Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) deals with the application of registration to charitable or religious trusts or institutions. This section provides for registration of a trust/institution formed for charitable or religious purposes. Such registration can either be done independently or as an adjunct to an existing trust or institution.
Section 12AA of the Act deals with the provisions that are applicable to the registration of a trust or institution under the Act. It begins by defining a trust or institution as one which is established either for charitable or religious purposes or both. It then mentions the conditions and requirements which must be satisfied before such a trust or institution can be registered and specifies that it must be applied for within a period of two years from the end of the financial year in which the property was acquired, settled or converted in trust or institution.
The application for registration must be made in a prescribed form, duly signed by the trustees or the manager. It must also include the particulars of the documents necessary for the registration of the trust or institution. The application must be accompanied by an authenticated copy of the trust deed and the Memorandum of Association or any other like document, specifying the purposes for which the trust or institution is established.
The Trustees or the Manager of the trust or institution applying for registration must also duly sign and submit an affidavit in the prescribed form along with the application, stating that the trust or institution meets all the requirements to be eligible for registration under the provisions of the Act. They must also furnish the details of all income earned and the expenditure incurred in the previous two years in accordance with the prescribed form.
Once the application has been made and all the requisite documents submitted, the Commissioner of Income Tax shall examine them, and if satisfied that the conditions mentioned in Section 12AA of the Act have been complied with, he shall register the trust or institution with effect from the date of the application. The registration certificate issued by him shall also specify the period for which it shall remain in force and any conditions that may be imposed by the Commissioner.
The Commissioner may at any time revoke or cancel the registration under Section 12AA of the Act. He can do so if he is satisfied that the trust or institution has ceased to exist or that it has become impossible for it to carry out the objects specified in the trust deed. The Commissioner may also cancel the registration if he is satisfied that the trustees or the Manager has made use of the registration for fraud or other illegal purposes, or if the trust or institution has failed to comply with any of the rules or regulations mentioned in the Act.
The applicability of Section 12AA of the Act has been discussed in several Supreme Court and High Court decisions. The Supreme Court in Laxmi Engineering Works Ltd. Vs CIT, wherein it was held that section 12AA of the Act has a two-fold purpose, i.e., to prevent evasion of tax and to provide a simpler procedure for the registration of charitable or religious trusts or institutions. The Court also noted that this section was intended to be a beneficial provision and should, therefore, be interpreted in a manner that would promote the underlying object of the statute.
The High Court of Bombay in Judiciouse Ministries Charities Commissioner vs. Anandji Kalyanji Pedhi also discussed the provisions of Section 12AA of the Act at length and concluded that the provisions are sufficiently clear and do not require any further elaboration. The Court held that in the absence of any tangible evidence to contravene the requirements of Section 12AA, the registration certificate issued under it should be maintained and respected by way of trust and confidence of the Registering Authority.
In conclusion, it can be stated that Section 12AA of the Income Tax Act is an important provision which facilitates the registration of trusts and institutions for charitable and religious purposes. This section has been interpreted by both the Supreme Court and High Court in numerous judgments, thereby solidifying its legal validity and applicability. It is also seen to be a beneficial provision and should thus be interpreted in a manner that promotes its underlying object.
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