2012 (12) TMI 876 - HC - Income Tax

Registration u/s. 12A - CIT(A)rejected the application on non submission of documentary evidence regarding its activities - ITAT allowed the claim - Held that - It can be seen that under Section 12AA the Commissioner has to satisfy himself about the objectives of the trust and the genuineness of its activities. For such purpose, he has the power to call for such documents or information from the trust as he think are necessary. However, this does not mean that if the activities of the trust have not commenced, the Commissioner has authority to reject its application for registration on the ground that the Trust failed to convince him about the genuineness of the activities. That is what unfortunately the Commissioner did in the present case. The Commissioner in the present case did not dispute about the charitable activities as indicated in the object clause of the assessee & in case where the assessee trust did not start charitable activity at the time of granting registration, the same can be verified from the object clause. In that view no error in the Tribunal s impugned order reversing the order of the Commissioner who merely on the ground that the activities of the Trust had not commenced persuaded to reject the application for registration - in favour of assessee.

Issues:
- Appeal against the judgment of the Income Tax Appellate Tribunal regarding registration under Section 12A of the Income Tax Act, 1961.

Analysis:
1. The appellant, the Revenue, challenged the Tribunal's decision to allow the assessee's application for registration under Section 12A of the Income Tax Act. The Commissioner had rejected the application citing lack of evidence on the activities carried out by the Trust. The Tribunal, however, noted that the Commissioner's rejection was primarily based on the Trust's failure to start activities by a certain date. The Tribunal emphasized that the Commissioner's power is limited to examining the genuineness of the Trust's activities during the registration process. The Tribunal found that the Commissioner's rejection solely on the grounds of non-commencement of activities was not justified as the genuineness of activities can only be verified when some activity has taken place. The Tribunal, therefore, allowed the appeal based on a strict interpretation of the law.

2. The learned counsel for the Revenue argued that the Tribunal erred in reversing the Commissioner's order and emphasized the Commissioner's authority to examine the genuineness of the Trust's activities. Section 12A of the Act outlines the conditions for the applicability of Sections 11 & 12, requiring registration of the Trust before a specified period. Section 12AA details the procedure for registration, empowering the Commissioner to assess the genuineness of the Trust's activities. However, the Tribunal correctly interpreted the law, highlighting that the Commissioner's power is not to reject an application solely based on the non-commencement of activities. The Tribunal's decision was based on a strict reading of the law, ensuring that the Commissioner's assessment is focused on the Trust's objectives and the genuineness of its activities, rather than the timing of activity commencement.

3. Upon reviewing the provisions of Section 12AA, it is evident that the Commissioner must evaluate the Trust's objectives and the genuineness of its activities during the registration process. The Commissioner has the authority to request relevant documents and information to ascertain the Trust's activities' genuineness. However, the law does not empower the Commissioner to reject an application solely due to the non-commencement of activities. The Tribunal rightly intervened in this case, emphasizing that the Commissioner's assessment should focus on the Trust's objectives and the genuineness of its activities, rather than the timing of activity initiation. The Tribunal's decision aligned with the legal framework, ensuring a fair evaluation of the Trust's registration application.

4. In conclusion, the High Court dismissed the Tax Appeal, affirming the Tribunal's decision to allow the assessee's application for registration under Section 12A of the Income Tax Act. The Court found no error in the Tribunal's interpretation of the law, emphasizing that the Commissioner's assessment should be based on the Trust's objectives and the genuineness of its activities, rather than the timing of activity commencement. The judgment upheld the principles of fair evaluation and adherence to the legal framework in matters of Trust registration under the Income Tax Act.

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