Holding

Registration under Section 12A of the Income Tax Act is a condition precedent for claiming exemption under Section 11(1)(a), and the corporation, not being registered, is not entitled to the exemption.

Summary

The U.P. Forest Corporation sought exemption from income tax on the ground that it was a charitable institution under Section 11(1)(a) of the Income Tax Act, 1961. The corporation had not obtained registration under Section 12A, which is a prerequisite for invoking the charitable exemption. The Supreme Court held that without such registration the corporation could not claim the benefit of Section 11(1)(a) or Section 12. Consequently, the Court dismissed the corporation's appeals and, by extension, the revenue's appeals. The Court directed the Income Tax Appellate Tribunal to decide the pending registration application on a priority basis and held that the High Court's order remanding the main assessment would remain in abeyance until the registration issue is finally resolved.

Issues considered

Whether the U.P. Forest Corporation is entitled to exemption under Section 11(1)(a) of the Income Tax Act as a charitable institution without registration under Section 12A.
Whether registration under Section 12A is a condition precedent for claiming exemption under Section 11(1)(a).
Whether the High Court should have remanded the matter to the assessing authority or the tribunal for consideration of the registration application.

Legislation cited

General Clauses Act, 1897s. 3(31)
Income Tax Act, 1961s. 11(1)(a), s. 12, s. 12A

Subjects

charitable institutionincome tax exemptionSection 12A registrationlocal authorityU.P. Forest Corporationtax assessmenttribunalHigh Court remand

Judgment

'

J

U.P. FOREST CORPORATION AND ANR. A
v.
DY. COMMISSIONER OF INCOME TAX, LUCK.NOW

NOVEMBER 27, 2007
B
[ASHOK BHAN AND ALT AMAS KABIR, JJ.)

Income Tax Act, 1961: ss.11 (J)(a), 12 and J2A-Assessment of
income-Application for registration under s. l 2A pending before
Tribunal-Claim for exemption under s.11(1) (a) on the ground that C
assessee is charitable institution-Assessing Authority holding that it
is not charitable institution-Challenge against-Held: For claiming
benefit under s. 11 (l)(a), registration under s. l 2A is must-Assessee
not registered under s. l 2A hence not entitled to exemption under s.
11 (l)(a)-Tribunal before whom application for registration pending D
to take up matter on priority basis and decide same expeditiously-
Order of High Court remanding the matter in respect of main
assessment shall remain in abeyance till matter regarding registration
is decidedfinally by Tribunal.
E
In the instant appeals, the question for consideration was: Whether
the assessee-U.P. Forest Corporation was entitled to benefit of
exemption unders. ll(l)(a) of the Income Tax Act, 1961, claiming itself
as a charitable institution?
F
Dismissing the appeals of assessee-Corporation as also of
Revenue, the Court
HELD: 1.1. For claiming benefit under s. ll(l)(a) of the Income
Tax Act, 1961, registration under s.12A is a condition precedent. S.11
provides for exemption of income which is applied for charitable G
purposes. S.12 is in the nature of an explanation ofs.11. S.12A provides
that provisions of ss.11 and 12 shall not apply in relation to income of
any trust or institution unless certain conditions are satisfied. Unless
601 H
(

