DEEMED REGISTRATION OF TRUST U/S 12AA OF INCOME TAX ACT - IF APPLICATION NOT DISPOSED OF WITHIN 6 MONTHS: SUPREME COURT

CIT v. Society for the Promotion of Education, Adventure Sport & Conservation of Environment (Supreme Court)

“Section 12AA of the Income Tax Act, 1961: Non disposal of an application for registration before the expiry of six months as provided u/s 12AA (2) results in deemed grant of registration”

In Society for the Promotion of Education, Adventure Sport & Conservation of Environment vs. Commissioner of Income Tax (2008) 216 CTR (All) 167, the Allahabad High Court held that non disposal of an application for registration before the expiry of six months as provided u/s 12AA (2) Income Tax Act, 1961 would result in deemed grant of registration. However, this was reversed by the Full Bench of the Allahabad High Court in CIT vs. Muzafar Nagar Development Authority (2015) 372 ITR 209.

Thereafter the Department filed an appeal against the above verdict before the Supreme Court.

Supreme Court disposed of the Appeal and HELD that:

(i) The short issue is with regard to the deemed registration of an application under Section 12AA of the Income Tax Act, 1961. The High Court has taken the view that once an application is made under the said provisions and in case the same is not responded within six months, it would be taken that the applicant is registered under the provisions;

(ii) The learned Additional Solicitor General appearing for the appellants, has raised an apprehension that in the case of the respondent, since the date of application was of Feb 24, 2003, at the worst, the same would operate only after six months from the date of the application;

(iii) SC perceives 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, SC made 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 August 24, 2003;

(iv) Subject to the above clarification and leaving all other questions of law open, the appeal is disposed off with no order as to costs.

NOTE : Though the Supreme Court left “all other questions of law open”, the impact of the verdict is that the law laid down in Society for the Promotion of Education, Adventure Sport & Conservation of Environment vs. Commissioner of Income Tax (2008) 216 CTR (All) 167 that there is a deemed registration after six months of the application and the law laid down by the Full Bench in CIT vs. Muzafar Nagar Development Authority (2015) 372 ITR 209 is no longer good law.

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