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2011 (10) TMI 47 - HC - Income TaxCIT declined to grant registration u/s 12A on the ground that expenditure to the extent of Rs.17.25 crores has been incurred by the respondents for purchase of the land, whereas substantial expenditure is still to be incurred on construction of the building and other infrastructure and that the expenditure on the charitable activities, is only Rs.1500/-. - Tribunal directed the CIT to grant the registration - Held that - the 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. - Decided against the revenue.
Issues:
Registration under Section 12AA of the Income Tax Act, 1961 for educational institution. Analysis: Issue 1: Registration under Section 12AA The respondent applied for registration under Section 12A of the Act to establish educational institutions. The Commissioner of Income Tax raised concerns regarding the timing of the application, the expenditure incurred, and the activities of the society. The Commissioner declined registration based on the perceived premature nature of the application and the focus on establishing educational institutes. The Tribunal, however, emphasized that the Commissioner's role is to assess the genuineness of the trust's activities, not the income for charitable purposes. The Tribunal highlighted that the registration application must be made within one year of the trust's creation, and the trust need not have started all activities in the first year. The Tribunal also noted the power of the Commissioner to cancel registration if the trust's activities are not in line with its objects. Issue 2: Interpretation of Relevant Sections The judgment discussed the provisions of Sections 11, 12, and 10(23C) of the Act concerning the exclusion of income for charitable or religious purposes. It clarified that the benefits of these sections are only available if the trust or institution is registered under Section 12AA. The judgment emphasized that the application for registration must demonstrate the genuineness of the trust's activities, both current and anticipated. The insertion of sub-section (3) to Section 12AA empowered the Commissioner to cancel registration if the trust's activities deviate from its stated objects. Issue 3: Applicability of Precedents The appellant cited judgments from the Madras High Court and the Supreme Court to argue that registration should only be granted once the educational institution is operational. However, the High Court found these precedents inapplicable to the present case, emphasizing that the focus of registration under Section 12AA is on the genuineness of the trust's objects, not the income for charitable purposes. The Court concluded that no substantial question of law arose in the appeals and dismissed them. In summary, the judgment clarifies the process and criteria for registration under Section 12AA of the Income Tax Act, emphasizing the importance of demonstrating the genuineness of the trust's activities and objects. It distinguishes between the assessment of income for charitable purposes and the registration of trusts, highlighting the Commissioner's role in ensuring compliance with the trust's stated objectives.
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