Society cannot seek retrospective registration by filing amended bye-laws as amended bye-laws operate prospectively: HC

Case details: CIT v. Young Women's Christian Association - [2021] 128 taxmann.com 105 (Madras)

Judiciary and Counsel Details

• • M. Duraiswamy and Mrs. T.V Thamilseelvi, JJ.
  • J. Narayanasamy, Sr. Standing Counsel for the Appellant.
  • G. Baskar, for the Respondent.

Facts of the Case

Assessee applied for registration under Section 12AA with a delay of 5 years and 10 months without any supporting evidence and instrument of formation of the Society and bye-laws. There was no response to the letters issued to assessee for production of the instrument of creation for the Society. Assessee also did not file the instrument of creation of Society reflecting the bye-laws. A letter was sent to assessee seeking the above details and the activities of Trust, donations, donors, etc. Since there was no response inspite of opportunity, an order rejecting the application for registration was passed.
Aggrieved by order of CIT assessee preferred an appeal before ITAT. ITAT remitted the case back to the CIT for re-consideration of the application of registration. On remittance, CIT gave another opportunity to assessee. Assessee filed an instrument of the amendment containing amended bye-laws with retrospective effect. Assessee sought registration with the retrospective effect being the original date of creation of Society by condoning the delay, and ITAT had granted the same.

High Court Held

On further appeal, Madras High Court held that the Hon’ble Supreme Court in the case of CIT v. Kamla Town Trust [1996] 84 Taxman 248 (SC), has held that the rectification brought about by order of the civil court had no retrospective effect and would operate prospectively from the date on which such rectification was effected. Relying on the same, CIT rejected assessee’s case and held that the rectification shall not have retrospective effect and would operate prospectively from the date when the rectification saw the light of the day. However, ITAT erroneously allowed the appeal observing that the order passed by the Hon’ble Supreme Court pertains to a Trust, and the same does not apply to assessee’s case, which is a Society.

Madras High Court held that the finding of ITAT could not be sustained for the reason that ITAT should have only followed the principle laid down by the Hon’ble Supreme Court to the effect that the rectification shall not have retrospective effect and would operate prospectively from the date on which such rectification saw the light of the day. Thus, the rectification or amendments made to the Society’s bye-laws would only operate prospectively while granting registration under Section 12AA of the Income-tax Act.

Cases Review

• • Order of ITAT, Madras in IT Appeal No. 1879 (Chy) of 2009, dated 11-2-2010 (para 9) set aside
  • CIT v. Kamla Town Trust [1996] 84 Taxman 248/217 ITR 699 (SC) (para 9) followed.

List of Cases Referred to

• • CIT v. Kamla Town Trust [1996] 84 Taxman 248/217 ITR 699 (SC) (para 4)
  • CIT v. Vasavi Manikandan Hospital Trust [T.C.A. No. 957 of 2010, dated 24-2-2020] (para 5).