Case Law Details

Case Name : CIT Vs Varanasi Welfare Trust (Allahabad High Court)
Appeal Number : ITA No 227 of 2014
Date of Judgement/Order : 12/11/2014
Related Assessment Year :
Courts : All High Courts (5987) Allahabad High Court (337)
CA Prarthana Jalan
Hon’ble Allahabad HC has in the case of Commissioner Of Income Tax Varanasi v/s Varanasi Welfare Trust in  ITA No 227 of 2014 has held that While granting Registration U/S 12A Commissioner of Income Tax is not required to look into the activities of the trust. The Hon’ble High Court has observed as under:-
A Division Bench of this Court, in the judgment in Hardayal Charitable & Educational Trust Vs. Commissioner of Income Tax-II, Agra-Income Tax Appeal No.75/A/2014 and 76/A/2014, has construed the provisions of Section 12AA  of the Act, after having due regard to the preponderance of judicialopinion of all the High Courts including of this Court and has held as follows:-

The preponderance of the judicial opinion of all the High Courts including this Court is that at the time of  registration under Section 12AA of the Income Tax Act, which is necessary for claiming exemption under Section 11 and 12 of the Act, the Commissioner of Income Tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under Section 12AA cannot be refused, on the ground that the Trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage only the genuineness of the objects has to be tested and not the activities, which have not commenced. The enquiry of the Commissioner of Income Tax at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced. The Trust or society cannot claim exemption, unless it is registered under Section 12AA of the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused.”

This aspect of the view of the Tribunal is hence consistent with a judgment of the Division Bench of this Court and would not require this Court to take any different view.

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  1. CA. M. Lakshmanan says:

    This decision will help a lot of trusts whose registration were denied because they have not carried out any charitable activity as mentioned in the Trust Deed. While the Trusts are in the initial stage how can one expect to fulfill the objects immediately. They approach the CIT for grant of exemption under section 12A and deduction under section 80G for the donors on the strength of the objects of the Trust. They should be given some time to collect donations and carry out the charitable activities. Trusts are are subject to audit and as they are having PAN they have to file returns and if anything is found wrong the Department can cancel the registration granted at any time even with retrospective effect, I believe. Let us hope that in future registration will not be denied at the initial stage itself.

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