(1.) THESE are six appeals filed by the assessee for the assessment years 2001-2002 to 2006-2007. The assessee is a society constituted by an Instrument dated 12th March 1942 and commenced operations pursuant to a Resolution passed by the Department of Commerce, Government of India on 26th September 1942, to foster growth of industrial and scientific research in India. It is registered under the Societies Registration Act, 1860. The main objects of the assessee's society are as under:
The objective of the Council being scientific and industrial/applied research of national importance, its major activities should be:
(i) research and development projects of national priority as evolved by the high level body concerned with overall planning for science and technology in the country;
(ii) research and development projects sponsored by industries in the public/private sector and others and in consonance with national priorities;
(iii) research and development directed towards continuous improvement of indigenous technology and adaptation and development of imported technology;
(iv) research and development of new technologies relevant to the country's social economic and industrial needs in keeping with the national objective of self-reliance;
(v) research and development on appropriate and alternate technologies, with emphasis on the use of local resources;
(vi) basic scientific research that is necessary and industrial/applied research and development in progress and from the view-point of future advances in technology in consonance with the national priorities;
(vii) maintenance of national physical standards and a library of standard reference materials; and
(viii) technical advisory services like information, extension, consultancy and testing.
In pursuance of the above objectives, the appellant has been carrying on scientific and research activities since inception through grants-in-aid. The benefits of the research carried on by the appellant are available for use by the public at large and for all persons interested in the industrial development of India.
(2.) The appellant has been notified under Section 10(2)(xiii) of the Indian Income-tax Act, 1922, by a series of notifications. This section allows deduction to an assessee of any sum paid to a scientific research association having its object the undertaking of scientific research or to university, college or other institution to be used for scientific research or to a university, college or other institution to be used for research related to the class of business carried on by the assessee, subject to the condition that the payee institution or association is approved by the prescribed authority for the purposes of the clause. The section itself was inserted by the Indian Income Tax (Amendment) Act of 1946 and it is common ground that the notifications issued approving the assessee for the purposes of the section since the inception were not withdrawn at any point of time. Since several conditions have to be complied with by the organisation which is notified for the purpose of above clause, the assessee has been submitting its annual accounts, balance-sheet, audit report, etc. to the prescribed authority in order to obtain the benefit of being notified uninterruptedly. The above position continued up to the year 1989. Thus, even after the advent of the Income-tax Act, 1961, the assessee was being notified under the corresponding section, which is Section 35(1)(ii). Even in the year 1989, there was no problem for the assessee in getting the renewal of the notification. In the year 1999, there was an inconsequential change in the sense that the prescribed authority was changed from Secretary, Department of Science & Technology, Government of India to the Central Government, which will obtain the opinion of the CBDT before granting approval. In view of the series of notifications issued both under the 1992 Act and under the 1961 Act, the assessee was not filing any income-tax returns though it was submitting its annual accounts, etc. for the scrutiny of the prescribed authority. Till and including the assessment year 2003-2004, there was not assessment upon the assessee nor was it required by the income-tax authorities to file any return of income. On 27th March 2003, the assessee made an application for renewal of the exemption under Section 35(1)(ii) up to 31.3.2006. It was stated that the sole activity of the assessee is research and development and the accounts were also maintained properly. Nothing was heard from the Director of Income-tax (Exemption) and the matter was thereafter pursued by the assessee at various levels including the Chairman of the CBDT, Revenue Secretary, Finance Minister, etc. It was pointed out that in the absence of the renewal of the notification, the laboratories are facing difficulties in obtaining sponsorship for the various research and development projects. There is a series of correspondence in this regard compiled in pages 13 to 32 of the paperbook filed by the assessee. Ultimately after protracted correspondence and reminders, the notification was issued on 30th November 2005 granting exemption under Section 35(1)(ii) from 1.4.2003 to 31.3.2006. However, the exemption was granted to the assessee not as a scientific research association existing solely for research as was done in the earlier notifications, but the exemption was granted under the category "University, college or other institution partly engaged in research activities". Immediately, on 26th December 2006, the assessee addressed a letter to the Revenue Secretary, Government of India clarifying that it was solely dedicated to the cause of research and development for the country and that it was not proper to categorized it as an institution partly engaged in research activities and a prayer was made that the assessee should be notified as a pure R&D Organisation fully funded by the Government of India. It is not known as to what was the response to this letter.
