The High Court of Delhi on Monday upheld the grant of tax exemption under Section 11 of the Income Tax Act, 1961 to the Vishwa Hindu Parishad, despite the delay in filing of audit reports along with the returns for FY 1993-94. The Court accepted the contention that such delay was justified as it was due to the fact that its accounts were seized when it was banned under the Unlawful Activities (Prevention) Act, 1967 after the Babri Masjid demolition incident.
“In the present case, however, there is no finding that the audit report submitted by the Assessee does not satisfy the requirement of the law. The Assessee’s audited accounts too were not doubted. The delay in submitting the audit report could not be said to be inordinate. The Assessee was able to show that the delay was due to bona fide reasons beyond its control,” the Bench comprising Justice S. Muralidhar and Justice Anil Kumar Chawla observed.
The Court was hearing an appeal filed by the Revenue Department against an order passed in June, 2003 allowing an exemption under Section 11, even though no order under Section 12A(a) was passed.
The question now posed before the Court was whether exemption can be allowed under Section 11 of the Act to the Assessee despite the fact that the Assessee was not allowed registration under Section 12A (a) of the Act, and also when there was failure on the part of the Assessee to comply with the provisions of Section 12A (b) of the Act.
Section 12A prescribes the conditions for registration of trusts. Section 12A (a) requires that an application for registration of the trust or institution needs to be made before 1 July, 1993, 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. The Court noted that VHP had applied for registration under Section 12A in June, 1973, and had therefore complied with the condition under Section 12A (a).
As per Section 12A (b), one of the conditions for registration of a charitable organisation is that its return should be accompanied by an audit report prepared by a duly qualified Chartered Accountant.
The Court noted that in the aftermath of the Babri Masjid Demolition, the Ministry of Home Affairs had issued a notification declaring VHP as an unlawful organisation under the Unlawful Activities (Prevention) Act, 1967. It therefore ruled that the delay in filing the audit report was justified, and observed, “It is held that the Assessee could not have been denied exemption under Sections 11 and 12 of the Act as there was no failure to comply with Section 12A (b) of the Act. The above conclusions are in the peculiar facts discussed hereinabove and also considering that this infraction is for only one AY, i.e., 1993-94. It is not even the Revenue’s case that for any year thereafter or earlier there has been any failure by the Assessee to comply with the mandatory provisions of the Act.”
Read the Order here.