2025 (2) TMI 716 - SCH - Income Tax

Denial of registration u/s 12AA - proof to indicate that the Trust was undertaking any charitable activities - HELD THAT - We may agree to a certain extent with the learned ASG that the very purpose for any assessee to seek registration under Section 12AA is to claim exemption u/s 10 and 11 respectively of the Act as the case may be. Therefore before seeking registration it is essential that the Trust should adduce cogent material to the satisfaction of the Commissioner that the activities are genuinely charitable in nature. To the aforesaid extent there is no problem. We may only say that mere registration under Section 12-AA automatically does not entitle any charitable trust to claim exemption u/s 10 and 11 respectively of the Act 1961. When a return is filed by any trust claiming exemption it is for the assessing officer to look into all the materials and satisfy itself whether the exemption has been claimed genuinely or not. If the assessing officer is not convinced it is always open for him to decline grant of exemption.

Summary

The issues presented and considered in the legal judgment are as follows:1. The true and correct interpretation of Section 12-AA of the Income Tax Act, 1961.2. Whether a charitable trust is eligible for registration under Section 12-AA based on the genuineness of its activities.Issue-Wise Detailed Analysis:The Court considered the relevant legal framework and precedents related to the registration of charitable trusts under Section 12-AA of the Income Tax Act, 1961. The Court interpreted and reasoned that for a trust to be registered under Section 12-AA, it must demonstrate genuine charitable activities. The key evidence and findings revolved around the activities of the trust, specifically whether they were genuinely charitable in nature. The Court applied the law to the facts by analyzing the trust's application for registration and the Commissioner's decision to decline registration based on lack of verifiable charitable activities. The Court also considered the competing arguments presented by the revenue and the respondent trust.Significant Holdings:The Court preserved verbatim quotes of crucial legal reasoning, emphasizing the requirement for genuine charitable activities for registration under Section 12-AA. The core principle established was that registration under Section 12-AA does not automatically entitle a charitable trust to claim exemptions under Sections 10 and 11 of the Income Tax Act, 1961. The final determination on each issue was that the trust must provide cogent evidence of genuinely charitable activities to satisfy the Commissioner for registration under Section 12-AA.In conclusion, the Court upheld the decision of the Tribunal and the High Court to grant registration to the trust under Section 12-AA. The Court rejected the revenue's appeal and affirmed that the trust's application for registration was valid. The Court clarified that registration under Section 12-AA does not guarantee exemption under Sections 10 and 11 of the Act, and the assessing officer has the discretion to verify the genuineness of the exemption claim.