Denial of Registration 12AA for not spending income by trust. CIT to consider issue u/s 12AA(3) – SC

Denial of Registration 12AA for not spending income by trust. CIT to consider issue u/s 12AA(3) if the facts justify Registration – Supreme Court

ABCAUS Case Law Citation:
ABCAUS 3276 (2020) (02) SC

In the instant case, a Special Leave Petition was filed by the Commissioner of Income Tax (Exemptions).

The respondent Trust had applied for registration under section 12AA of the Income Tax Act,1961 (the Act).

The Commissioner of Income Tax (CIT) found that the trust had not spent any part of its income on the charitable activities. The CIT, therefore, refused the registration of the Trust.

The Income Tax Appellate Tribunal reversed the decision of the Commissioner of income Tax on the basis of the judgment of the Delhi High Court.

Denial of Registration 12AA for not spending income

The Hon’ble Supreme Court stated that as held by it the object of the provision of section 12AA is to ensure that   the   activities   undertaken   by   the   Trust   are   not contrary   to   its objects and that a Commissioner is entitled to refuse registration if the activities   are found contrary to the objects of the Trust.

The Hon’ble Supreme Court noted that in the present case, it had been found that the Trust had not spent any amount of its income for charitable purposes.

The Apex Court stated that the case in hand was a case of not carrying out the objects of the Trust and not carrying on activities contrary to its object. These circumstances may arise for many reasons including not finding suitable circumstances for carrying on activities and undoubtedly the inaction in carrying   out   charitable purposes might also become actionable depending on other circumstances.

However, the Hon’ble Supreme Court left it upon the Commissioner of Income Tax   to consider the issue by exercising his powers under sub-section (3) of   section12AA and grant registration if the facts justify it.

The appeal was however, dismissed.

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