Section 12AA of the Income-tax Act, 1961 - Charitable or religious trust - Procedure for registration [Denial of registration] - Whether where there was no material to conclude that objects of trust or activities of trust were not genuine or any doubt arose in respect of genuineness of activities, registration under section 12AA could not be denied - Held, yes - Whether only because trust has not commenced activities, Commissioner would have no authority to ipso facto reject application made under section 12A for registration under section 12AA - Held, yes [Paras 5 & 6] [In favour of assessee]
HIGH COURT OF
Director of Income-tax (Exemption)
v.
Panna Lalbhai Foundation*
AKIL KURESHI AND MS. SONIA GOKANI, JJ.
TAX APPEAL NO. 853 OF 2012†
FACTS
■ | The assessee-trust preferred an application under section 12A for registration in form No. 10A. | |
■ | A report of inspector was called for, who reported that there was no activity relating to the trust going on at the premises of the trust. Letter given by the trust indicated that the trust intended to work on educational objects, medical relief and object of advancement of music, art etc. and that it also expected to receive donation. | |
■ | On the basis of the above report, the Director (Exemption) refused the registration applied under section 12A. | |
■ | The Tribunal held that the trust was at infant stage and the trust needed to be registered in order to get benefits under the Act. |
HELD
■ | The Commissioner is required to call the documents and information from the trust if he deems it necessary in order to satisfy about the genuineness of the activities of the trust. After duly satisfying himself about the objects of the trust and genuineness of the activities, he is required to grant registration. | |
■ | The powers of the Commissioner to satisfy himself about objects and the genuineness of the activities are recognized under law. However, only because the trust has not commenced the activities, the Commissioner would have no authority to ipso facto reject the application for registration on that count alone. [ | |
■ | In the instant case, the Director (Exemption) held that the trust had not commenced its activities and denied registration. However, there was nothing to indicate any material to conclude that the objects of the trust or the activities of the trust were not genuine or any doubt arose in respect of the genuineness of the activities. The Tribunal, in the instant case, therefore, has rightly held in favour of the assessee by interfering with such an order. Considering the objects of the trust, the Tribunal, with cogent reasons, directed the Director (Exemption) to grant registration under section 12AA on an application preferred under sections 12A. [ | |
■ | There is absolutely no reason to interfere with the order of the Tribunal. It is also to be noted that additionally the Statute itself provides for cancellation of such registration in the event of satisfaction of the authority concerned with the amendment in the Statute. With regard to activities of the trust, after once registration is granted under clause (b) of sub-section (1) of section 12AA or under section 12A, Commissioner, in the event of any its conclusion that activities of trust are not genuine or not being carried out in accordance with the objects, can direct cancellation under sub-section (3) of section 12AA. In other words, the registration once granted can always be cancelled if the activities of the trust are found to be dubious or non-genuine or contrary to objectives of the Act. [ |
CASES REFERRED TO
DIT (E) v. Meenakshi Amma Endowment Trust [IT Appeal No. 152 of 2010, dated 10-11-2010 ] (para 2.2).
Mrs. Mauna M. Bhatt for the Appellant.
ORDER
Ms. Sonia Gokani, J. - Aggrieved by the order of the Income Tax Appellate Tribunal dated 20.07.2012, this Tax Appeal is preferred under Section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act").
2. The brief facts leading to filing of the present Tax Appeal are as follow.
2.1 The applicant-Trust preferred an application under Section 12A of the Act for registration of the Trust on 25.01.2012 in Form No.10A. This application had contained certificate of registration by the Deputy Charity Commissioner and copy of the Trust deed with comprehensive list of objects. When the applicant was asked to furnish a detailed note of actual activities of the Trust from its inception, the applicant-Trust submitted a copy of bank statement and also had given details of Trust Deed. A report of inspector was called for, who reported that there is no activity relating to the Trust going on at the premises of the Trust. He was directed to meet one of the staff members working in the organization as Lalbhai Group had many trusts operating and carrying charitable activities. A letter was given by the Inspector dated 29.03.2012 which indicated that the Trust intended to work on educational objects, medical relief and object of advancement of music, art, drama, dance, literature etc. It also expected to receive donation from individuals, companies, business organizations and other trusts. On the basis of this report, the Director of Income-tax (Exemption) refused the registration applied under Section 12A by holding that due opportunity was given under proviso to Section 12AA(1) to the applicant-Trust and not having been satisfied with the explanation, this registration was rejected.
2.2 When the applicant-Trust approached the Income-tax Appellate Tribunal against the said order, the Tribunal held that the Trust is at infant stage and the trust needed to be registered in order to get benefits under the Act. The Tribunal, in a detailed order on analyzing the Trust Deed and applying the decision of the Karnataka High Court rendered in case of DIT (E) v. Meenakshi Amma Endowment Trust [IT Appeal No. 152 of 2010, dated 10-11-2010] granted prayer and directed DIT(E) to grant registration on application under Section 12A and 12AA of the Act.
2.3 Being aggrieved by the said decision, the revenue has preferred this Tax Appeal raising following substantial questions of law:
"(A) "Whether the Appellate Tribunal has substantially erred in law and on facts in applying the provisions of section 12AA(1) of the Income-tax Act observing that if the trust/institution is in infant stage then no verification of genuineness of activities is required?"
