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Judgment
The petitioner herein, which is a society registered under the Tamil Nadu Societies Registration Act, 1975 has filed this petition for a writ of
mandamus to the first respondent herein directing it to register the petitioner u/s 12-A of the Income Tax Act.
The factual panorama is as under: The petitioner''s claim is that the petitioner is the Society for religious and charitable purposes. It''s objects are
running of orphanages and institutions to train orphans, widows and unemployed. Besides these charitable objects, there are some religious objects
also such as establishment of Churches and it is claimed that the objects are non-political and non-racial. The Society is said to have been formed
on 31.8.1985 and was registered under the Tamil Nadu Societies Registration Act on 15.11.1985 and it was on 1.10.1986 that the present
application was made u/s 12A of the Income Tax Act for the registration thereunder. It was informed to the Society by the respondent that the
application was belated, but, besides this, it was suggested by the first respondent that the objects of the Society should be amended.
The objection raised by the first respondent seems to be reflected in the communication by the first respondent dated 1.12.1986. The letter
suggests that the memorandum of association/bye-laws should be suitably amended and it is only thereafter, that the application for registration u/s
12A of the Act would be considered. The objections pointed out were that the application for registration was belated; there were clauses in the
Trust Deed/Memorandum of Association/Bye-laws which make the Trust/Society/Association a religious one and hence, not eligible for exemption
u/s 80G of the Act; that there was no clear provision that the funds of the Society would be invested in the modes specified under the provisions of
Section 13(1)(d) read with Section 11(5) of the Income Tax Act. It was also suggested that the Memorandum of Association did not specify the
mode of disbursement of assets of the Society in the event of dissolution. It was also pointed out that the memorandum should clearly state that its
benefits would be open to all irrespective of caste, creed or religion; and the last suggestion made was that there should be a specific clause that
any amendment to the Memorandum would be carried on only with the approval of the Commissioner of Income Tax. In pursuance of this, it
seems that the petitioner made an unsuccessful effort to get his bye-laws amended and ultimately it was intimated to the petitioner by a letter dated
12.12.1988 that the application can be taken up for consideration only after carrying out the suggestions made in the earlier letter. In short, the
application for registration was not granted at this stage. It is by this action that the petitioner is aggrieved and comes before this Court for a
direction as mentioned above.
Learned counsel for the petitioner painstakingly invited my attention to the provisions of Section 12-A of the Income Tax Act and contended
that the suggestions made by the petitioner were all in the nature of considering whether the income of the said Trust would be liable to be
exempted under Sections 11 and 12, and more particularly, Section 80G of the Act. The view taken by the Commissioner, according to the
learned counsel, was that because the Society was of religious nature, such income would not be exempted under those Sections and could not
claim registration u/s 12A. According to the learned counsel, such a view was clearly impermissible considering the language of Section 12A of the
Act.
Learned counsel avers that Section 12A of the Act is only procedural in nature and while considering the application u/s 12A of the Act, the
consideration as to whether the Society is for religious purposes or not etc., would be irrelevant. According to the learned counsel, there were only
two conditions for registration u/s 12A of the Act, they being making an application within time and secondly, the accounts being maintained in a
particular manner and they being audited annually. On the other hand, learned counsel for the Department suggests that the enquiry as to the nature
of the Society would be very much relevant because the very purpose of the grant of registration is to enable the Society to claim exemptions under
Sections 11 and 12 of the Act. If that be so, before the registration is granted, it has to be shown that the petitioner could claim the exemptions u/s
11 and 12 as also Section 80G of the Act.
It will have to be considered therefore, as to whether the Commissioner was right in law in insisting upon the Society to change its bye-laws and
to exclude the religious aspect from the said bye-laws as a pre-condition for grant of registration u/s 12A of the Act. Section 12A of the Act is as
under:
12A. The provisions of Section 11 and Section 12 shall not apply initiation to the income of any trust or institution unless the following conditions
are fulfilled namely:-
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed
manner to the (Chief Commissioner or Commissioner) before the 1st day of July, 1973, or before the expiry of a period of one year from the date
of the creation of the trust or the establishment of the institution, (whichever is later and such trust or institution is registered under. Section 12A):
Provided that were an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of
Sections 11 and 12 shall apply in relation to the income of such trust or institution:-
(i) from the date of the creation of the trust or the establishment of the institution if the Chief Commissioner or Commissioner is, for reasons to be
recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period
aforesaid for sufficient reasons;
(ii) from the 1st day of the financial year in which the application is made, if the Chief Commissioner or Commissioner is not satisfied; (b) where the
total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds
(fifty) thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in
the Explanation below sub-section (2) of Section 288 and the person in receipt of the income furnishes along with the return of income for the
relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such
particulars as may be prescribed.
