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SUPREME COURT OF INDIA
S.A. BOBDE, CJI., B.R. GAVAI, SURYA KANT, JJ.
M/s. Ananda Social and Educational Trust – Appellant
Versus
The Commissioner of Income Tax and Another – Respondents
Civil Appeal Nos. 5437-5438 of 2012, 4702 of 2014, 1727 of 2020, SLP (C) No. 25761 of 2015
Decided On : 19-02-2020
REGISTRATION - INCOME TAX - 12AA - The court discussed the provisions of section 12AA of the Income Tax Act, 1961, which provides for the registration of a trust. The court emphasized that the Commissioner is required to be satisfied about the genuineness of the trust's objects and activities before granting registration. The court held that the term 'activities' in the provision includes proposed activities, and the Commissioner is bound to consider whether the proposed activities are genuine and in line with the objects of the trust. The court also highlighted the distinction between assessing proposed activities for registration and assessing actual activities for cancellation of registration.
Fact of the Case:
The Trust applied for registration under section 12AA of the Income Tax Act, 1961, without having undertaken any activities. The Commissioner refused registration on the ground of no activities being undertaken. The High Court and the Tribunal reversed the decision, holding that a newly registered trust can be considered for registration under section 12AA even without any activities.
Finding of the Court:
The court found that the Commissioner is required to be satisfied about the genuineness of the trust's objects and proposed activities for registration. It emphasized that the term 'activities' in the provision includes proposed activities and held that the Commissioner is bound to consider whether the proposed activities are genuine and in line with the objects of the trust.
Issues: The main issue was whether a newly registered trust can be considered for registration under section 12AA of the Income Tax Act, 1961, even without having undertaken any activities.
Ratio Decidendi: The court held that the Commissioner is required to be satisfied about the genuineness of the trust's objects and proposed activities for registration. It emphasized that the term 'activities' in the provision includes proposed activities and held that the Commissioner is bound to consider whether the proposed activities are genuine and in line with the objects of the trust.
Final Decision: The court upheld the decisions of the High Court and the Tribunal, dismissing the appeals and leaving it upon the Commissioner of Income Tax to consider the issue by exercising his powers under sub-section (3) of section 12AA, if the facts justify such actions.
ORDER :
CIVIL APPEAL NOS. 5437-5438/2012
1. We have heard learned counsel appearing for the parties and perused the impugned Judgments and Orders passed by the High Court of Karnataka.
2. In our considered view, the reasons assigned by the High Court in passing the impugned judgments and orders need no interference as the same are in consonance with law.
3. Accordingly, there is no merit in these appeals and they are dismissed.
CIVIL APPEAL NO. 4702/2014
4. This appeal has been preferred by the appellant - Director of Income Tax against the impugned judgment and order passed by the Delhi High Court holding that a newly registered Trust is entitled for registration under section 12AA of the Income Tax Act, 1961 (for short, the ‘Act’) on the basis of its objects, without any activity having been undertaken. Section 12AA of the Act reads as follows:
“12AA. Procedure for registration - (1) The [Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall:-
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf.
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he:-
(i) shall pass an order in writing registering the trust or institution.
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant:
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the [Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the [Principal Commissioner or] Commissioner and the [Principal Commissioner or] Commissioner may proceed with such applications under that sub section from the stage at which they were on that day.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A.
(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.
(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the r
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