2015 (1) TMI 1454 - HC - Income Tax

Exemption u/s 11 - registration filed under Section 12 AA denied - Revenue questions the trust not having commenced its activity for the grant of registration - HELD THAT - When the genuineness of the objects of the Trust were not questioned by the CIT and when the Trust was yet to commence its operation and when a subject matter of scrutiny by the CIT as contemplated under section 12 AA(3) of the Income Tax Act the Revenue would not be justified in refusing the registration at the threshold. The said ratio was laid down in a judgment reported in CIT Vs. Arulmighu Sri Kamatchi Amman Trust 2012 (2) TMI 159 - MADRAS HIGH COURT - Decided against revenue.

Summary

Issues:
1. Eligibility of a trust for registration under Section 12AA of the Income Tax Act.

Analysis:
The High Court of Madras addressed the issue of whether a trust is eligible for registration under Section 12AA of the Income Tax Act in the present case. The Revenue filed an appeal against the order of the Income Tax Appellate Tribunal, questioning the eligibility of the assessee trust for registration. The Court noted that the Revenue's argument was based on the trust not having commenced its activities at the time of the registration application. However, the Court emphasized that Section 12AA(1) does not mandate the commencement of activities as a condition for registration. The Commissioner is required to be satisfied about the trust's objects and activities' genuineness and has the power to cancel registration if the trust deviates from its stated objectives. The Court highlighted that the Commissioner's authority to cancel registration in case of non-compliance indicates that the trust's activities can be scrutinized post-registration. The Court cited a previous decision and agreed with the Gujarat High Court's ruling, emphasizing that the Revenue cannot refuse registration merely because the trust had not started operations at the time of application.

The Court referred to its previous decision in T.C.(A)No.579 of 2013 dated 27.01.2014, where it dismissed a similar appeal by the Revenue based on the same reasoning. The Court reiterated that the genuineness of the trust's objectives was not in question, and the trust's commencement of activities at the time of application was not a valid ground for denying registration. The Court further highlighted that the Commissioner's authority to review and cancel registration if the trust deviates from its objectives ensures ongoing scrutiny of the trust's activities post-registration. Based on the precedent set by the earlier decision, the Court upheld the trust's eligibility for registration under Section 12AA of the Income Tax Act and ruled against the Revenue in the present case.

In conclusion, the High Court of Madras, following its previous decisions and citing relevant legal provisions, held that the trust in question was eligible for registration under Section 12AA of the Income Tax Act. The Court emphasized that the trust's commencement of activities at the time of application was not a valid ground for denying registration, as the Commissioner has the authority to assess and cancel registration if the trust fails to adhere to its stated objectives. The Court's decision was based on the principle that ongoing scrutiny post-registration ensures compliance with the trust's objectives and activities.