Whether a newly registered Trust is entitled to registration under section 12AA of the Income Tax Act, 1961 on the basis of its objects, without any activity having been undertaken.
Ananda Social and Educational Trust Vs. CIT
Civil Appeal No(s). 5437-5438/2012 with 4702/2014
Date of Pronouncement: 19.02.2020, Supreme Court of India
The trust was formed as a society on 30.05.2008 and it applied for registration on 10.07.2008 i.e. within a period of about two months. No activities had been undertaken by the Trust before the application was made. The Commissioner rejected the application on the sole ground that since no activities have been undertaken by the trust, it was not possible to register it, presumably because it was not possible to be satisfied about whether the activities of the trust are genuine. The Income Tax Appellate Tribunal, Delhi, reversed the orders and after which the Revenue Department approached the High Court by way of filing an appeal. The High Court upheld the order of the Tribunal and came to the conclusion that in case of a newly registered trust even though there was no activities, it was possible to consider whether the trust can be registered under section 12AA of the Act. Hence the appeal was made by the revenue on the aforesaid substantial question of law.
The Hon’ble Apex Court held that “Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term ‘activities’ in the provision includes ‘proposed activities’. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust.”
Therefore, the substantial question of law was answered in favour of the assessee trust.