602 SUPREME COURT REPORTS [2007] 12 S.C.R.

A and until an institution is registered under s. 12A of the Act, it cannot
claim benefit of s. 11(1 )(a) of the Act. Keeping in view the factthat the
appellant-Corporation has not been granted registration under s.12A
of the Act, it is not entitled to claim exemption from payment of tax under
ss. 11(1 )(a) and 12 of the Act. [Paras 11 and 12) [606-B, C; 607-A, BJ
B
Commissioner ofIncome-tax, Lucknowv. UP. Forest Corporation,
[1998) 3 SCC 530 and Valjibhai Muljibhai Soneji v. State a/Bombay (now
Gujarat), [1964) 3 SCR 686, referred to.
1.2. However, in order to protect the interest of the assessee as
C well as the Revenue, the Tribunal before whom the appeals are pending
against the order passed by the Commissioner rejecting the application
filed unders.12A of the Act, would take up the matter on priority basis
and decide the same as expeditiously as possible without being
influenced by any of the findings recorded by the High Court in the
D impugned order. Till then, the order of the High Court remanding the
matter in respect of main assessment shall remain in abeyance. In the
event the matter is finally decided in favour of the assessee-Corporation,
it would be at liberty to get these appeals revived for a decision on
merits. In case these appeals are re-opened at the instance of the
E assessee, the appeals filed by the Revenue shall also get revived
automatically for decision on merits. All questions are left open.
[Para 14, 15and16) (607-D, E, F, G)
CIVIL APPELLATE .nJRISDICTION: Civil Appeal No. 9432 of
F 2003.
From the Judgment and final Order dated 26.11.2002 of the High
Court of Judicature at Allahabad in Income Tax Appeal No. 3 of2000.
WITH
G C.A. Nos. 9433, 9435-9437 of 2003 & 5552 of 2007.
Anil Divan, A.K. Ganguli and Sunil Gupta, Jatin Zaveri, Prantap
Kalra, R.B. Shukla, Ranvir, Rachana Srivastava and Noorullah for the
Appellants.
H Mohan Parasaran, ASG, Dr. R.G. Padia and R.K. Shukla, K.K.
U.P. FOREST CORPORATION v. DY. COMMISSIONER 603
OF INCOME TAX, LUCKNOW [BHAN, J.]
Senthivelan and Anjani Aiyagari (for B.V. Balaram Das) for the A
Respondent.
The Judgment of the Court was delivered by
ASHOK BHAN, J. 1. Leave granted in S.L.P. (C) No. 7476 of
2006. B
2. The U.P. Forest Corporation (for short, 'the Corporation'), the
appellant no.l in Civil Appeal Nos. 9432; 9333; 9435 and 9436 of2003,
was constituted by a Notification issued under Section 3 of the U.P. Forest
Corporation Act, 1974. In the year 1977, the Income-tax authorities C
issued a notice to the Corporation of file its return of income for the
assessment year 1976-77 under the Income-tax Act, 1961 (for short, 'the
Act'). The Corporation challenged the said notice by filing Writ Petition
No. 1568 of 1977 which was disposed of by the High Court by holding
that the Corporation was a local authority under Section 10(20) of the D
Act and was entitled to claim exemption. Since the said order was not
challenged by the Revenue, the same became final and remained in force
till a contrmy view was taken by this Court in respect of Assessment Years
1977-78, 1980-81 and 1984-85 in the case of Commissioner of Income
tax, Lucknow v. UP. Forest Corporation, reported in [1998] 3 SCC E
530.
3. For the Assessment Year 1977-78, the Corporation's income was
asssed by making some additions of income and deleting some deductions
claimed in the return of income. On an appeal being filed, the
Commissioner (Appeals) upheld that the Corporation was exempt from F
paying tax on the ground that it was a 'local authority' within the meaning
of Section 10 (20) of the Act. Insofar as the relief sought regarding
additions of income and deletion of deduction in concerned, the
Commissioner declined to decide the said issue. The Income Tax
Appellate Tribunal ('the Tribunal' for short) set aside the said order of G
the Commissioner (Appeals) and held that the Corporation was not a 'local
authority' and remanded the appeals to the Commissioner (Appeals) for
rehearing on merits on the issue of grant of relief relating to
additions/deductions.
H
604 SUPREME COURT REPORTS (2007] 12 S.C.R.

A 4. Since the Corporation was also a5sessed for the Assessment Year
1984-85 as was assessed for the Assessment year 1977-78, the ._
Corporation preferred Writ Petition No. 4424 of 1987 before the High
Court of Allahabad which was accepted and the High Court, by its order
dated 19th May 1988, declared that the Corporation was a 'local
B authority' and was entitled to exemption under Section 10(20) of the Act.
It also held that it was entitled to exemption under Section 11(1) (a) of
the Act being a charitable institution.
5. Aggrieved by the said order, the Department chose to file Special
Leave Petition before this Court wherein leave was granted and ultimately
C the appeals were accepted and the order passed by the High Court was
set aside. It was held that the expression 'local authority' was not defined
under the Income Tax Act. Section 3(31) of the General Clauses Act,
1897 defined the said expression which came up for consideration before
this C'1urt in the case of Valjibhai Muljibhai Soneji v. State ofBombay,
D (now Gujarat) [1964] 3 SCR 686 wherein it was held that the defmitions
given in the General Clauses Act, govern all Central Acts and Regulations
made after the commencement of this Act. Following the said decision,
this Court held that even though Section 3(3) of the U.P. Forest
Corporation Act regards the Corporation as being the local authority but
E for the purpose of the Act, it would not, in law, make the Corporation a
local authority for the purposes of Section I 0(20) of the Act. On the
question whether the Corporation was to get itself registered under Section
12A of the Act for invoking the provisions of Section 11(1) (a) of the
Act of claim exemption being a charitable institution, it was held that since
F the question had not been raised before any of the authorities below, the
High Court should have remanded the case back to either the Assessing
Authority or the CEGAT for a decision. This Court, under peculiar facts
and circumstances of the case, directed the Assessing Authority to consider
the claim of the appellant-Corporation as the whether the appellant was
G not liable to be taxed in view of the provisions of Section 11 (1) (a) of the
Act as a charitable institution.
6. In the meantime, following the decision ofche High Court in W.P.
No. 4424of1987, the Commissioner (Appeals) allowed the appeals of
H the Corporation in respect of Assessment Years 1977-78 and 1980-81
U.P. FOREST CORPORATION v. DY. COMMISSIONER 605
OF INCOME TAX, LUCKNOW [BHAN, J.]
allowing exemption under Section 10 (20) and Section 11 (1) (a) of the A
Act.
7. The appellant-Corporation, on 1lth July 1988, moved an
application before the competent authority for being registered under
Section 12A of the Act which was rejected after a gap of nine years on B
18th March 1997.

