THROUGH the judgement of the Income Tax Appeal in the case-The Commissioner of Income Tax-IV, Pune v. Dr Kasliwal Medical Care & Research Foundation, Solapur, delivered on October 21, 2024, Justice G S Kulkarni and Justice Firdosh P Pooniwalla, at the Bombay High Court, have held that the clear position in law is, as has been decided by the Supreme Court in its decision of the case – Harshit Foundation Sehmalpur v. Commissioner of Income Tax-(2022)139 taxmann.com 55(All), that section 12AA(2) of the Income Tax Act, 1961, does not recognise any deeming fiction, that an application for registration is deemed to be granted, if it is not disposed of within six months, as has been held by the Full Bench of the Allahabad High Court in the case-Muzafar Nagar Development Authority-AIR 2015 Allahabad 76, when it had observed that the Parliament has carefully and advisedly not provided for such deeming fiction.

 

This view has been upheld by the Supreme Court in the Harshit Foundation judgement. The appeal in this case was filed by the Revenue under section 260 of the Income Tax Act, 1961, and was directed against an order passed by the Income Tax Appellate Tribunal, Pune Bench on March 28, 2008, whereby the respondent-assessee’s appeal against an order passed on September 15, 2006,by the Commissioner of Income Tax –IV, Pune, under section 12AA read with section 12A of the 1961 Act was allowed. By the impugned order, the Tribunal had held that as the CIT did not pass an order granting or refusing registration of the assessee under section 12A(1) within six months as prescribed under section 12AA(2) of the I-T Act, the assessee is deemed to have been granted a registration. Accordingly, the Tribunal held that the order of the CIT refusing registration was a nullity requiring it to be quashed and set aside.

 

The Assessment Year in question is 2005-06. The appeal came to be admitted on June 6, 2011 on the question of law, as under: “Whether, on the facts and in the circumstances of the case and in law, the ITAT(Tribunal) was justified in granting the assessee, a deemed registration under section 12AA of the Act of 1961, when there is no such specific deeming provision in the I-T Act,1961.” The assessee is a public trust running a hospital at Pune. On February 6, 2006, the assessee had filed an application in Form 10A requesting registration of the assessee under section 12A of the Act. In response, the CIT-IV, Pune passed an order under section 12AA of the Act on September 15, 2006, refusing registration to the assessee. Aggrieved by the said order, the assessee challenged the order before the Tribunal. Through the impugned order, the Tribunal allowed the appeal referring to its an earlier decision in the case of Bhagwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham Trust (2007) 17 SOT 281(SB) (Del.).

 

The premise on which the Tribunal allowed the assessee’s appeal is considering that the date of assessee’s application seeking registration is February 6, 2006 and it was rejected on September 15, 2006, which was beyond the period of six months. On such reasoning, the Tribunal directed the CIT to grant registrartion to the assessee with effect from April 1, 2005, namely, the First day of the Financial Year in which the application was made. This order by the Tribunal was challenged was challenged by the Revenue before the High Court.

 

The HC has pointed out that it is clear from reading of the orders passed by the Supreme Court that the apex court considered the question ‘whether on non-disposal of application for registration under section 12 AA(2) of the Act within six months, will result in deemed grant of registration or not?. Referring to the decision of the Full Bench of the Allahabad HC in the case Muzafar Nagar Development Authority (AIR 2015 All.76), the SC has approved in para 4 of its order that said Full Bench judgement and also the division bench decision holding that, even if in a case, where the registration application under section 12AA(2) is not decided within six months, there shall not be a deemed registration. The SC has expressed complete agreement with the view taken by the HC Full Bench. Through a Bombay HC decision in the case –Purandhar Technical Education Society v. the CIT (Exemption), Pune-(2024)7 Taxmann 421 (Bom.), it has been pointed out that one of the SC decisions in the case –Society for Promotion of Education-(372) ITR 222 (All.), was rendered on an appeal involving a merger of the High Court’s order in the orders passed by the Supreme Court and the subsequent decision being rendered on a special leave petition, and in such context, what would be the legal position. According to the HC, there is much substance in the contention as urged by the Counsel for Revenue that the decision of the Supreme Court in the case of Harshit Foundation would be required to be held as law declared by the Supreme Court under the Constitution, on the interpretation of the interplay between section 12A and section 12AA of the Acton the issue whether sub-section (2) of section 12AA conceives any deemed grant of registration, if the assessee’s application is not decided in six months.

 

This decision considers the applicability and interpretation of the said provisions and records an approval to the view taken by the Allahabad HC Full Bench in the Muzafar Nagar Development Authority decision and as followed by the Division Bench in Harshit Foundation judgement, which had distinguished the applicability of the Supreme Court judgement in the case-Society for Promotion of Education. Considering the reasoned orders passed by the Supreme Court although in dismissing the SLP, applying the principles as laid down in the decision- Kunhayaammed and others v. State of Kerala-(2000)6 SCC 359, it would be required to be held that the Revenue is right in its contention that the judgement in Harshit Foundation case is the law declared by the Supreme Court under Article 141 of the Constitution of India. In result, the High Court has allowed the Revenue’s appeal by answering the question of law in its favour and against the assessee.