C/TAXAP/783/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 783 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/ and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Sd/ 1 Whether Reporters of Local Papers may be allowed YES to see judgment ? 2 To be referred to Reporter or not ? YES 3 Whether their Lordships wish to see fair copy NO of judgment ? 4 Whether this case involves substantial question NO of law as to interpretation of Constitution of India or any order made thereunder ? COMMISSIONER OF INCOME TAX (EXEMPTIONS) Versus ADDOR FOUNDATION Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 MR SUDHIR M MEHTA(2058) for Opponent(s) No. 1 MS SHAILEE S MEHTA(5873) for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 04/02/2020 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. This Tax Appeal was ordered to be admitted on following substantial questions of law : Page 1 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT (A) Whether Appellate Tribunal is justified in allowing registration to assessee disregarding fact that assessee trust is not charitable organization, as trust has not fulfilled condition laid down for registration in section 12AA of Income Tax Act, 1961 and Rule 17A of Income Tax Rules, 1962 ? (B) Whether Appellate Tribunal is correct in holding that non-disposal of application for registration by granting or refusing registration before expiry of six months as provided U/s.12AA(2) of I.T.Act, 1961 would result in deemed grant of registration, particularly in view of decision of Allahabad High Court in case of CIT vs Muzafar Nagar Development Authority which has distinguished decision of Hon ble Supreme Court in case of Society for Promotion of Education (2016) in which Supreme Court had not decided this question ? 2. short question that falls for our consideration is, whether Tribunal could have allowed Appeal filed by respondent - assessee on ground of not deciding application for deemed registration filed under Section 12AA of Income Tax Act, 1961 (for short 'the Act, 1961') within stipulated period of time as specified in sub-section (2) of Section 12AA of Act, 1961. 3. brief facts of present case are as under : 3.1 respondent - assessee made online application for registration under Section 12AA of Act, 1961, on Page 2 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT 23.01.2017 in Form No.10A under Rule 11AA of Income Tax Rules, 1961, along with Registration Certificate issued by Charity Commissioner. 3.2 Commissioner of Income Tax (Exemption), Ahmedabad (for short, 'CIT(E)'), by letter dated 05.02.2018, called for details of various activities actually carried out by respondent - assessee. 3.3 CIT(E), after considering details submitted by respondent-Trust, rejected application for registration. 3.4 Being aggrieved by such decision of rejecting application for registration, respondent - Trust preferred appeal before Income Tax Appellate Tribunal. Tribunal took note of fact that while passing order rejecting application for registration, CIT(E) has wrongly mentioned date of receipt of application for registration as 23.01.2018 instead of 23.01.2017. Tribunal, relying on sub-section (2) of Section 12AA of Act, 1961, has held that as application for registration is not decided within period of six months from date of filing, registration is deemed to have been granted. In this regard, Tribunal placed reliance on decision of Supreme Court in case of CIT vs. Society for Promotion of Education, (2016) 238 taxmann 0330 (SC). Accordingly, Tribunal allowed appeal filed by respondent - assessee. 4. Ms.Bhatt, learned counsel appearing for Revenue, submitted that dictum of law as laid down by Supreme Page 3 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT Court in case of Society for Promotion of Education (supra) is of no avail to respondent - assessee in facts and circumstances of present case. It is true that issue raised before Supreme Court in case of Society for Promotion of Education (supra) was quite similar to issue on hand, i.e. with regard to grant of deemed registration of application under Section12AA of Act. However, Supreme Court has decided said issue in favour of assessee and against Revenue only on basis of statement made by learned Additional Solicitor General, keeping all questions of law open. It is, therefore, submitted that on plain reading of sub-section (2) of Section 12AA of Act, 1961, it cannot be said that merely not deciding application by Income Tax Commissioner within stipulated period of six months, deemed registration is to be granted. In such circumstances, referred to above, Ms. Bhatt prays that there being merit in this Appeal, same be allowed. 5. On other hand, this Appeal has been vehemently opposed by Mr.Sudhir Mehta, learned counsel appearing for respondent - assessee. He placed reliance on decision of Kerala High Court in case of Commissioner of Income Tax, Cochin vs. TBI Education Trust, reported in (2018) 96 taxmann.com 356 (Kerala), as well as decision of Rajasthan High Court in case of Commissioner of Income Tax vs. Sahitya Sadawart Samiti jaipur, reported in (2017) 88 taxmann.com 703 (Rajasthan), to submit that identical issue was raised before Kerala High Court as well as Rajasthan High Court, wherein both Courts took similar view that registration is deemed to have been granted automatically Page 4 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT on expiry of period of six months as specified in sub-section (2) of Section 12AA of Act, 1961. 