INCOME TAX ACT, 1961

Section 11 read with section 12AA

Charitable trusts - Registration under section 12AA - Whether trust should show some activities undertaken by it before registration to the CIT(E) -

Revenue challenged order of Tribunal contending that it misinterpreted section 12AA 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. Issue was as to whether trust should show some activities undertaken by it before registration to the CIT(E) to satisfy him or is CIT(E) required to be satisfied that intended activities of the trust after registration are genuine. Held: If a trust registered under Indian Trust Act and Registration Act as a charitable trust, does not get itself registered before the PCIT(E), it loses certain benefits both for itself and for those who donate to it. Since by definition a charitable trust is not one which makes profits and if interpretation of Revenue is accepted that first activities of trust must commence and its genuineness ascertained before PCIT(E) registers it, it would mean asking trust to carry on activities perhaps at a loss to corpus or by compromising on quality of such activities, if expenditure is done from interest on corpus because no one will donate money to a trust knowing that it is not tax deductible. Thus, interpretation offered by revenue appeared to be one which perhaps defeats section 12A/12AA of the said Act of 1961 and its very purpose and, therefore, it could not be accepted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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