No Deemed Registration u/s 12AB for 6-Month Delay in Passing Refusal Order: Bombay HC [Read Order]
The case arose after an assessee argued that a six-month delay in passing a refusal order should result in an automatic or deemed grant of registration for tax exemption purposes under Section 12AB of Income Tax Act, reinforcing the importance of explicit legislative provisions
No Deemed Registration – 6 – Month Delay – Passing Refusal Order – Bombay HC – taxscan
No Deemed Registration – 6 – Month Delay – Passing Refusal Order – Bombay HC – taxscan
In a significant ruling, the Bombay High Court has clarified that charitable organisations cannot assume deemed registration under Section 12AB of the Income Tax Act, 1961, even if there is a substantial delay in the issuance of the registration order by tax authorities.
By the impugned order, the Tribunal has held that as the CIT did not pass an order granting or refusing registration of the assessee under Section 12A(1) within a period of six months as prescribed under Section 12AA(2) of the I.T. Act, the assessee is deemed to have been granted a registration. The Tribunal had accordingly held that the order of CIT refusing registration was a nullity requiring it to be quashed and set aside.
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By an order dated 6 June, 2011, the present appeal came to be admitted on the following question of law as to “Whether on the facts and in the circumstances of the case and in law, the ITAT is justified in granting the assessee a deemed registration under section 12AA of I.T. Act, 1961, when there is no such specific deeming provision in the I.T. Act, 1961”?
One key argument presented by the petitioner was that since the Commissioner of Income Tax (CIT) failed to pass an order within the prescribed six-month period under Section 12AB, the trust should be granted deemed registration. This argument was built on the fact that under certain provisions of the Income Tax Act of the Income Tax Act, failure to act within a prescribed time leads to automatic or deemed outcomes.
Section 12AB of the Income Tax Act governs the registration process for trusts and other charitable institutions seeking tax exemptions. It replaces the earlier Section 12AA of the Income Tax Act, with stricter procedural requirements aimed at ensuring that only eligible institutions benefit from tax exemptions.
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However, the Bombay High Court Bench of Justice Firdosh P Pooniwalla and Justice G S Kulkarni rejected this plea, ruling that the law does not provide any scope for deemed registration under Section 12AB of the Income Tax Act, even in the case of a significant delay in processing the application.
The court emphasised that unless the law explicitly states a provision for deemed registration, the courts cannot assume such an outcome.
The ruling also noted the absence of an express “deeming” provision in the law meant that charitable institutions must wait for an actual order, and delays by the tax department do not grant any automatic rights.
The ruling is expected to have a wide impact on charitable organisations, many of which rely on timely registration for their operations to be tax-exempt.
Organisations seeking tax-exempt status should now be mindful that delays from tax authorities will not translate into deemed registrations, and the procedural framework under the Income Tax Act must be strictly adhered to.
To Read the full text of the Order CLICK HERE
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