Maheswara Educational Society, vs. Director of Income Tax (Exemptions)

| 3447 l IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY, THE NINTH DAY OF APRIL TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA INCOME TAX TRIBUNAL APPEAL NO: 90 OF 2008 lncome Tax Tribunal Appeal Under Section 260A of the Income Tax Act,1961 against the Order dated 31-10-2007 passed in ITA No.270iHydl2005 for the Assessment Year 2004-2OO5 on the file of the lnmme Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad. Between: Maheswara Educational Warangal District. Society,, Maheswaram, Narasampet Mandal, ...Appellant AND Director of Income Tax (Exemptions), Basheerbagh, Hyderabad -500 029. ...Respondent Counsel forthe Appellant: SRI C V NARASIMHAM, ADVOCATE Counsel for the Respondent: SRI A RAMAKRISHNA REDDY, SC FOR INCOME TAX The Court made the following: JUDGMENT

THE HON ,BLE SRI JUSTICE P.SAM KOSHY AND THE HON 'BLE SRI JUSTICE NARSING ON INCOME TAX TRIBUNAL PPEAL No.90 0F 2008 JUDG MENT: ANDIKONDA The instant is an appeal under Section 2604 of the Income Tax Act, 1961 (for short'the Act') preferred Dy the appellant assailing the order dated 31.10.2007, in ITA. llo.27)/Hyd/2005, passed by the Income Tax Appellate Tribunal, Hyrlerabad Bench 'A' Hyderabad (for short, 'the ITAT') for the assessmerlt year 2004-05' 2. Heard Mr. C.V.Narasimham, learned counsel for the appellant, and Mr. A.Ramakrishna Reddy, learned Standing Ccunsel for Income Tax Department appearing on behalf of the responlent. 3. Vide the said impugned order, the ITAT has dismissed an appeal filed by the appellant against the order of [lirector of income Tax (Exemptions), Hyderabad dated 25.01.2005, refusing to grant registration under section 12A of the Act from inception of the appellant's institution and grant registration only prospectively' 4. The facts of the case in brief are that the appellant is an educational society formed in the year 1989 anc running a junior college in the name of Maheshwara Junior college. Down the line, (per the Hon'ble Sn lustice P.Sam Kashy)

PaEe 2 of 72 the appellant applied to All India Council for Technical Education (AICTE) seeking permission for starting an engineering college which was accorded and established in the name of Balaji Institute of Technology and Science with effect from the academic year 2001- 02. After having successfully established two educational institutions, the appellant society further thought of starting a B.Ed college and, accordingly applied to National Council for Technical Education, New Delhi. Upon getting the permission, started an institution for B.Ed in the name of Maheshwara College of Education from the year 2003-04. However, in between the operation of these educational institutions, the appellant society claims to have inadvertently forgotten to seek registration under Section 124 of the Act. According to the appellant, this was not either intentional or deliberate but was only due to inadvertence. It was also the contention of the appellant that the gross receipts of the appellant society suddenly went up and crossed Rs.1 crore after successful stafting of B.Ed college and this could be noticed only during the audit that was aonducted in July, 2004. 5. Immediately, thereafter steps were taken and an application was filed seeking for grant of registration under Section 124 of the Act. The application upon being duly scrutinized by the Director of I ! ll {l ,l * i : I

Page 3 of 12 Income Tax (Exemptions), it was noticed that though the appellant society was formed in the year 1989, the applicati()n for registration under Section 12A of the Act was filed only on 30.08.2004. The Director of Income Tax (Exemptions) finally vlde order dated 25.01.2005 granted registration only from financial year 0t.O4.2004 in which the application was made and did not grant any registration for previous years/ as according to the Director of Income Tax (Exemptions), the appellant could not satisfactrtrily explain the reasons for delay in filing of the application for registration under Section 72A of the Act. It was this order which'ruas subjected to challenge before the ITAT where it was registered as ITA. No.270/Hyd/2OO5. The ITAT also affirming the order passed by the Director of Income Tax (Exemptions) dismissed the appeal of the appellant, leading to filing of the present appea . 6. Perusal of the records would show that tl- e appellant had initially obtained an exemption under Section 10(2.1C) (iii ad) of the Act. The said exemption is applicable only in tespect of those assessees whose income does not exceed Rs.1 crrtre in a year. In the instant case, according to the appellant, they crossed the gross income of Rs.1 crore in the year 2003-04 i.e. after the B.Ed college was established and it was then that the necessity for getting

