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2017 (1) TMI 1007 - HC - Income TaxDenial of grant of registration u/s 12AA - trust not yet commenced - Held that - As held in Commissioner of Income Tax-II Vs. R.S. Bajaj Society 2014 (1) TMI 761 - 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.
Issues:
1. Interpretation of Section 12AA of the Income Tax Act, 1961 for registration of charitable trusts. 2. Requirement of commencement of charitable activities for registration under Section 12AA. 3. Application of judicial precedents in determining eligibility for registration. 4. Distinction between different High Court judgments on registration of charitable trusts. Issue 1: Interpretation of Section 12AA of the Income Tax Act, 1961 for registration of charitable trusts: The judgment discusses the interpretation of Section 12AA concerning the registration of charitable trusts under the Income Tax Act, 1961. It emphasizes that at the registration stage, the focus should be on the genuineness of the trust's objects and not on the commencement of activities. The Commissioner of Income Tax is not required to evaluate activities that have not yet started. The judgment highlights that registration under Section 12AA is crucial for claiming exemptions under Sections 11 and 12 of the Act. Issue 2: Requirement of commencement of charitable activities for registration under Section 12AA: The judgment clarifies that the initiation of charitable or religious activities is not a prerequisite for registration under Section 12AA. It states that if a trust is in the process of establishing institutions to fulfill its objectives, registration cannot be denied based on the lack of commencement of activities. The judgment emphasizes that assessing the genuineness of the trust's objects is essential at the initial stage, and the focus should not be on activities that have not yet begun. Issue 3: Application of judicial precedents in determining eligibility for registration: The judgment extensively relies on a Division Bench judgment and other High Court decisions to establish the legal principles regarding registration of charitable trusts under Section 12AA. It cites precedents from various High Courts, including Karnataka, Delhi, Punjab, Haryana, and Kerala, to support the interpretation that the genuineness of the trust's objects is paramount for registration, rather than the commencement of activities. The Tribunal's decision aligns with the consistent legal position established by previous judgments. Issue 4: Distinction between different High Court judgments on registration of charitable trusts: The judgment distinguishes between various High Court judgments to clarify the unique circumstances of each case. It contrasts the facts of cases from Kerala and Punjab and Haryana High Courts to underscore that the rejection of registration in the present case was contrary to law, as the trust's objects were found to be charitable in nature. The judgment dismisses the appeal, emphasizing that the precedents cited by the revenue are not applicable due to factual distinctions. In conclusion, the judgment affirms that the registration of charitable trusts under Section 12AA should primarily focus on the genuineness of the trust's objects, rather than the commencement of charitable activities. It underscores the importance of legal precedents in interpreting the law and highlights the need to distinguish between different High Court judgments based on the specific facts of each case.
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