(B) "Whether or not, the words in section 12AA(1) "shall call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or institution and may also make such inquiries as he may deem necessary and after satisfying himself about the objects of the trust or institution and the genuineness of its activities" presume the existence of activities before the Commissioner can pass an order granting registration?"
3. Learned counsel Ms. Mauna Bhatt for the revenue has fervently argued that there is nothing emerging on record that the Trust started its activities and therefore, the decision of the Tribunal cannot be sustained. However, she candidly pointed out to this Court that in Tax Appeal No. 918 of 2011, identical question arose for consideration of this Court where the order of the Tribunal has been upheld by detailed reasonings.
4. It would be profitable to reproduce some relevant findings of Tax Appeal No.918 of 2011 as under:
"3.1 Section 12A of the Act pertains to conditions of applicability of Sections 11 & 12. Sub-section (1) thereof provides that provisions of Sections 11 & 12 shall not apply in relation to the income of the Trust or institution unless (a) the person in receipt of the income has made application for registration of the Trust or institution in the prescribed manner before the Commissioner before 1st day of July 1973 or before the expiry of period of one year from the date of creation of the Trust or institution; whichever is later and such Trust and Institution is registered under Section 12 AA of the Act.
3.2 Thus, to avoid applicability of Sections 11 & 12 of the Act, a Trust would have to make an application for registration before the Commissioner before expiry of period of one year from the date of its creation and such Trust would have to be registered under Section 12AA of the Act.
3.3 Section 12AA of the Act pertains to procedure for registration. Sub-section (1) thereof, which is relevant for our consideration, reads as under :-
'12AA. Procedure for registration - (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of Section 12A, shall -
(a) | call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and | |
(b) | after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he - |
(i) | shall pass an order in writing registering the trust or institution; | |
(ii) | shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant. |
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1stday of June 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) of sub-section (1) of Section 12A.
(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution :
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.'
4. Upon perusal of the provisions of sub-section (1) of Section 12AA of the Act, it emerges that upon receipt of an application for registration of a Trust or Institution under Section 12A(1) (a) of the Act, the Commissioner would call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf. After satisfying himself about the objectives of the trust or institution and the genuineness of its activities, the Commissioner would pass an order in writing registering a trust or institution, and if he is not satisfied, would pass an order in writing refusing the registration of the trust or institution.
5. It can thus be seen that under Section 12AA of 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. In that view of the matter, we see no error in the Tribunal's impugned order reversing the order of the Commissioner. It is of course true that even if the activities of the trust have not commenced, if the Commissioner has sufficient material in his command, he may still come to the conclusion that he is not satisfied about the objectives of the Trust or the genuineness of its activities. We understand the decision of the Tribunal accordingly.
6. In the present case, however, merely on the ground that the activities of the Trust had not commenced, the Commissioner was persuaded to reject its application for registration, which in our opinion, was not appropriate and therefore, rightly interfered by the Tribunal."
5. As can be noted in the instant case also, for availing benefits under Sections 11 and 12, the Trust made an application under Sections 12A for registration u/s. 12AA before the Director of Income-tax (Exemption). It also further emerges that Commissioner since is required to call for documents and information from the Trust if he deems it necessary in order to satisfy about the genuineness of the activities of the Trust, he, in this case also, made such inquiries. After duly satisfying himself about the objects of the Trust and genuineness of the activities, he is required to grant registration as held hereinabove. The powers of the Commissioner to satisfy himself about objects and the genuineness of the activities are recognized under law. However, only because the Trust has not commenced the activities, the Commissioner would have no authority to ipso facto reject the application for registration on that count alone.
6. In the instant case, the Director of Income-tax (Exemption) held that Trust had not commenced its activities and denied registration. However, there was nothing to indicate any material to conclude that the objects of the Trust or the activities of the Trust were not genuine or any doubt arose in respect of the genuineness of the activities. The Tribunal, in the instant case, therefore, has rightly held in favour of the assesee by interfering with such an order. Considering the objects of the Trust, the Tribunal, with cogent reasons, directed the DIT(E) to grant registration u/s. 12AA on an application preferred under Sections 12A.
7. We see absolutely no reason to interfere with the order of the Tribunal and as such, stand of the Tribunal is in consonance with the decision of this Court referred to hereinabove. It is also to be noted that additionally the Statute itself provides for cancellation of such registration in the event of satisfaction of the authority concerned with the amendment in the Statute. With regard to activities of the Trust, after once registration is granted under clause (b) of Sub-section (1) of Section 12AA or under Section 12A, Commissioner, in the event of any its conclusion that activities of Trust are not genuine or not being carried out in accordance with the objects, can direct cancellation under Sub-section (3) of Section 12AA. In other words, the registration once granted can always be cancelled if the activities of the Trust are found to be dubious or non-genuine or contrary to objectives of the Act. On cumulative examination of the facts, it can be held that questions proposed are answered as above. Therefore, this Tax Appeal does not deserve any further consideration and the same is disposed of.
No comments:
Post a Comment