DENIAL OF EXEMPTION TO A TRUST UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT, 1961 FOR NON-SUBMISSION OF CERTIFICATE ISSUED UNDER SECTION 12AB

[DR.MARIAPPAN GOVINDARAJAN]

Exemptions to a charitable trust

Income of a charitable and religious trust is exempt from tax subject to certain conditions. The exemptions are provided to the trusts under various provisions, inter-alia, Section 10, section 11 of the Income Tax Act, 1961 (‘Act’ for short), etc. Some of the exemptions allowed to a trust are as under:

• section 11 of the Act provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions.
• In view of Section 12, income in the form of voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall also be exempt from tax (subject to certain conditions).

Section 12AA of Income Tax Act 1961 deals with the registration of charitable trusts and institutions. As per this section, trusts and institutions engaged in charitable activities can apply for registration to claim tax exemptions and deductions under various provisions of the Income Tax Act. Section 12AB of the Act provides the procedure of fresh registration of a trust.

Claim of exemptions

The claim of exemptions under section 11 and 12 of the Act are subject to conditions mentioned in the certificate. The registration certificate is to be produced before the authorities. Otherwise, the exemptions claimed by the Assessee in the return of income will be disallowed.

Case law

In ‘Pareviya Veer Mandir Trust v. Income Tax Officer’ – 2025 (4) TMI 1090 – Gujarat High Court, the petitioner is a public charitable trust, registered under the Bombay Public Trusts Act, 1950, which was established on 09.08.2000. The petitioner got registration under Section 12A of the Act as a Charitable Trust during the year 2002. The petitioner also availed exemption, pursuant to the registration under Section 12A, under section 11 and 12 of the Act.

As per the amendment taken place in the Act the petitioner has to obtain registration under the new Section 12AA. The petitioner also got registration under the said section. The petitioner regularly filed its income tax returns claiming exemption under Sections 11 and 12 of the Act. Due to heavy rain in the year 2012 most of the documents washed out. The registration certificate obtained under Section 12AA was also lost.

The petitioner filed income tax return for the assessment year 2012 – 13 claiming exemption under section 11 and 12 of the Act. The Assessing Authority, on assessment, disallowed the exemptions claimed by the petitioner since the certificate of registration was not submitted to the income tax authorities. The petitioner did not file an appeal before the Commissioner of Income Tax (Appeals) against the order of Assessing Officer, disallowing the exemption claimed under section 11 and 12 of the Act. Instead, the petitioner filed an application under Right to Information Act, 2005 (‘RTI’ for short) on 17.10.2018 to the Commissioner of Income Tax, Gandhi Nagar. The said application of the petitioner was rejected by the Department. In this matter the Authority under RTI Act passed an order on 28.12.2018 rejecting the petition of the petitioner seeking copy of registration certificate on the ground that the respondent authority has lost the records containing certificate of registration of the petitioner trust and therefore, the respondent authority was not in a position to provide the copy of the certificate of registration to the petitioner.

Being aggrieved against the petitioner filed the present writ petition against the above said order. The petitioner prayed for the following-

• to direct the respondent authority to furnish the copy of the registration certificate bearing no. CIT/GNR/12AA/PTN-8-2002- 03 issued to the petitioner – trust under Section 12AA of the Income-Tax Act, 1961;
• to issue an appropriate writ, order or direction directing the respondent authority to allow the claim of exemption of the petitioner based on the details of the registration certificate being certificate no. CIT/GNR/ 12AA/PTN-8/2002-03 that is already provided in the returns of income filed by the petitioner – trust;
• to stay the assessment proceedings as already initiated vide issuance of notice dated 25.09.2020 by the respondent authority till the disposal of the present petition.

The petitioner submitted the following before the High Court-

• it is not in dispute that the petitioner had preferred an application in Form 10A as per Rule 17A of the Rules in the year 2002 under section 12A of the Act for registration.
• the registration was granted to the petitioner by following procedure prescribed in section 12AA of the Act by issuance of Registration Certificate No. CIT/ GNR/12AA/PTN-8/2002-03 which was reflected in the returns of income filed by the petitioner.
• In view of the above the petitioner is entitled to get a copy of registration certificate issued under section 12AA of the Act by the respondent authority to claim the exemption under section 11 and 12 of the Act.
• In view of the provisions of section 12AB of the Act, the petitioner would not be in a position to apply for a fresh registration and as the petitioner has already been granted the registration under section 12A as it stood at the relevant point of time by issuing certificate under section 12AA of the Act, the respondent authorities are required to provide a copy of the registration certificate so as to avoid any complication of granting exemption to the petitioner under provisions of section 11 and 12 of the Act.

The Department submitted the following before the Supreme Court-

• the petitioner is regularly filing return of income claiming exemption under section 11 and 12 of the Act
• as per the order dated 28.12.2018 passed under the Right to Information Act, the respondent authority has shown the inability to trace its own records and therefore, the copy of the certificate under section 12AA of the Act as prayed for by the petitioner cannot be issued.
• the petitioner has accepted the order of dis-allowance for the Assessment Year 2013-14 without preferring an appeal and therefore, the petitioner is not entitled to exemption under section 11 and 12 of the Act
• the petitioner failed to produce the copy of the registration certificate under section 12AA of the Act.
• the respondents have even tried to search the records pursuant to the order passed by the High Court on 27.01.2025 calling upon the respondent to produce the original record, however, in spite of the best efforts from the office of the respondent, records for grant of registration to the petitioner could not be traced.

The High Court considered the submissions of the parties. The High Court observed that it is not in dispute that-

• the registration of the petitioner trust under section 12A of the Act by issuance of the certificate under section 12AA of the Act; and
• the loss of certificate of the petitioner in the year 2012.

The Department is, therefore, required to issue copy of the certificate under section 12AA of the Act by reconstructing their own file as it is reported that the old records have been lost and the respondent authorities are unable to trace the original file.

The High Court held that the only remedy available is to direct the respondent to reconstruct the file of original records on the material available with the respondent with the help of the petitioner and issue a copy of registration certificate under section 12AA of the Act with Registration Certificate No. CIT/GNR/12AA/PTN-8/2002-03 so as to enable the petitioner to claim the exemption under section 11 and 12 of the Act without any hindrance. The High Court also directed the Department to complete this exercise within 12 weeks from the date of receipt of its order.