Newly registered trust is entitled for registration under Section 12AA of the Income Tax Act 1961, on the basis of its objects, says Supreme Court

By
Asif Iqbal
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Approach of Art.136 Cannot Be Adopted While Deciding Petitions by The High Court Under Art.227: SC

The judgment and order to this case were given by the High Court of Karnataka in relation to whether the newly registered trust is entitled to registration under Section 12AA of the Income Tax Act 1961 or not?. The case was between the Appellant M/s Ananda Social and Educational Trust and Respondent the Commissioner of Income Tax and Others. The Bench was in the quorum of three judges’ consisting of Chief Justice of India S.A. Bobde and Justices B.R Gavi and Surya Kant, the reason which was assigned by the Karnataka High Court in passing the impugned judgment(s) and order(s) need no interference as the same agrees with law. The Section 12AA of the Income Tax Act 1961 provides the registration of a trust and such registration can be applied by the trust which has been in existence for some time and by the newly registered trust. The aforementioned section mentions empowering the Principal Commissioner or the Commissioner of the Income Tax on receipt of an application for registration of a trusted call for such documents which could be necessary to satisfy the genuineness of the activities of trust or institutions. 

The Appellant formed the trust as a society on 30th May 2005 and it applied for registration on 10th July 2008, which occurred within a period of two months. The application was rejected by the Income Tax Department that there wasn’t any performance of activities undertaken by the trust but the tribunal reversed the order of the Income Tax Commissioner, which led to the submission of filing of an appeal in the High Court by Revenue Department. The High Court upheld the decision made by the Tribunal and concluded though there were no activities they can be registered under Section 12 AA of the Income Tax Act 1961. The Commissioner requires satisfying himself about the objects of the trust or institution and genuineness of its activities and granting registration only if he is so satisfied. The counsel representing the Respondent argued before the Court that the purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. 

The argument made by the counsel representing the Appellant drew the attention of the bench towards the judgment of the Allahabad High Court in IT Appeal no. 36 of 2013 titled “Commissioner of Income Tax-II vs. R.S. Bajaj Society” which the Delhi High Court took the same view but a contrary view was opined by the bench in the Kerala High Court’s judgment to the case of Self Employers Service Society vs. Commissioner of Income Tax – (2001) Vol.247 ITR 18. 

The Judgment made by the Supreme Court was “we are of the view that the object of the provision in question is to ensure that the activities undertaken by the Trust are not contrary to its objects and that a Commissioner is entitled to refuse registration if the activities are found contrary to the objects of the Trust”.

The bench considered circumstances in which the Commissioner shall exercise the power as provided under the sub-section 2 of Section 12AA of the facts justify the actions.

Key-Features:-

  • Consisting of Justices SA Bobde, Surya Kant and B.R Gavi
  • Section 12AA of the Income Tax Act 1961 pertains to the registration of the trust.
  • Section 12AA of the Act deals with the procedure for registration of Trust or Institutions to claim benefits under sections 11 and 12 of the Act.
  • The bench gave a contrary view against the judgment made by the Kerala High Court in the case between SESC vs. Commissioner of Tax-2001, Vol.247 ITR 18.
  • Section 12 AA pertains to the registration of trust and not what the trust has done. 

Edited by J. Madonna Jephi

Approved & Published – Sakshi Raje

Reference:-

Asif Iqbal
Asif Iqbal
I am pursuing my integrated five years bachelors of law degree from Centre for Juridical Studies, Dibrugarh University. I do have an interest in reading books written by Arundhati Roy, Ashwini Sanghi, Ramachandra Guha and others. Any personality whom I like is Karl Marx and Che Guevara, as latter did write the book “Motor Cycle diaries” which is based on upon his journey on a bike with his friend. Whereas I do like to binge-watch series and out of those which I have seen till now are two and a half men, Suits, Sherlock and Friends to name a few. Apart from that, I do have an interest in writing articles and stories along with being a part of any discussions or debates.