On 31.3.2005, apparently because its letters to the CBDT did not elicit any response, the assessee filed a return of income for the first time on 31.3.2005 for the assessment year 2004-2005 claiming exemption under Section 11 of the Act as a charitable institution. The exemption was refused by the Assessing Officer on the ground that the assessee was not registered under Section 12AA which was the condition precedent for claiming the exemption. The order of the Assessing Officer was passed on 26.12.2006. It was in these circumstances that the assessee on 20.3.2007 filed an application in Form No. 10A seeking registration from the Director of Income-tax (Exemption) under Section 12A. The Director of Income-tax (Exemption) granted registration to the assessee from 1.4.2006 subject to the satisfaction of several conditions which are listed in his order dated 27.9.2007 which is the impugned order. The assessee claimed registration from 1.4.2000 which was refused by the Director of Income-tax (Exemption) on the ground that the application for registration should have been filed by 1.7.1973 under Section 12A(a) which was not done and the application filed on 20.3.2007 was after a delay of over 34 years. He observed that nothing prevented the assessee from applying the registration before 1.7.1973. In this behalf, he pointed out that Section 10(21) which provided exemption to a scientific research association was not applicable to other institutions and the assessee has been categorized as other institution in the notification issued under Section 35(1)(ii) and this itself must have made the assessee aware of the obligation to get itself registered under Section 12A of the Act. In other words, it was the opinion of the Director of Income-tax (Exemption) that since the benefit of Section 10(21) was not available to the assessee, it ought to have realised that it can claim exemption only under Section 11 for which purpose registration under Section 12A was mandatory. He, therefore, refused to condone the delay and rejected the assessee's claim for registration from 1.4.2000.
(3.) IT is against the aforesaid decision of Director of Income-tax (Exemption) that the assessee has come in appeal before the Tribunal seeking condonation of the delay in filing the application for registration under Section 12A. From the narration of the chronology of the events starting from the establishment of the assessee society right up to the date on which it filed an application for registration under Section 12A, it seems to us that till the notification dated 30th November 2005 was issued under Section 35(1)(ii) for the period from 1.4.2003 to 31.3.2006, the assessee was being notified under the category as scientific research association existing solely for research. Therefore, at least up to that day, its income was exempt under Section 10(21) which applied to any income of a scientific research association for the time being approved under Section 35(1)(ii). When the assessee found that in the above notification, it was categorized as "Other institution" partly engaged in research activities, it took up the matter with the Revenue Secretary asking it to be notified as a scientific research association as was done in the past. Even before the notification was issued the assessee, perhaps frustrated by the long delay of one & half years (from 27th March 2003), must have thought that it would be advisable to claim exemption under Section 11 and on that basis filed its first return of income for the assessment year 2004-2005 on 31.3.2005. Till it did so it had good grounds to think that its income was exempt under Section 10(21) as it was considered as a scientific research association in the notifications issued under Section 35(1)(ii). When its income was exempt under Section 10(21) there was no need to claim exemption under Section 11 and consequently there was no need to get itself registered under Section 12 A. The need arose only when the Assessing Officer refused exemption under Section 11 on the ground that the assessee was not registered under Section 12A. In our opinion, it cannot be said that there was any delay on the part of the assessee in making the application for registration for a period of more than 34 years. If at all there was a delay, it was only from the date of filing the return of income for the assessment year 2004-2005. That delay is only about two years for which there was sufficient cause in the circumstances narrated by us above.;