6. With regard to grant of deemed registration, reliance is placed on following decisions : (i) In case of Commissioner of Income Tax, Cochin vs. TBI Education Trust, (2018) 96 taxmann.com 356 (Kerala); (ii) In case of Commissioner of Income Tax vs. Sahitya Sadawart Samiti Jaipur, (2017) 88 taxmann.com 703 (Rajasthan); (iii) In case of Commissioner of Income Tax, Kanpur vs. Society for Promotion of Education, Allahabad, (2016) 67 taxmann.com 264 (SC). 7. Having heard learned counsel appearing for parties and having gone through orders passed by CIT(A) as well as Tribunal, we are of view that in order to adjudicate controversy involved in this Appeal, we must look into provision of Section 12AA of Act, 1961, which reads thus; 12AA. Procedure for registration: (1) Principal Commissioner or Commissioner, on receipt of application for registration of trust or institution made under clause (a) or clause (aa) [or clause (ab)] of sub-section (1) of section 12A, shall Page 5 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT (a) call for such documents or information from trust or institution as he thinks necessary in order to satisfy himself about genuineness of activities of trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about objects of trust or institution and genuineness of its activities, he (i) shall pass order in writing registering trust or institution; (ii) shall, if he is not so satisfied, pass order in writing refusing to register trust or institution, and copy of such order shall be sent to applicant : Provided that no order under sub-clause (ii) shall be passed unless applicant has been given reasonable opportunity of being heard. (1A) All applications, pending before Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before 1st day of June, 1999, shall stand transferred on that day to Principal Commissioner or Commissioner and Principal Commissioner or Commissioner may proceed with such applications under that sub-section from stage at which they were on that day. Page 6 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before expiry of six months from end of month in which application was received under clause (a) or clause (aa) [or clause (ab)] of sub-section (1) of Section 12A. (3) Where trust or institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under Section 12A as it stood before its amendment by Finance (No. 2) Act, 1996 (33 of 1996) and subsequently Principal Commissioner or Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given reasonable opportunity of being heard. (4) Without prejudice to provisions of sub-section (3), where trust or institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under Section 12A [as it stood before its amendment by Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that activities of trust or institution are being carried out in manner that provisions of Sections 11 and 12 do not apply to exclude either whole or any part of income of such trust Page 7 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT or institution due to operation of sub-section (1) of Section 13, then, Principal Commissioner or Commissioner may by order in writing cancel registration of such trust or institution: Provided that registration shall not be cancelled under this sub-section, if trust or institution proves that there was reasonable cause for activities to be carried out in said manner. 8. On perusal of aforesaid provision, more particularly, sub-section (2) thereof provides time limit for deciding application filed for registration by any trust. Sub-section (2) further provides that every order, granting or refusing registration under clause (b) of sub-section (1) shall be passed before expiry of six months from end of month in which application was received under clause (a) or clause (aa) [or clause (ab)] of sub-section (1) of Section 12A. Thus, Section 12AA provides for procedure for registration of application filed under Section 12AA of Act. 9. decision of Division Bench of Allahabad High Court in case of Society for Promotion of Education (supra) is of no avail to case on hand as correctness of said decision was questioned before Full Bench of Allahabad High Court in case of CIT vs. Muzafar Nagar Development Authority, 372 ITR 209. Full Bench of Allahabad High Court relying on decisions of Madras High Court in case of Commissioner of Income-tax-I Salem vs. Sheela Christian Charitable Trust, (2013) 214 Taxman 551 and CIT vs. Page 8 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT Karimangalam Annya Pangal Semipu Amaipur Ltd., (2013) 354 ITR 483 (Mad) has held as under : mere fact that in sub-section (1) of Section 12AA, legislature has used expression 'may' while providing that Commissioner may make such inquiry as he may deem necessary to satisfy himself about genuineness of activities of trust or institution, is not by itself reason enough to hold that use of expression 'shall' in sub-section(2) must, as necessary consequence or corollary, be