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TMI Blog2020 (3) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961 and came to an erroneous decision that verification of genuineness of activity is not condition precedent for granting registration under Section 12AA of the Income Tax Act, 1961." Section 12AA of the said Act provides that the Principal Commissioner or Commissioner of Income Tax shall register a trust on being satisfied about its objects and the genuineness of its activities. The only question to be decided is whether the trust should show some activities undertaken by it before registration to the Commissioner to satisfy him or is the Commissioner required to be satisfied that the intended activities of the trust after registration are genuine? In this case, the tribunal proceeded on the basis that the activities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e termed as charitable as per the details furnished by the assessee, therefore, such registration could not be granted. When the trust itself was formed in January, 2008, with the money available with the trust, one cannot expect them to do activity of charity immediately and because of that situation the authority cannot come to a conclusion that the trust was not intending to do any activity of charity. In such a situation the objects of the trust have to be taken into consideration by the authority and the objects of the trust could be read from the trust deed itself. In the subsequent returns filed by the trust, if the Revenue comes across that factually the trust has not conducted any charitable activities, it is always open to the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Act. Any prudent trustee would not carry out the substantial activities of the trust for a length of time and then apply for registration under Section 12AA, for the simple reason that the income of the trust would be chargeable to income tax during that period. On the other hand, a donor would be reluctant to make donations to the trust unless it was registered. In those circumstances, it is a little unrealistic to think of two situations. First, on creation of the trust the trustees apply for registration under Section 12AA. In that case, they would have to demonstrate the genuineness of the objects of the trust, only, before the Commissioner. Secondly, the other situation where the trustees carry on activities for sometime and then ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h to add a few words to show how unrealistic the interpretation offered by the Revenue is in real life. No trust can be created without registration under the Indian Registration Act. Section 12A/12AA of the Income Tax Act, 1961 does not refer to this registration. The registration referred to in Section 12AA is done by the Principal Commissioner of Income Tax who on being satisfied about the objects and genuineness of the activities of trust registers it and by this act of registration, permits people to donate funds to it to claim certain deductions. If a trust registered under Indian Trust Act and Registration Act as a charitable trust, does not get itself registered before the Principal Commissioner of Income Tax it loses certain bene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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