Case Law Details
CIT Vs A.R. Trust (Allahabad High Court)
Section 12 AA of the Act provides that the Registering Authority after satisfying himself about the objects of the Trust and genuineness of its activities shall pass an order in writing for registration of the Trust or to refuse the registration. Therefore, satisfaction of the Registering Authority is mandatory before any Trust is registered under Section 12 AA of the Act. The aforesaid satisfaction has not to be recorded by any other authority.
In the present case, the registration was refused simply for the reason that the objects and activities of the Trust were not charitable in nature. The said order having been set aside by the tribunal leaves no material which could reflect that any satisfaction as required exists. Thus, in the absence of any satisfaction of the Registering Authority, the direction to register the Trust is without jurisdiction.
The Tribunal could have ordered for setting aside the order of Registering Authority refusing registration but it could not have directed for registration straight away inasmuch as there has to be satisfaction recorded by the Registering Authority which was lacking.
Accordingly, we answer the question in favour of the Department and against the respondent and it is held that the Tribunal has no jurisdiction in law to direct for registration of the Trust without there being satisfaction recorded by the Registering Authority as contemplated by Section 12 AA of the Act.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:
The appeal of Revenue under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) raises the following substantial question of law as was formulated vide order dated 11.04.2017 :-
“Whether the tribunal itself can direct for the registration of a trust under Section 12 AA of the Act without there being satisfaction recorded by the registering authority ?”
Notice was issued to the respondent and in view of the Office report, it is evident that the notice was served upon it on 09.05.2017 but no one has put in appearance on its behalf. Therefore, we are left with no option but to proceed ex-parte against it.
We have heard Sri Gaurav Mahajan, learned counsel appearing for the Revenue.
The facts of the case reveal that the respondent applied for registration under Section 12 AA of the Act vide letter dated 09.03.2012 but the same was refused by the Commissioner of Income Tax on the ground that the respondent is not carrying out any charitable activities.
The Tribunal by the impugned order dated 16.01 .2013 has allowed the appeal of the respondent and has directed for registration of the Trust under Section 12 AA of the Act.
In Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income Tax (Exemptions) (2006) 285 ITR 327 (Karnataka) held that for the registration of a Trust under Section 12 AA of the Act, the authorities have to satisfy about genuineness of the activities of the trust and the manner in which its income is applied in charitable or religious purpose. It observed as under :-
“Therefore, for the purpose of registration under section 12 AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust.”
In Fifth Generation Education Society Vs. Commissioner of Income Tax (1990) 185 ITR 634 (Alld), it has been laid down that at the stage of considering the application for the registration, all that may be examined is whether the application is made in accordance with the requirements of Section 12 AA read with Rule 17 A, whether Form-10 A has been properly filled up and thereafter, to see whether the objects of the Trust are charitable or not and its activities are genuine but it is not within the domain of the Commissioner of Income Tax (Exemptions) to examine whether any activity carried out by the Trust is charitable in nature or not.
In view of the aforesaid authorities, for the purposes of registration of a Trust under Section 12 AA of the Act, the authorities have to satisfy about the genuineness of the objects of the Trust and its activities.
The Kerala High Court in Sree Anjaneya Medical Trust Vs. Commissioner of Income Tax (2016) 382 ITR 399 (Kerala) has been pleased to observe as under :-
“At the time of registration of the trust, going by the binding judgments of the apex court, what is to be looked into is whether the trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act ”
Recently, a Division Bench of our High Court in Commissioner of Income Tax (Exemption) Vs. Yamuna Expressway Industrial Development Authority and others, (2017) 395 ITR 18 (Alld) also accepted that the Commissioner of Income Tax (Exemptions) at the stage of registration is not supposed to inquire into the conduct of charitable or other activities performed by a Trust applying for registration as these are matters of investigation at the time of assessment and held that the authorities could only examine the genuineness of the Trust and its activities.
Another Division Bench of this Court in Commissioner of Income Tax-II Vs. R.S. Bajaj Society (2014) 222 Taxmann.com 111 (Alld) has held that the genuineness of the objects and activities of the Trust has to be tested at the time of registration and not the activities, which had not commenced by that time.
In view of the above authorities, the Tribunal is justified in holding that the Commissioner of Income Tax (Exemptions) committed illegality in refusing registration.
Section 12 AA of the Act provides that the Registering Authority after satisfying himself about the objects of the Trust and genuineness of its activities shall pass an order in writing for registration of the Trust or to refuse the registration. Therefore, satisfaction of the Registering Authority is mandatory before any Trust is registered under Section 12 AA of the Act. The aforesaid satisfaction has not to be recorded by any other authority.
In the present case, the registration was refused simply for the reason that the objects and activities of the Trust were not charitable in nature. The said order having been set aside by the tribunal leaves no material which could reflect that any satisfaction as required exists. Thus, in the absence of any satisfaction of the Registering Authority, the direction to register the Trust is without jurisdiction.
The Tribunal could have ordered for setting aside the order of Registering Authority refusing registration but it could not have directed for registration straight away inasmuch as there has to be satisfaction recorded by the Registering Authority which was lacking.
Accordingly, we answer the question in favour of the Department and against the respondent and it is held that the Tribunal has no jurisdiction in law to direct for registration of the Trust without there being satisfaction recorded by the Registering Authority as contemplated by Section 12 AA of the Act.
Accordingly, the order of the Tribunal dated 16.01.2013 to the extent it directs for registration of the respondent Trust is set aside and the matter is sent to the Registering Authority i.e. Commissioner of Income Tax for recording its satisfaction in the light of decision of the Tribunal and to pass appropriate order in accordance with law thereunder.
The appeal is allowed.