regarded as mandatory in nature. In Ganesh Prasad Sah Kesari and another vs. Lakshmi Narayan Gupta5, Supreme Court held as follows : Obviously where legislature uses two words 'may' and 'shall' in two different parts of same provision prima facie it would appear that legislature manifested its intention to make one part directory and another mandatory. But that by itself is not decisive. power of court still to ascertain real intention of Legislature by carefully examining scope of statute to find out whether provision is directory or mandatory remains unimpaired even where both words are used in same provision. In Govindlal Chagganlal Patel v. Agricultural Produce Market Committee Godhra (1976) 1 SCR 451: (AIR 1976 SC 263) Chandrachud, C.J., speaking for Court approved following passage in Crawford on 'Statutory Construction' (Ed. 1940 Art. 261, p. 516): Page 9 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT question as to whether statute is mandatory or directory depends upon intent of legislature and not upon language in which intent is clothed. meaning and intention of legislature must govern, and these are to be ascertained, not only from phraseology of provision, but also while considering its nature, its design and consequences which would follow from construing it one way or other. Applying this well-recognised canon of construction conclusion is inescapable that word 'shall' used in provision is directory and not mandatory and must be read as 'may'. In that case, Supreme Court was construing provisions of Section 11A of Bihar Buildings (Lease, Rent and Eviction) Control Act 1947 relating to deposit of rent by tenant in suit for ejectment. Supreme Court observed that expression 'shall' must be construed as being directory and not mandatory having due regard to legislative intent. We are unable to accept line of reasoning which weighed with Division Bench of this Court in Society for Promotion of Education Adventure Sport & Conservation of Environment (supra). Division Bench, in holding that Page 10 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT consequence of non-consideration of application for registration within time fixed by Section 12AA(2), would be deemed grant of registration, placed reliance on following considerations: (i) Unlike decision of Supreme Court in Chet Ram Vashist (supra) which dealt with sanctioning of lay-out plan where element of public interest is involved, no such public element or public interest is involved and reading breach of Section 12AA(2) as leading to deemed grant of registration may, "at worst", cause some loss of revenue to department; (ii) On other hand, taking contrary view and, if deemed grant of registration is not read into statute, assessee would be left at mercy of income tax authorities since no remedy has been provided in Act against failure to decide; (iii) irreversible situation is not created by grant of deemed registration because it is always open to revenue to cancel registration under sub-section (3) of Section 12AA prospectively. only adverse consequence is loss of revenue if deemed registration is cancelled subsequently with prospective effect; and (iv) purposive interpretation of statute should be adopted. Page 11 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT We are not inclined to accept this line of reasoning which has found favour with Division Bench. For one thing, it would be inappropriate for Court to accept, as first principle of law, proposition that there is no public element involved in collection of revenue as legislated upon by Parliament or by State Legislature. Proper collection of revenues of State is matter of public interest since public revenues are utilized for public purposes. But such general considerations cannot override duty of Court to give plain meaning and effect to language used in taxing statute. duty of Court first and foremost is to construe words of taxing statute in question as they stand and intention of legislature has to be construed with reference to language of words used. While interpreting provision, Court cannot legislate new provision or introduce deeming fiction where none has been provided. Similarly, even as matter of first principle, casus omissus cannot be supplied by Court unless there is case of clear necessity and when reason is found within statute itself (Padmasundara Rao (Dead) and others vs. State of T.N. and others, Union of India vs. Rajiv Kumar and Unique Butyle Tube Industries (P) Ltd. vs. U.P. Financial Corporation and others) similar view to that of Division Bench was adopted in judgement of Delhi Bench of Income Tax Appellate Tribunal in Bhgwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham Trust vs. Commissioner of Income-tax, Dehradun. Tribunal, as indeed Division Bench of this Court, in earlier decision, observed that on Page 12 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT balance and though questions presented some difficulty, it was inclined to take view supporting plea of deemed registration, otherwise assessee would be left without remedy. assessee, in our view, is not without remedy since delay on part of Commissioner to consider application can be remedied by recourse to jurisdiction under Article 226 of