, namely :- (i) it is approved in terms of clause (vi) of sub-section (5) ; (ii) it maintains s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return filed by the petitioner for the assessment year 2003-04 the entire donation of Rs. 24,51,58,192.08 has been treated as taxable income of the petitioner-society, i.e., deemed taxable income under section 12(3) of the Act, vide assessment order dated December 20, 2006. 7. It so happened that the petitioner realized belatedly when it received a questionnaire from the respondent/Assessing Officer asking for details in respect of the aforesaid donations received and raising various queries with regard to non-filing of Form No. 10AA before the prescribed authority as required under section 12(3) of the Act read with rule 18AAA of the Income-tax Rules, 1962. The petitioner while submitting the details to those queries by furnishing requisite particulars, also tried to file Form No. 10AA on March 29, 2006 and March 30, 2006 in the office of respondent No. 1. It was, however, not accepted stating that "they had no jurisdiction to receive this form." On the very next day, i.e., March 31, 2006 this form was filed before the Director of Income-tax (Exemptions) along with a letter seeking condonation of delay in filing the same. However, vide communication dated August 8, 2006, respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2006, the application for condonation of delay preferred by the petitioner is dismissed on the ground that there is no provision to condone the delay. Challenge to this stance of the respondent is predicated on the following : (i) Provision contained in clause (v) of sub-section (5C) of section 80G is not mandatory, but directory in nature. In other words, it is contended that the date of June 30, 2004 specified therein is not sacrosanct or inflexible ; (ii) No hearing was given to the petitioner before rejecting the application and thus, principles of natural justice are violated. 10. Almost identical situation occurred in the other writ petition inasmuch as there also the application for condonation of delay is rejected on the plea of want of power. We may state at the outset that concededly no hearing was given to the petitioners before passing the impugned orders and taking the view that there is no provision to condone delay for any reason, in section 80G(5C)(v) of the Act. Naturally, this order has far reaching ramifications and adversely affects the interests of the petitioners. Before passing such an order, therefore, it was necessary to provide an opportunity of be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat ; such institutions maintain separate accounts of income and expenditure for this purpose and, if any part amount received remained unutilized as on the 31 st day of March of the year, the same is transferred to the Prime Minister's National Relief Fund on or before March 31, 2004. Since such accounts, etc. are to be maintained by these trusts/institutions, it is their obligation to render the accounts as well for which the last date of June 30, 2004 is prescribed. 13. If the conditions are not fulfilled as mentioned in sub-section (5C) of section 80G, it entails certain consequences. The donations received are, otherwise, treated as income under section 12 of the Act. At the same time, if such trusts or charitable institutions are treated as registered under section 12 of the Act and granted exemption for the purpose of section under section 80G of the Act, this income is not liable for tax. However, in respect of donation received for providing relief to the victims of earthquake in Gujarat, speciation provision in the form of sub-section (3) of section 12 has been inserted, inter alia, stipulating that the amount of donations in respect of which accounts of income and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strous and onerous consequence of treating the entire donation as income and taxing the same should not follow particularly when the entire amount of donation so received was spent for the purpose mentioned therein, viz., providing relief to the earthquake victims of Gujarat by March 31, 2004. If the provision is to be interpreted in the manner the Revenue wants, even in the given case where the petitioner in the first petition received donations of more than Rs. 24.50 crores for this specific purpose and spent the entire amount for the same specified cause will still be called upon to pay the tax of several crores even when the petitioner did not keep with itself a penny from those donations received. 16. In Black's Law Dictionary, 6 th Edn. (at page 461), the word "directory" is defined as "permissive" and "mandatory" as "imperative". It is explained that under a general classification, statutes are either "directory" or "mandatory", and if mandatory, they prescribe, in addition to requiring the doing of the things specified, the result that will follow if they are not done, whereas, if directory, their terms are limited to what is required to be done. A "mandatory" provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm. Accordingly, when a particular provision of a statute related to some immaterial matter, as to which compliance with the statute is a matter of convenience rather than sub-stance, or where the directions of a statute are given merely with a view to the proper, orderly, and prompt conduct of business, it is generally regarded as directory, unless followed by rules of absolute prohibitions ; and a statute is regarded as directory where no substantial rights depend on it, no injury can result from ignoring it, and the purpose of the Legislature can be accomplished in a manner other than that prescribed, with substantially the same results. On the other hand, a provision relating to the essence of the thing to interpretation of a statute, which directs acts or proceedings to be done in a certain way, shows that the Legislature intended a (sic) compliance with such provision to be essential to the validity of the act or proceeding, or when some antecedent and prerequisite conditions must exist prior to the exercise of power or must be performed before certain other powers can be exercised, the statute must be regarded as mandatory. (82 C. J. S., Statutes, $ 376)." Wilcox, 200 Kan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other relevant circum-stances are required to be taken into consideration in construing whether the provision would be mandatory or directory. 30. The question, whether a particular provision of a statute, which, on the face of it, appears mandatory inasmuch as it used the word 'shall', or is merely directory, cannot be resolved by laying down any general rule, but depends upon the facts of each case particularly on a consideration of the purpose and object of the enactment in making the provision. To ascertain the intention, the court has to examine carefully the object of the statute, consequence that may follow from insisting on a strict observance of the particular provision and, above all, the general scheme of the other provisions of which it forms a part. The purpose for which the provision has been made, the object to be attained, the intention of the Legislature in making the provision, the serious inconvenience or injustice which may result in treat-ing the provision one way or the other, the relation of the provision to other consideration which may arise on the facts of any particular case, have all to be taken into account in arriving at the conclusion whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s attention from the important question of what the legislator should be judged to have intended should be the consequence of the non-compliance. This has to be assessed on the consideration of the language of the legislation against the factual circumstances of the non-compliance. In the majority of cases, it provides limited, if any, assistance to inquire whether the requirement is mandatory or directory." He went to say at pages 238-39 : "I suggest that the right approach is to regard the question of whether a requirement is directory or mandatory as only at most a first step. In the majority of cases there are other questions which have to be asked which are more likely to be of greater assistance than the application of the mandatory/directory test. The questions which are likely to arise are as follows : Is the statutory requirement fulfilled if there has been substantial compliance with the requirement and, if so, has there been substantial compliance in the case in issue even though there has not been strict compliance ? (The substantial compliance question.) Is the non-compliance capable of being waived, and if so, has it or can it and should it be waived in this parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We may also, at this stage, refer to another judgment of the apex court in Union of India v. Ranbaxy Laboratories Ltd. [2008] 7 SCC 502. In this judgment, the court opined that purposive consideration may be given full effect to the exemption notification and it had to be construed to be a workable one. 24. In respect of taxation statutes, the courts have held that the statutes that regulate the assessment of taxation must be construed as mandatory. However, if establishing a uniform system of procedure, to promote dispatch, non-compliance with such payer, the statute should be construed as directory. There are a catena of judgments where different provisions of the Income-tax Act imposing time limit in order to enable an assessee to seek deduction or benefit are interpreted as merely directory and not mandatory. Section 80HHC(4) read with rule 18BBA(3) is treated as directory in the following cases : (1) CIT v. Valli Cotton Traders P. Ltd. [2007] 288 ITR 400 (Mad) ; (2) CIT v. Magnum Export P. Ltd. [2003] 262 ITR 10 (Cal) ; (3) CIT v. Gupta Fabs [2005] 274 ITR 620 (P H) ; (4) Murali Export House v. CIT [1999] 238 ITR 257 (Cal) ; (5) CIT v. G. Krishnan Nair [2003] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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