A cursory glance to the provisions of Section 12A of the Act would show that unless a Society or Trust as the case may be, is registered u/s
12A of the Act, it would not be entitled to claim the benefits under Sections 11 and 12 of the Act. The caption of the Section says ""Conditions as
to the registration of the Trust''. The two conditions which are provided are, firstly, that the person concerned should have made an application for
registration in the prescribed form and in the prescribed manner to the authorities named in that Section before first day of July, 1973 or before the
expiry of the period of one year from the date of creation of the Trust or establishment of the institution. The second condition provides for the
keeping of the accounts in a particular manner and further that such accounts should be audited. The language of the Section does not show that in
order to be able to get registration u/s 12A of the Act, there is necessity of first establishing as to how the concerned institution or as the case may
be the Society would be able to claim the exemptions under Sections 11 or 12 of the Act. There is nothing in the language to suggest that an
institution of a religious nature is precluded from getting registration u/s 12A of the Act. The question of exemptions under Sections 11 and 12 of
the Act or as the case may be u/s 80G of the Act would come only when the said exemptions are claimed by the society at the time when it is
assessed to tax. To consider whether the said Society would be entitled to the benefits under Sections 11 and 12 of the Act or as the case may be
u/s 80G of the Act would be pre-judging the issue before the grant of certificate. At the stage of grant of certificate u/s 12A of the Act, the only
enquiry which could possibly be made would be whether the society has actually made an application in time and whether the accounts of the
society are maintained in the manner as suggested by the said Section. Beyond that, the scope of enquiry would not go in insisting upon the society
in changing or amending its bye-laws and in refusing to consider the application on the ground that those bye-laws have not been changed so as to
exclude the religious aspect from those bye-laws, the Commissioner has clearly over-stepped his limits. The said question came up before the
consideration of the Allahabad High Court in a reported decision in Fifth Generation Education Society Vs. Commissioner Income Tax, , by
Justice B.P. Jeevan Reddy, (as he then was) who has taken a view in the following words:
It is evident that, at this stage, the Commissioner is not to examine the application of income. All that he may examine is whether the application is
made in accordance with the requirements of Section 12A read with rule 17A and whether Form No.10A has been properly filled up. He may
also see whether the objects of the trust are charitable or not. At this stage, it is not proper to examine the application of income.
The precedent applies on all fours to the present case.
In the present case also, there is no question of considering as to how the income of the present society would be applied. The view of the
Commissioner that unless the religious aspect of the society is removed from the bye-laws, the application could not be taken for consideration is
clearly erroneous. Merely because the Society is of a religious nature, it is not disentitled from claiming a certificate u/s 12A of the Act. The
question whether it is entitled to exemptions under Sections 11 and 12 of the Act or as the case may be u/s 80G of the Act would be decided at a
much later stage. The only purpose for which the registration is required is for establishing its identity as an institution for being able to claim the
benefits under Sections 11 and 12 of the Act. Therefore, at this stage of enquiry, the Commissioner could not insist upon the Society to show that
its income was not going to be spent for religious purpose.
In that view of the matter, the petition succeeds. It is seen that the Commissioner has refused to pass an order unless the Society has complied
with the objections. As has already seen the objections raised besides the question of delay relate to the aspect of the religious nature of the
institution or the Society as the case may be. The objections, vide point Nos. 3, 4, 6 and 8 pertain to the religious aspect only. It will not be
necessary for the petitioner to comply with those objections. As for delay, learned standing counsel very fairly stated that the question of delay
would not come in the way of the petitioner. As regards the other objections, which are of technical nature, they may be complied with. In that
view of the matter, it will not be necessary for the petitioner to comply with the objections and or suggestions made by the first respondent as a
pre-condition for consideration of the application. The first respondent is, therefore, directed to pass an order in the light of the objections made
above. The application shall be disposed of within one month from today.
The writ petition shall stand allowed. Rule is made absolute in the terms stated above without any order as to costs.