\]-\ .,_-.1 \ Page 4 of 12 registration under section 124 of the Act was felt and an application was thereafter filed and, which stood allowed from 01.04.2004 only. Whereas, according to the appellant, the exemption ought to have been granted from the date the establishment came into force i.e' 15.05.1989. According to the appellant, the fact that the gross income of the appellant had neve-r crossed Rs.1 crore, it never thought of seeking registration under Section 12A of the Act and, in any case there has been no default as suclr committed by the appellant since they already had an exemption under Section 10(23C) (iii ad) of the Act and admittedly the income of the appellant also for all these periods was less than Rs'1 crore' This being the bona fide and genuine ground of the appellant, the Director of Income Tax (Exemptions) could not have rejected the claim of the appellant for granting registration with effect from the date the appellant society was established. 7. Though the learned counsel for the appellant raised various grounds to assail the impugned order, the primary challenge was non-consideration of the fact that appellant already was enjoying exemption under Section 10(23C) (iii ad) and that the gross receipts of the appellant had never crossed Rs.1 crore till 2OO3-O4 and that the Department if at all was not inclined to grant exemption for

PaBe 5 of 12 whole 14 years period, but definitely could had granted registration w.e.f. 01.04.2003 i.e. the previous financial year during which the gross income of the appellant for the First time crossed the limit of Rs.1 crore so far as exemption that could be avai ed under Section 10(23C) (iii ad) of the Act is concerned. 8. Learned counsel for the appellant further contended that the Director of Income Tax (Exemptions) as also the ITAT ought to have allowed the appeal and condoned the delay considering the bona fide and reasonable grounds explained by the app,eltant. According to the learned counsel for the appellant, the order cf the Director of Income Tax (Exemptions) as also the ITAT does not record any sufficient reasons in not conceding to the request of the appellant for registration from a back date and also in nct giving proper reasons and justification for rejection of the application for condonation of delay. 9. In support of the aforesaid contentions, the rearned counsel for the appellant placed reliance on the following decisions: a) Commissioner of Income Tax vs. Bar Council of Maharashtral '1tsar1 r:o rn za

PaBe 6 of 12 b) Bar Counci! of Uttar Pradesh vs. Commissioner of Income-tax, Lucknow2 c) Seimens Engineering & Manufacturing Co. of India Ltd. vs. Union of India and Another3 d) Woolcombers of India Ltd. vs. Woolcombers Union and Anothera I e) Commissioner of Income-Tax Improvement Foundations vs. Village Life f) Shrimanta Shankar Academy vs. Income-Tax Officer6 g) Commissioner of Income-tax vs. Shrimanta Shankar AcademyT h) Commissioner of Income-tax vs. Mahasabha Guruku! Vidyapeet Haryana8 1O. Per contra, the learned Standing Counsel for Income Tax Department contended that since the application for registration itself for the first time was made on 30.08.2004, the appellant could not had been granted registration with a retrospective effect from 1989 onwards or even from the previous financial year. ' 1r9s:1 tal rtn saa 311976) 2 Supreme Court Cases 981 4 (1974) 3 Supreme Court Cases 318 '5 [2010] 320 rrR 188 (P&H) u lzoor] zgz [a (lr) 226 (Gauhati] '1zoro1 :zs trR zor '(zoro) gzs trn zs

PaEe 7 of 12 11. According to the learned Standing Counsel for Income Tax Department, no justifiable reasons have been ilssigned by the appellant to show the reasons which prevented th,:m from seeking registration earlier. According to him, the stand tlrat the appellant has taken before the Director of Income Tax (t:xemptions) and before the ITAT are in itself in self-contradiction inasmuch as at one stage they contend that because of the rush of wo-k and ignorance of the provisions and also not getting proper advice from the Accountant they could not seek for registratior early. On the contrary, they have now taken a stand that they did not apply earlier for the reason that their income itself was ltelow Rs.1 crore and, until and unless the income had crossed Rs.1 crore, they were not required to seek registration before gross incorne crossed Rs.1 crore because that itself would disentitle them from claiming for registration for the previous period and that the ar-thorities on due consideration have granted the registration from tleginning of the financial year in which the application was made w.e.f. 01.04.2004. 12. According to the learned Standing Counsel for income Tax Department, the two orders i.e. one passed by the Director of Income Tax (Exemptions) and the other passed try the ITAT are strictly in accordance with the provisions of law and does not

