2014 (1) TMI 761 - HC - Income Tax

Rejection of grant of registration u/s 12AA - Held that - The Commissioner did not raise any issue about the objects of the trust which the Tribunal found are clearly charitable in nature - The only ground which weighed with the Commissioner in declining to grant registration has been found to be contrary to law - Following Hardayal Charitable and Educational Trust vs. Commissioner of Income-Tax1 2013 (3) TMI 377 - ALLAHABAD HIGH COURT - The registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity - 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 the genuineness of the objects - Decided against Revenue.

Summary

Issues:
- Appeal under Section 260-A of the Income Tax Act, 1961 regarding registration under Section 12AA
- Interpretation of Section 12AA in relation to charitable activities commencement
- Application of judicial opinions from various High Courts in deciding registration under Section 12AA

Analysis:
1. The appeal before the High Court stemmed from the Income Tax Appellate Tribunal's decision regarding the registration under Section 12AA of the Income Tax Act, 1961. The Commissioner of Income Tax-II, Lucknow had initially declined to grant registration to the assessee, citing the non-commencement of charitable activities, despite the society being established for imparting higher medical education. The High Court referred to the Division Bench judgment in Hardayal Charitable and Educational Trust case, emphasizing that registration under Section 12AA should focus on the genuineness of objects, not activities that have not yet commenced.

2. The Income Tax Appellate Tribunal (ITAT) found the Commissioner's rejection of registration to be against the law as per the Division Bench judgment in Hardayal Charitable and Educational Trust case. The Tribunal noted that the trust's objects were charitable in nature, and the rejection was solely based on the non-commencement of activities. Consequently, the ITAT directed the Commissioner to grant registration under Section 12AA, aligning with the consistent legal stance.

3. The revenue's counsel referenced a judgment from the Kerala High Court and another from the Punjab and Haryana High Court to support their argument. However, the High Court distinguished these cases from the present situation. In the Kerala case, the society's proposal for a technical institution came after the rejection of the application, indicating a different scenario. Similarly, the Punjab and Haryana case involved delays in application and misuse of funds, making them distinguishable from the current matter.

4. Ultimately, the High Court dismissed the appeal, stating that it did not raise any substantial question of law. The decision was based on the understanding that the registration under Section 12AA should primarily focus on the genuineness of the trust's objects rather than the commencement of charitable activities. No costs were awarded in this dismissal.