The Tax Publishers

Institution Merely Implementing Govt. Welfare Scheme--Whether Liable for Cancellation of Registration

Pawan Prakash

The registration of a trust can be cancelled where the Principal Commissioner or Commissioner is satisfied that the activities of the trust were not genuine or were not being carried out in accordance with the objects of the trust. The present write up discusses the justification of cancellation of registration where trust is not involved in charitable activities as envisaged in objects of the trust deed.

1. Circumstances when power of cancellation of registration can be exercised

According to sub-section (3) of Section 12AA, if the Principal Commissioner or Commissioner of Income Tax is satisfied that the activities of any trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, he shall, after giving reasonable opportunity of being heard to the concerned trust or institution, pass an order in writing cancelling the registration granted under the said Section

As per Section 12AA(4), where a trust or an institution has been granted registration and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of Sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of Section 13, then the Principal Commissioner or Commissioner may by order in writing cancel the registration of such trust or institution.

The proviso to sub-section (4) however, provides that the registration shall not be cancelled under the said sub-section, if the aforesaid trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.

2. Justification of withdrawal of registration

Under Section 12AA(3), the registration can be cancelled on the ground that Commissioner was satisfied that the activities of the trust were not genuine or were not being carried out in accordance with the objects of the trust. The fact that some activities, which were not solely carried out for charitable purposes could not be a ground for cancelling the registration under Section 12AA, though such ground could be made available to the department to refuse exemption under Section 10(23C). Commissioner cancelled the registration only on the ground that assessee did not solely exist for charitable purpose. There was no whisper that assessee did not fulfil any of the conditions mentioned in Section 12AA(3), namely, that the activities of such trust were not genuine or were not being carried out in accordance with the objects of the trust. Therefore assessee was entitled for registration under Section 12AA.--Vide CIT v. Varanasi Catholic Education Society 2014 TaxPub(DT) 3533 (All-HC).

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