Constitution. If Commissioner has delayed in passing order on application for registration under Section 12AA, recourse to remedy under Article 226 is always available to order expeditious decision thereon. considerable amount of reliance was placed on behalf of assessee in present case on judgement of Supreme Court in Commissioner of Income-Tax vs. Ajanta Electricals. In that case, Supreme Court construed provisions of Section 139(2) of Act prior to its deletion with effect from 1989. proviso to Section 139(2) conferred discretion on Income Tax Officer to extend date for furnishing of return. revenue had relied upon judgement of Andhra Pradesh High Court in which it had been held that there was no provision in Act or Rules requiring Income Tax Officer to pass order on application filed by assessee subsequent to time given to him for filing his return pursuant to notice under sub-section (2) of Section 139. Supreme Court held that merely because specific provision was absent for authorising Income Tax Officer to entertain application made beyond time, it was not proper to hold that it was not open to assessee to make application under Section Page 13 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT 139(2) for extension of time, after time allowed had expired. In consequence, Supreme Court held that application made by assessee under Section 139(2) for extension of time after expiry of time allowed was maintainable and therefore valid. That was point which was decided by Supreme Court. This decision would be of no assistance to assessee. We may also note at this stage, that provisions of sub-section (2) of Section 12AA of Act have been construed in judgment of Division Bench of Madras High Court in Commissioner of Income-tax-I Salem vs. Sheela Christian Charitable Trust. Division Bench in that case has held that Tribunal was not right in holding that failure to pass order in application under Section 12AA within stipulated period of six months would automatically result in granting registration to trust. same view has been reiterated by Division Bench of Madras High Court in Commissioner of Income-tax vs. Karimangalam Onriya Pengal Semipu Amaipu Ltd.. There can be no dispute about basic principle of law that where legal fiction has been created, it must be given full force and effect. As Lord Asquith,J observed in East End Dwellings Co. Ltd. vs. Finsbury Borough Council, "where statute says that you must imagine certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to inevitable corollaries of that state of affairs". point, Page 14 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT however, in this matter is that Section 12AA(2) does not provide for legal fiction at all. Parliament has carefully and advisedly not provided for deeming fiction to effect that application for registration would be deemed to have been granted, if it is not disposed of within six months. Legislative fictions are what they purport to be : acts of legislating body. Court cannot create one, where legislature has not provided deeming fiction. In Bhavnagar University vs. Palitana Sugar Mill (P) Ltd. and others, Apex Court held as follows: We are not oblivious of law that when public functionary is required to do certain thing within specified time, same is ordinarily directory but it is equally when settled that when consequence for inaction on part of statutory authorities within such specified time is expressly provided, it must be held to be imperative. Significantly, in present case, Parliament has not legislated consequence of failure to decide application within period of six months. In circumstances, we answer questions referred to Full Bench for reference in following terms: (i) Non disposal of application for registration, by granting or refusing registration, before expiry of Page 15 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT six months as provided under Section 12AA (2) of Income Tax Act 1961 would not result in deemed grant of registration; and (ii) judgment of Division Bench of this Court in Society for Promotion of Education Adventure Sport & Conservation of Environment (supra) does not lay down correct position of law. reference is, accordingly, answered. appeal shall now be placed before regular bench in accordance with roster for final disposal in terms of questions so answered. 10. principles discernible from above referred Full Bench decision of Allahabad High Court may be summarised thus : (1) court should first construe words of taxing statute as they stand and intention of legislature should be construed with reference to language of words used. (2) court, while interpreting provision, should not legislate new provision or introduce deeming fiction where none has been provided. (3) casus omissus cannot be supplied by court unless there is case of clear necessity and when reason is Page 16 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT found within statute itself. If statutory mandate as laid in Section 12AA of Act is flouted, then assessee cannot be said to be without remedy. delay on part of Commissioner to consider application can be remedied by recourse to jurisdiction under Article 226 of Constitution of India. (4) Section 12AA(2) of Act does not provide for legal fiction. Parliament has carefully and advisably not provided for deeming fiction to effect that application for registration would be deemed to have been granted, if it is not disposed of within six months. (5) non-disposal of application for registration by granting or refusing registration before expiry of six months as provided under Section 12AA(2) of Act would not result in deemed grant of registration. 