- \ -- .l Page 8 of 12 warrant any interference and the present appeal deserves to be dismissed. 13. Having heard the contentions put forth on either side and on perusal of records, some of the admitted factual matrix as is reflected from the proceedings, are that: a) The appellant's society got its registration under the Public Societies Registration Act w.e.f. 15.05.1989; b) Initially the appellant had started with a junior college and, subsequently, expanded and started an engineering college and later also started B.Ed college; c) The appellant from the beginning had sought for an exemption under Section 10(23C) (iii ad) of the Act; d) The appellant had applied for exemption under Section L2A of the Act on 30.08.2004; and e) The gross income of the appellant crossed the Rs.1 crore Iimit as is prescribed under Section 10(23C) (iii ad) of the Act in the financial year 2003-04 and the application for registration was filed by the appellant only in the financial year 2004-05 \

PaBe 9 of 12 L4. From perusal of the pleadings there seems to be only two grounds that the appellant have raised seeking for condonation of delay and for grant of registration w.e.f. 15.05.11)89. One being, because of inadvertence of the appellant society's Accountant and, second belng that the gross income of the appellan: having crossed Rs.1 crore limit only w.e.f. 2003-04, therefore they did not thought it fit for moving a registration application earlier. 15. Both these grounds are self-contradictory in itself. If there would have been an ignorant and bona fide lapse orr the part of the appellant in applying, the second ground would not be available to them. At the same time, if the second ground is to be accepted, then the first ground would become an afterthought and the fact that they had applied only for after their income crossed Rs.1 crore goes to show that they had deliberately not sought for registration earlier because their income was less than Rs.1 crore. This would also amount to having deliberately not applied for registration because their income was less than Rs.1 crore. In that event the first ground of ignorance or inadvertence would not lte acceptable or tenable. 16. Another fact which is glaringly visible is that tle appellant had obtained exemption under Section 10(23C) (iii ad) of the Act from

Page 10 of 12 the beginning which goes to show that they were aware of the statutory requirement, and in spite of that, they did not thought it necessary for seeking registration under Section 12A of the Act. This again would amount to an intentional act in not filing of an application considering the fact that there income was less than Rs.1 crore. Thus, we are of the considered opinion that the findings given by the Director of Income Tax (Exemptions) as also by the ITAT does not seem to be in any manner erroneous or contrary to law. L7. Upon perusal of the factual matrix of the each of the judgments relied upon by the learned counsel for the appellant, and the principles laid down all those cases, one can easily reach to the conclusion that the assessees therein had made application seeking registration under Section 12A of the Act belatedly giving cogent and justifiable reasons in the delay that took place in applying for registration. However, when we look into the facts of the present case, what can be visualized is that in the present case though the appellant has tried to give certain explanation, but what is required to be considered is whether the grounds raised were cogent and strong enough to justify the delay in seeking for registration. As would be seen from the order passed by the Director of Income Tax a

PaBe 11 of 12 (Exemptions) so also the order passed by the ITAT' it clt:arly reflects that the appellant has taken contradictory stand justifyirlg the delay' The appellant, on the one hand' submits that because cf the rush of work on account of frequent expansion of the educational society they were not able to apply for registration under Sectitln 12A of the Act. At the same time, they also try to take a stand that since they had an exemption under Section 10(23C) (iii ad) of the Act' therefore they were not required to seek another regisitration under Section 12-A of the Act and' once when they crossed the limit that was prescribed under section 10(23c) (iii ad) of the Act, they had immediately moved an application' This again is not-sttstainable and acceptable as compared to the first ground giving explanation for the delay; as the two do not match each other and are self- contradictory in itself' Further' the aforesaid judgnrents have all been decided under an entirely different contextual backdrop and the principles laid down in those judgments can be d stinguished on its factual basis itself ' The instant appeal therefore fails and is accordingly dismissed' 18. I

Page 12 of 12 19. As a sequel, miscellaneous applications pending if any, shall stand closed. However, there shall be no order as to costs' SD/- M. VIJAYA BHASKER JOINT REGISTRAR a //TRUE COPY// SECTW OFFICER To, ABK 1. The lncome Tax Appellate Tribunal, Hyderabad Bench 'A" Hyderabad - i. i6" oii""t"r of tncome Tix (Exemptions), Basheerbagh, Hyderabad -500 029. 3. o;; CC to Sri c V Narasimham, Advocate [OPUC] ; o;; cc to sri A Ramakrishna Reddy, SC for lncome Tax [oUT] 5. Two CD CoPies \

HIGH COURT DATED: 0910412025 JUDGMENT ITTA.No.90 of 2008 DISMISSING THE ITTA WITHOUT COSTS 1 0 iEi .ul5 .',:.'',. >7 ? g el \.