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2017 (9) TMI 667 - HC - Income TaxRegistration of a trust under Section 12AA denied - satisfaction recorded by the registering authority - Held that - Section 12AA of the Act provides that the Registering Authority after satisfying himself about the objects of the Trust and genuineness of its activities shall pass an order in writing for registration of the Trust or to refuse the registration. Therefore satisfaction of the Registering Authority is mandatory before any Trust is registered under Section 12AA of the Act. The aforesaid satisfaction has not to be recorded by any other authority. In the present case the registration was refused simply for the reason that the objects and activities of the Trust were not charitable in nature. The said order having been set aside by the tribunal leaves no material which could reflect that any satisfaction as required exists. Thus in the absence of any satisfaction of the Registering Authority the direction to register the Trust is without jurisdiction. The Tribunal could have ordered for setting aside the order of Registering Authority refusing registration but it could not have directed for registration straight away inasmuch as there has to be satisfaction recorded by the Registering Authority which was lacking. Answer the question in favour of the Department and against the respondent and it is held that the Tribunal has no jurisdiction in law to direct for registration of the Trust without there being satisfaction recorded by the Registering Authority as contemplated by Section 12 AA of the Act.
Issues:
Whether the tribunal can direct for the registration of a trust under Section 12 AA of the Income Tax Act without satisfaction recorded by the registering authority. Analysis: The appeal before the High Court raised the issue of whether the tribunal could order the registration of a trust under Section 12 AA of the Income Tax Act without the satisfaction of the registering authority. The facts of the case revealed that the respondent had applied for registration under Section 12 AA, which was initially refused by the Commissioner of Income Tax on the grounds of lack of charitable activities. The Tribunal, however, allowed the appeal and directed the registration of the Trust. The High Court referred to various precedents to determine the legal requirements for registration under Section 12 AA. In the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income Tax, it was established that the authorities must satisfy themselves about the genuineness of the trust's activities and the application of income to charitable purposes for registration under Section 12 AA. Similarly, in Fifth Generation Education Society Vs. Commissioner of Income Tax, it was clarified that the Commissioner should only examine the genuineness of the trust's objects and activities during the registration process. The High Court also cited the Kerala High Court's decision in Sree Anjaneya Medical Trust case, emphasizing the need to verify the genuineness of a trust during registration to prevent misuse of tax exemptions. Furthermore, the judgment in Commissioner of Income Tax (Exemption) Vs. Yamuna Expressway Industrial Development Authority highlighted that the authorities should not investigate the charitable activities during registration but focus on the trust's genuineness. The High Court concluded that the Tribunal was correct in holding that the Commissioner of Income Tax committed an error in refusing registration. However, it emphasized that the Registering Authority must be satisfied about the trust's objects and activities before registration under Section 12 AA. As there was no satisfaction recorded by the Registering Authority in this case, the High Court held that the tribunal could not direct registration without proper jurisdiction. In the final decision, the High Court set aside the Tribunal's order directing registration and sent the matter back to the Registering Authority for proper assessment and decision in accordance with the law. The appeal was allowed in favor of the Department, highlighting the importance of the Registering Authority's satisfaction for trust registration under Section 12 AA of the Income Tax Act.
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