11. Mr.Mehta, learned counsel appearing for respondent, would submit that although legislature has thought fit not to incorporate word 'deemed' in Section 12AA(2) of Act, yet having regard to language and intention, it can be said that legal fiction has been created. As such, it is not necessary for us to deal with such submission canvassed by Mr.Mehta on behalf of respondent. However, as this is principal argument of Mr.Mehta, we propose to answer same. We, for purpose of answering submission of Mr.Mehta, proceed on footing that legislature has used word 'deemed' in Section 12AA(2) of Act. Whether that by itself would make any difference or whether Page 17 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT that by itself would create legal fiction having regard to provision of law we are dealing with. 12. word 'deemed' is used in various senses. Sometimes, it means 'generally regarded'. At other time, it signifies 'taken prima facie to be', while in other case, it means, 'taken conclusively'. Its various meanings are, - 'to deem' is 'to hold in belief, estimation or opinion'; to judge; adjudge; decide; considered to be; to have or to be of opinion; to esteem; to suppose, to think, decide or believe on considerations; to account, to regard; to adjudge or decide; to conclude upon consideration. (see Major Law Lexicon by P.Ramanatha Aiyar, 4th Edition 2010 Vol.2) 13. deeming fiction is supposition of law that thing is true without inquiring whether it be so or not, that it may have effect of truth so far as it is consistent with justice. deeming provision is made to include what is obvious or what is uncertain or to impose, for purpose of statute, ordinary construction of word or phrase that would not otherwise prevail but, in each case, it would be separate question as to that what object Legislature has made on such deeming fiction. 14. Ruth Sullivan (Sullivan on Construction of Statutes, 5 th ed.) classifies deeming rules into four broad categories according to their purpose : (1) To create legal fiction by declaring that something exists or has occurred regardless of truth of matter; Page 18 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT (2) To declare law; (3) To create legal presumption by declaring that certain facts are to be taken as established; and (4) To confer discretion. 15. In Consolidated Coffee Ltd. v. Coffee Board, Bangalore, reported in AIR 1980 SC 1468, purpose of word 'deemed' occurring in Section 5(3) of Central Sales Tax Act, 1956, came for consideration. issue that emanated was whether legal fiction had been created by use of word 'deemed'. It is fruitful to reproduce what has been exposited by Their Lordships: deeming provision might be made to include what is obvious or what is uncertain or to impose for purpose of statute artificial construction of word or phrase that would not otherwise prevail, but in each case it would be question as to with what object legislature has made such deeming provision. In St. Aubyn and Ors. v/s. Attorney General, 1952 A.C. 15 at p.53 Lord Radcliffe observed thus: word 'deemed' is used great deal in modern legislation. Sometimes it is used to impose for purposes of statute artificial construction of word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt particular construction that might otherwise be uncertain. Page 19 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT Sometimes it is used to give comprehensive description that includes what is obvious, what is uncertain and what is, in ordinary sense, impossible. 16. In State of Tamil Nadu v. M/s. Arooran Sugars Ltd., reported in AIR 1997 SC 1815, Constitution Bench, while dealing with deeming provision in statute, opined that role of provision in statute creating legal fiction is well settled. Their Lordships referred to decisions in East End Dwellings Co. Ltd. v. Finsbury Borough Council, 1952 AC 109, Chief Inspector of Mines v. Karam Chand Thapar, AIR 1961 SC 838, J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India, AIR 1988 SC 191, M.Venugopal v. Divisional Manager, Life Insurance Corporation of India, AIR 1994 SC 1343 and Harish Tandon v. Addl. District Magistrate, Allahabad, AIR 1995 SC 676, and came to hold that when statute creates legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, Court has to examine and ascertain as to for what purpose and between which persons such statutory fiction is to be resorted to and thereafter courts have to give full effect : 6. It is well known principle of construction that in interpreting provision creating legal fiction, Court is to ascertain for what purpose fiction is created, and after ascertaining this, Court is to assume all those facts and consequences which are incidental or inevitable corollaries to giving effect to fiction. But in so construing fiction it is not to be extended beyond purpose for which it is Page 20 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT created, or beyond language of Section by which it is created.... 