2017 (10) TMI 386 - HC - Income Tax

Rejection of grant of registration u/s 12AA - trust has not yet commenced the charitable or religious activity - Held that - This issue raised in this appeal is squarely covered by Division Bench judgment of this Court in Commissioner of Income Tax-II Vs. R.S. Bajaj Society 2014 (1) TMI 761 - ALLAHABAD HIGH COURT as held 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:
1. Appeal under Section 260-A of Income Tax Act, 1961 challenging judgment of Income Tax Appellate Tribunal, Lucknow Bench.
2. Interpretation of Section 12AA of the Income-tax Act, 1961 regarding registration for claiming exemption under sections 11 and 12.
3. Comparison of judgments from various High Courts on registration under Section 12AA based on commencement of charitable activities.

Analysis:
1. The appeal before the High Court arose from a judgment of the Income Tax Appellate Tribunal, Lucknow Bench, concerning the rejection of registration under Section 12AA of the Income-tax Act, 1961. The Tribunal directed the Commissioner to grant registration based on a Division Bench judgment, emphasizing the genuineness of the trust's charitable objects over the commencement of activities. The High Court upheld the Tribunal's decision, citing the consistent legal position that registration should not be denied solely due to activities not being initiated.

2. The High Court referred to the Division Bench judgment in Hardayal Charitable & Educational Trust v. CIT, which clarified that the focus at the registration stage under Section 12AA should be on the genuineness of the trust's objects, not the commencement of activities. The Court highlighted that the trust's eligibility for exemption should not be hindered by the timing of when charitable activities begin. This principle was applied to the present case, where the rejection of registration was deemed contrary to law, as the trust's objects were charitable in nature, and no issues were raised regarding their genuineness.

3. The High Court distinguished judgments from other High Courts, such as the Kerala High Court and the Punjab and Haryana High Court, where registration denials were based on different circumstances, such as delayed applications or lack of charitable work. These cases were deemed distinguishable from the present matter, emphasizing the importance of examining each case's unique facts. The High Court concluded that, based on the legal principles established in previous judgments and the specific circumstances of the case, no substantial question of law arose, leading to the dismissal of the appeal.

In summary, the High Court upheld the Tribunal's decision to grant registration under Section 12AA, emphasizing the importance of assessing the genuineness of charitable objects over the commencement of activities, in line with established legal principles and precedents from various High Courts.