Law prescribes that Registration to be granted within six months - what happens if it is not granted?

By Vijay Kumar

SECTION 12AA(1) of the income Tax Act requires the Commissioner to whom an application is made for the registration of a trust or institution to satisfy himself about the genuineness of the activities of the trust or institution as well as about the objects of the trust or institution. The Commissioner is empowered to pass an order in writing either registering an institution or, if he is not satisfied about the objects of the trust or institution and of the genuineness of its activities, to pass an order in writing refusing to register the trust or institution.

Sub-section (2) of Section 12AA requires that every such order granting or refusing permission under clause (b) of sub-section(1) shall be passed before the expiry of six months from the end of the month in which the application was received.

What happens if the Commissioner does not pass any order within six months? Is the registration deemed to be given?

NO, according to a Larger Bench of the Allahabad High Court.

The High Court held:

1. The legislature has not made any provision to the effect that the application for registration should be deemed to have been granted, if it is not disposed of within a period of six months with an order in writing either allowing registration or refusing to grant it.

2. Laying down a consequence that an application would be deemed to be granted upon the expiry of six months can only be by way of a legislative fiction or a deeming definition which the Court, in its interpretative capacity, cannot create.

3. That would be to rewrite the law and to introduce a provision which advisedly the legislature has not adopted.

4. While interpreting the provision, the Court cannot legislate a new provision or introduce a deeming fiction where none has been provided.

5. Parliament has carefully and advisedly not provided for a deeming fiction to the effect that an application for registration would be deemed to have been granted, if it is not disposed of within six months.

6. Significantly, in the present case, Parliament has not legislated a consequence of a failure to decide an application within a period of six months.

Please see 2015-TIOL-546-HC-ALL-IT-LB