17. From aforesaid pronouncements, principle discernible is that, it is bounden duty of court to ascertain for what purpose legal fiction has been created. It is also duty of Court to imagine fiction with all real consequences and instances unless prohibited from doing so. That apart, use of term deemed has to be read in its context and further fullest logical purpose and import are to be understood. It is because in modern legislation, term deemed has been used for manifold purposes. object of Legislature has to be kept in mind. (See Andaleeb Sehgal v. Union of India and another, AIR 2011 Delhi 29 (FB)) 18. In Lt. Col. Prithi Pal Singh Bedi v. Union of India and Ors., reported in AIR 1982 SC 1413, Supreme Court has expressed view as follows: dominant purpose in construing statute is to ascertain intention of Parliament. One of well recognised canons of construction is that legislature speaks its mind by use of correct expression and unless there is any ambiguity in language of provision Court should adopt literal construction if it does not lead to absurdity. first question to be posed is whether there is any ambiguity in language used in Rule 40. If there is none, it would mean language used speaks mind of Parliament and there is no need to look somewhere else to discover intention or meaning. If literal construction Page 21 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT leads to absurdity, external aids to construction can be resorted to. To ascertain literal meaning it is equally necessary first to ascertain juxtaposition in which rule is placed, purpose for which it is enacted and object which it is required to subserve and authority by which rule is framed. This necessitates examination of broad features of Act. 19. In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and others, reported in AIR 1987 SC 1023, Their Lordships have ruled thus: Interpretation must depend on text and context. They are bases of interpretation. One may well say if text is texture, context is what gives colour. Neither can be ignored. Both are important. That interpretation is best which makes textual interpretation match contextual. statute is best interpreted when we know why it was enacted. With this knowledge, statute must be read, first as whole and then section by section, clause by clause, phrase by phrase and word by word. If statute is looked at, in context of its enactment, with glasses of statute- maker, provided by such context, its scheme, sections, clauses, phrases and words may take colour and appear different than when statute is looked at without glasses provided by context. With these glasses we must look at Act as whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into scheme of entire Act. No part of statute and no word of statute can Page 22 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT be construed in isolation. Statutes have to be construed so that every word has place and everything is in its place... 20. Supreme Court in Kalidas Umedram and others v. State of Gujarat and another, (1996)7 SCC 635, took view that deemed provision would not be free licence to make use of same defeating object with which such provision is made. Supreme Court made following observations as under : It is true that proviso envisages deemed permission if Collector does not grant permission within three months from date of receipt of application excluding time as specified taken thereunder. But condition is that land should be used for raising commercial crops but not for industrial purposes or for building purposes. Deemed permission would not be free licence to use land for any other purpose defeating object of grant. public policy behind grant is to augment agricultural production so as to enable tiller of soil economic empowerment and social and economic justice assured in Preamble to Constitution of India and Articles 38 and 46 to minimise inequalities in income and status. State distributes under Article 39(b), its material resources to subserve said purpose. Having obtained grant or permission, grantee-appellants cannot convert land into non-agricultural use as well as for building houses. sale of government land for nominal amount was for avowed constitutional purposes. After conversion, sale of lands for building purposes would be windfall. Page 23 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT Obviously, public purpose of grant and constitutional goals would be defeated by this method of circumvention. Government, therefore, is justified in cancelling grant. Under above circumstances, Government was entitled to revoke grant in respect of entire extent of land. 21. In Mansingbhai Kahalsingbhai v. Surat Municipal Corporation, AIR 2001 Guj. 44, issue before Division Bench of this Court was, whether construction work carried out by petitioners of that case was in accordance with law or not. In said case also, it was pleaded that application for permission to construct was submitted on 7th August 1999 and since there was no communication in that regard within period of one month, application can be