2012 (10) TMI 1023 - HC - Income Tax

Grant of registration to assessee u/s 12AA - Held that - Object of Section 12AA of the Act is to examine the genuineness of the objects of the Trust but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment

Summary

Issues:
Grant of registration under Section 12AA of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Grant of Registration under Section 12AA
The appeal was filed against the order passed by the Income-tax Appellate Tribunal (ITAT) regarding the registration under Section 12AA of the Act for the assessment year 2008-09. The main question raised was whether the Tribunal erred in setting aside the order passed by the Commissioner of Income-tax, Panchkula, and allowing registration to the applicant society despite the finding that the institution was being run with the motive to earn profit, even though its activities were covered under the definition of charitable purpose. The Tribunal relied on its earlier decision in Surya Educational & Charitable Trust v. CIT and reversed the appellant's decision to decline registration to the respondent due to surplus funds not being utilized for charitable purposes.

Issue 2: Interpretation of Section 12AA and Related Provisions
The Court referred to Section 12AA of the Act, which requires the Commissioner to satisfy himself about the genuineness of the activities of the Trust for registration. It was noted that the benefit of Sections 11 and 12 of the Act, dealing with income derived from property held for charitable or religious purposes, is available only if the Trust or Institution is registered under Section 12AA. The Court emphasized that the object of Section 12AA is to examine the genuineness of the Trust's objects, not its income for charitable purposes. The judgment clarified that the application for registration must be made within one year of the Trust's creation, and the Commissioner can cancel registration if the Trust's activities are not carried out in accordance with its objects.

Conclusion:
The Court dismissed the appeal, stating that no substantial question of law arose for consideration. The judgment highlighted the importance of registration under Section 12AA for Trusts or Institutions to avail benefits under Sections 11 and 12 of the Act. It emphasized that the focus of Section 12AA is on the genuineness of the Trust's objects, not its income for charitable purposes. The decision provides clarity on the interpretation of relevant provisions and the procedure for registration under the Income-tax Act, 1961.