\ 8. Against the said rejection, the Corporation filed Writ Petition No.
173 of 1998 before the High Court during the pendency of which the
Corporation filed another application for the purpose on 04th May 1998.
The High Court allowed the Writ petition and set aside the order of the C
competent authority rejecting the application of the Corporation for
registration on the ground that the Commissioner had passed an order in
violation of principles of natural justice inasmuch as the appellant-
Corporation had not been given an opportunity of hearing and directed
the Commissioner to re-decide the Corporation's application dated l l'h D
July 1988 for registration after giving an opportunity of hearing to the
Corporation. The Commissioner decided against the Corporation against
which order an appeal filed by the Corporation before the Tribunal at
Lucknow is pending decision.
E
9. After the matter was remanded by this Court in the case of
Commissioner of Income-tax, Lucknow v. UP. Forest Corporation
(supra), the Assessing Authority held that the appellant was not a
charitable institution and assessed the income in respect of Assessment
Years 1977-78, 1980-81 and 1984-85 to tax. Commissioner (Appeal) F
partly allowed the appeals of the appellant-Corporation granting some relief
on issues of addition/deductions. The appellant-Corporation as also the
Revenue filed appeals against the said order before the Tribunal. The
Tribunal allowed the appeals filed by the Revenue and set aside the relief
granted to the Corporation on the issue of additions/deductions on the G
ground that this Court had remanded the matter only to decide one issue.
10. Being aggrieved, the Corporation filed an appeal under Section
260A of the Act before the High Court. By the impugned order dated
26'11 November 2002, the High Court has remanded the matter to the
H
(
606 SUPREME COURT REPORTS [2007] 12 S.C.R.

A Tribunal for considering the matter afresh. Aggrieved by the said order,
the Corporation is in appeal before us by filing the aforementioned appeals.
The Revenue has also filed Civil Appeal No. 9437 of2003 against the
impugned order. The Revenue has also challenged a subsequent order
passed by the High Court wherein the above question has not been
B decided in view of the pendency of the aforementioned appeals.
11. We are of the considered view that for claiming benefit under
Section l l(l)(a), registration under Section 12A is a condition precedent.
Section 11 provides for exemption of income which is applied for
I
I
I
C charitable purposes. Section 12 is in the nature of an explanation of Section
11. Section l 2A provides that provisions of Sections 11 and 12 shall not
apply in relation to income of any trust or institution unless certain
conditions are satisfied, one of which is clause (a), the same is reproduced
as under:
D "12A. The provisions of section 11 and section 12 shall not apply
in relation to the income ofany trust or institution unless the following
conditions are fulfilled, namelv:-
(a) the person in receipt of the income has made an application
E
for registration of the trust or institution in the prescribed form and
in the prescribed manner to the Chief Commissioner or
Commissioner before I st day of July 1973, or before the expiry
of a period of one year from the date of the creation of the trust
or the establishment of the institution, whichever is later:
F Provided that the Chief Commissioner or Commissioner may,
in his discretion, admit an application for the registration of any trust
or institution after the expiry of the period aforesaid;
(b) ................ "
G 12. Application for registration under Section 12A has to be made
in form IOA prescribed by Rule 17-A of the Income Tax Rules, 1962
before the expiry of one year from the date of the creation of the trust or
the establishment of the institution, whichever is later. TI1e same has to be
made by the person in receipt of the income of the trust. Chief
H
U.P. FOREST CORPORATION v. DY. COMMISSIONER 607
OF INCOME TAX, LUCKNOW [BHAN, J.]
Commissioner or Commissioner under proviso to clause (a) of Section A
12A has been vested with the discretion to admit an application for
registration after the expiry of the prescribed period. A conjoint reading
of Section 11, 12 and 12A makes it clear that registration under Section
12A is a condition precedent for availing benefit under Section 11 and
12 of the Act. Unless and until an institution is registered under Section B
12A of the Act, it cannot claim the benefit of Section l l(l)(a) of the Act.
Keeping in view the fact that the appellant-Corporation has not ben
granted registration under Section 12A of the Act, we hold that the
appellant is not entitled to claim exemption from payment of tax under
Sections 11 (1 )(a) and 12 of the Act. C
13. We, accordingly, dismiss the appeals filed by the Corporation
without deciding the merits of the dispute.
14. In view of the dismissal of these appeals, the appeals filed by
the Revenue also stand dismissed. However, in order to protect the interest D
of the assessee as well as the Revenue, we direct the Tribunal, before
whom the appeals are pending against the order passed by the
Commissioner rejecting the application filed under Section 12A of the Act,
to take up the matter on priority basis and decide the same as
expeditiously as possible without being influenced by any of the findings E
recorded by the High Court in the impugned order.
15. We make it clear that in the event the matter is finally decided
in favour of the assessee, the assessee, viz., the Corporation would be at
libe1ty to get these appeals revived for a decision on merits. Similarly, in F
case these appeals are re-opened at the instance of the assessee, the
appeals filed by the Revenue shall also get revived automatically for
decision on me1its. All questions are left open.
16. It is further made clear that the order of the High Court remanding
the matter in respect of main assessment shall remain in abeyance till the G
matter regarding registration is decided finally by the Tribunal.
17. No. costs.
D.G. Appeals dismissed.
H