said to have been granted by deeming fiction. In said background, Bench made following observations : Thus even after period of one month as stated by petitioner is over, it is necessary that unless and until notice is given to City Engineer, proposed date of commencement to erect new building, petitioners could not have commenced construction work. Section 263 and Rule 3 of Chapter XII refers to deeming provision. Reading aforesaid provision assuming that deeming provision is applicable for construction which is otherwise legal even then one has to give notice of commencement of work and only thereafter work of erection of building can be commenced. After completion of building within one month thereafter notice is required to be given in writing of Page 24 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT completion accompanied by certificate. Law also prohibits occupying building in absence of any permit or occupation certificate issued to use building. In instant case, there is flagrant violation of these provisions. No notice has been given and yet we find that persons have occupied building. This speaks volume about intention of petitioners. Court while exercising jurisdiction under Article 226 of Constitution of India has to bear in mind that persons who are coming to Court with clean hands and those who have acted in accordance with law are required to be assisted and not persons who are committing breach of provisions of law. Thus, it goes without saying that deemed permission means that person is erecting building after expiry of period mentioned in Rule 3 strictly in accordance with Rules, bye-laws etc. It is required to be emphasised here that when person moves Commissioner for permission of erection of building, person concerned knows Rules and Regulations and Bye-laws with regard to Building Regulations. It is for him to carry out construction as per Building Regulations and Bye-laws and particularly keeping in mind FSI. person who constructs building as per Rules and Regulations can say that he has constructed building as per requirement of law but not otherwise. deemed permission can be said to have been attracted in case where person has carried out construction in accordance with existing Rules, Bye-laws and Building Regulations and not otherwise. It is required to be noted that likewise case of Page 25 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT Calcutta Municipal Corporation before Apex Court, Rule 3 of Chapter XII of Appendix IV of Act provides that if within 30 days there is no disapproval, subject to Rules one may commence work of erection of building but not so as to contravene any provisions of Act or any Rule or bye-laws. Under Act before commencement, notice is required to be given as contemplated in Chapter XII of Appendix IV. In our opinion, therefore, one has to submit plan for erection of building keeping in mind all Building Regulations and if any one constructs contrary to that, same being illegal must be demolished. suggestion made by petitioners that whatever type of plan is submitted and for which no intimation is given within thirty days then person is deemed to have been granted permission has no merit. If such view is taken, it will be for benefit of wrong doers only who will carry out construction and will transfer building/flats and innocent purchasers would be in difficulty. Under circumstances, if one constructs building in contravention of Rules and Regulations and Bye-Laws then he is wrong doer and even if permission is not granted because of connivance or negligence of Officer, shelter of deeming provision cannot be made available to him. Learned single Judge was justified in arriving at conclusion that deemed permission cannot be inconsistent with Rules and Regulations and no deemed permission can be against relevant Rules and Regulations. 22. We are in complete agreement with view taken by Full Bench of Allahabad High Court in view of fact that Page 26 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 C/TAXAP/783/2019 JUDGMENT Supreme Court, in case of Society for Promotion of Education (supra), has not laid down any ratio with regard to questions raised before us, and on contrary, kept questions of law open to be considered. 23. In that view of matter, we find it difficult to subscribe to views expressed by Kerala High Court in case of TBI Education Trust (supra), wherein court has relied upon decision of Supreme Court in case of Kunhayammed v. State of Kerala, 245 ITR 360 (SC). Supreme Court decision does not lay down any principle of law. In such circumstances, deemed registration cannot be granted on ground that application filed by Trust under Section 12AA is not decided, for any good reason, within period of six months from date of filing. 24. In result, Appeal is allowed. impugned order passed by Tribunal is hereby quashed and set aside and matter is remitted to Tribunal for purpose of deciding same on merits after giving opportunity of hearing to respondent - assessee. We answer questions in favour of Revenue and against assessee. (J. B. PARDIWALA, J.) (BHARGAV D. KARIA, J.) VAHID MOINUDDIN Page 27 of 27 Downloaded on : Tue Apr 21 09:23:24 IST 2020 Commissioner of Income-tax (Exemptions) v. Addor Foundation