Telangana High Court
Maheswara Educational Society, vs Director Of Income Tax Exemptions on 9 April, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
INCOME TAX TRIBUNAL APPEAL No.90 OF 2008
JUDGMENT:
(per the Hon’ble Sri Justice P.Sam Koshy)
The instant is an appeal under Section 260A of the Income
Tax Act, 1961 (for short ‘the Act’) preferred by the appellant
assailing the order dated 31.10.2007, in ITA. No.270/Hyd/2005,
passed by the Income Tax Appellate Tribunal, Hyderabad Bench ‘A’
Hyderabad (for short, ‘the ITAT’) for the assessment year 2004-05.
2. Heard Mr. C.V.Narasimham, learned counsel for the appellant,
and Mr. A.Ramakrishna Reddy, learned Standing Counsel for Income
Tax Department appearing on behalf of the respondent.
3. Vide the said impugned order, the ITAT has dismissed an
appeal filed by the appellant against the order of Director 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 and running a junior
college in the name of Maheshwara Junior College. Down the line,
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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 12A 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
starting of B.Ed college and this could be noticed only during the
audit that was conducted in July, 2004.
5. Immediately, thereafter steps were taken and an application
was filed seeking for grant of registration under Section 12A of the
Act. The application upon being duly scrutinized by the Director of
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Income Tax (Exemptions), it was noticed that though the appellant
society was formed in the year 1989, the application for registration
under Section 12A of the Act was filed only on 30.08.2004. The
Director of Income Tax (Exemptions) finally vide order dated
25.01.2005 granted registration only from financial year 01.04.2004
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 satisfactorily explain the
reasons for delay in filing of the application for registration under
Section 12A of the Act. It was this order which was subjected to
challenge before the ITAT where it was registered as
ITA. No.270/Hyd/2005. 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 appeal.
6. Perusal of the records would show that the appellant had
initially obtained an exemption under Section 10(23C) (iii ad) of the
Act. The said exemption is applicable only in respect of those
assessees whose income does not exceed Rs.1 crore 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
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registration under Section 12A 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 never 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 such 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 2003-04 and that
the Department if at all was not inclined to grant exemption for
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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 availed 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 appellant. According
to the learned counsel for the appellant, the order of 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 not giving proper
reasons and justification for rejection of the application for
condonation of delay.
9. In support of the aforesaid contentions, the learned counsel for
the appellant placed reliance on the following decisions:
a) Commissioner of Income Tax vs. Bar Council of
Maharashtra 11
(1981) 130 ITR 28
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b) Bar Council of Uttar Pradesh vs. Commissioner of
Income-tax, Lucknow 2
c) Seimens Engineering & Manufacturing Co. of India Ltd.
vs. Union of India and Another 3
d) Woolcombers of India Ltd. vs. Woolcombers Union and
Another 4
e) Commissioner of Income-Tax vs. Village Life
Improvement Foundation 5
f) Shrimanta Shankar Academy vs. Income-Tax Officer 6
g) Commissioner of Income-tax vs. Shrimanta Shankar
Academy 7
h) Commissioner of Income-tax vs. Mahasabha Gurukul
Vidyapeet Haryana 8
10. 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.
2
(1983) 143 ITR 584
3
(1976) 2 Supreme Court Cases 981
4
(1974) 3 Supreme Court Cases 318
5
[2010] 320 ITR 188 (P&H)
6
[2007] 292 ITR (AT) 226 (Gauhati)
7
(2010) 325 ITR 261
8
(2010) 326 ITR 25
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11. According to the learned Standing Counsel for Income Tax
Department, no justifiable reasons have been assigned by the
appellant to show the reasons which prevented them from seeking
registration earlier. According to him, the stand that the appellant
has taken before the Director of Income Tax (Exemptions) and
before the ITAT are in itself in self-contradiction inasmuch as at one
stage they contend that because of the rush of work and ignorance
of the provisions and also not getting proper advice from the
Accountant they could not seek for registration early. On the
contrary, they have now taken a stand that they did not apply
earlier for the reason that their income itself was below Rs.1 crore
and, until and unless the income had crossed Rs.1 crore, they were
not required to seek registration before gross income crossed Rs.1
crore because that itself would disentitle them from claiming for
registration for the previous period and that the authorities on due
consideration have granted the registration from beginning 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 by the ITAT are
strictly in accordance with the provisions of law and does not
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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 12A of
the Act on 30.08.2004; and
e) The gross income of the appellant crossed the Rs.1 crore limit
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.
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14. 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. 15.05.1989. One being,
because of inadvertence of the appellant society’s Accountant and,
second being that the gross income of the appellant 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 on 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 be acceptable or
tenable.
16. Another fact which is glaringly visible is that the appellant had
obtained exemption under Section 10(23C) (iii ad) of the Act from
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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.
17. 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
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(Exemptions) so also the order passed by the ITAT, it clearly reflects
that the appellant has taken contradictory stand justifying the delay.
The appellant, on the one hand, submits that because of the rush of
work on account of frequent expansion of the educational society
they were not able to apply for registration under Section 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 registration under
Section 12A 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-sustainable 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 judgments have all
been decided under an entirely different contextual backdrop and
the principles laid down in those judgments can be distinguished on
its factual basis itself.
18. The instant appeal therefore fails and is accordingly dismissed.
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19. As a sequel, miscellaneous applications pending if any, shall
stand closed. However, there shall be no order as to costs.
_____________
P.SAM KOSHY, J
_________________________
NARSING RAO NANDIKONDA, J
Date: 09.04.2025
GSD
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