Section 12AA of Income-Tax Act, 1961 deals with Procedure for Registration of a Charitable Trust or institution
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Period of six months as provided in Sub-section (2) of Section 12AA is not mandatory. Though the word ‘shall’ has been used but it is well known that to ascertain whether a provision is mandatory or not, the expression ‘shall’ is not always decisive. It is also well known that whether a statutory provision is mandatory or directory has to be ascertained not only from the wording of the statute but also from nature and design of the Statute and the purpose which it seeks to achieve.
Tribunal vide their order dt.12.9.2011 had noted all the facts finding when it was the endeavor of the learned CIT to limit himself to satisfy about the charitable nature of the objects of the Trust and find the genuineness of the activities of the Trust. The undisputed fats are that the learned CIT in the second innings has reiterated that the activities carried out are the same as were before and therefore, there was violation of the provisions of Section 11 to grant registration u/s.12AA.
In addition to the regular cricket matches, the assessee is conducting commercially oriented matches like Indian Premier League (IPL). Players of IPL teams are selected by sponsors to play under their brand names. Players are selected through auctions. Players choose that sponsor which offers the highest amount of money. IPL Matches are played with hype and celebration so as to create more and more revenue out of sale of telecast rights. All these activities when read together, one has to come to a finding that the entire activities of the Association is poised towards generating huge amount of income through the game of cricket.
Order of ld. DIT(E) has clearly mentioned that assessee’s objects were in the nature of advancement of object of general public utility coming within the ambit of Section 2(15) of the Act. He had cancelled the registration only for the reason that the receipts exceeded Rs. 10 lakhs.
Under section 12AA of the Act, the Commissioner has to satisfy himself about the objectives of the trust and the genuineness of its activities. For such purpose, he has the power to call for such documents or information from the trust as he think are necessary.
It would be relevant to mention here that the trust was formed on 11-1-2012, the application for registration under section 12AA was submitted by the appellant on 27-3-2012, i.e., within a period of three months of its creation. The school activities started in June, 2012. The appellant submitted its books of account up to September, 2012 before the Commissioner. The Commissioner, after examining the statement of accounts, for such a short period formed its opinion that the activities of trust were not charitable in nature. The Commissioner did not raise any objection on the objects of the trust. It was premature for the Commissioner to judge the activities of the trust by just glancing through the statement of accounts of the trust of such a short period.
In the instant case, the assessee-trust is carrying on various activities in the nature of trade, commerce or business and rendering its services for the purpose of trade, commerce and business, because it is charging huge fees on account of various facts. No doubt, the assessee has given some explanation for charging fees by stating that it is charging fees as per rules framed by the Punjab Local Bodies Govt., which is clearly the admission by it that it is doing activities not for charitable purpose but for business purpose only.
DIT (E) was not justified in forming an opinion that the objects of the assessee are for a specific community being violative of the provisions of s. 13(1)(b) of the Act. As a matter of fact, the assessee has been serving the public irrespective of caste, creed and religion by imparting education and, thus, it is entitled to registration u/s 12AA of the Act.
Corpus donation could not be considered as general donation in AY 2006-07 and 2007-08, merely on the ground of its utilisation in AY 2008-09 for giving corpus donation to other charitable institutions. Further, as per instruction No. 1132/CBDT dated 05.01.1978, it has been clarified that the payment of a sum by one charitable trust to another for utilization by the donee trust towards its charitable objects is proper application of income for charitable purposes in the hands of the donor trust, and the donor trust will not loose exemption u/s 11.
CIT Vs. Surya Educational & Charitable Trust (P&H HC) – Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act.
