Per R.V. Easwar, Vice President. - The appeal has been referred to the Special Bench and the following question has been posed for decision :

"Whether in a case where the Commissioner of Income-tax does not pass the order granting or refusing registration of Trust within the period laid down in section 12AA(2) registration would be deemed to have been granted to the Trust or Institution automatically on expiry of the period specified in section 12AA(2) of the Act?"

2. A few basic facts may be stated now. The assessee is a charitable institution. It applied to the CIT for registration under section 12A of the Income-tax Act on 23-10-2001. Under section 12AA(2) every order granting or refusing registration shall be passed by the CIT before the expiry of six months from the end of the month in which the application was received by him. In the case before us the CIT ought to have passed an order granting or refusing registration on or before 30-4-2002. He however passed the order refusing registration to the trust on 26-5-2003 which was beyond the period laid down in section 12AA(2). He had however initiated certain enquiries by letter dated 3-4-2002, which was well within the period of six months, to which the assessee responded by furnishing the relevant details. The enquiry continued well beyond 30-4-2002 and ultimately the CIT passed the order refusing to register the assessee-institution.

3. When the appeal of the assessee against the order of the CIT was originally taken up for hearing, the argument of the assessee was that once the time-limit fixed by section 12AA(2) expired without the CIT having passed any order, it must be deemed that the registration has been granted and in support of this contention, two orders of the Tribunal, one of the (Delhi) Bench in Sambandh Organisation v. CIT [IT Appeal No. 5582 (Delhi) of 2003] and another of the Bangalore Bench in Karnataka Golf Association v. DIT(E) [2005] 272 ITR 123 (AT), were relied upon. In these orders, it was held in the event the application for registration is not decided one way or the other within the period of six months, then the registration sought for must be deemed to have been allowed. The Bench was of the view that this would result in certain serious consequences and cited as an example the case of a trust having objects which are not charitable. It further opined that there is no specific provision in the section to the effect that registration would be deemed to have been allowed if no order is passed within the period of six months. However since a contrary view had been expressed by two co-ordinate Benches of the Tribunal, the Bench thought it fit and proper to place the appeal before the Hon’ble President for being referred to a Special Bench and also proposed the question to be decided (extracted in the first paragraph). The Hon’ble President has accordingly constituted the Special Bench.

4. Section 12AA was introduced by the Finance (No. 2) Act, 1996 with effect from 1-4-1997. The object of introducing the section, as stated in the Circular No. 762 of 18-2-1998, is as follows :

"19.1 Registration of charitable and religious trusts.—Under the existing provisions of the Income-tax Act, exemption from income-tax in respect of the income of a charitable or religious trust or institution is available only if the conditions specified in that section are satisfied. One of these conditions is that the person in receipt of the income shall make an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or the Commissioner of Income-tax Act for processing of such an application and granting or refusal of registration to the concerned trust or institution.

19.2 Hence the Finance (No. 2) Act, 1996, now provides for a procedure to be followed for grant of registration to a trust or institution. According to this procedure, the Chief Commissioner or Commissioner shall call for documents