For registration u/s 12AA if Commissioner’s satisfaction is limited to the objects of the Institution, or also to genuineness of its activities? – Special Leave Petition (admitted by Supreme Court
In a recent case Hon’ble Supreme Court has admitted Petition of the Income Tax Department to consider the question as to whether for the purpose of according registration under Section 12AA of the Income Tax Act, 1961 (the Act), Commissioner’s satisfaction is limited to the objects of the Trust or Institution, or also to the genuineness of its activities.
ABCAUS Case Law Citation:
4898 (2025) (12) abcaus.in SC
In the instant case, the respondent trust filed an application for registration under Section 12AA(1)(b)(i) of the Act in appropriate form before the Commissioner of Income Tax (Exemption). The said application was rejected by the CIT(E) holding that the case of the assessee was not covered by the provisions contained in Section 12AA(1)(b)(i) of the Act.
Feeling dissatisfied with the order of the Commissioner of Income Tax (Exemption), the respondent herein preferred an appeal before the Income Tax Appellate Tribunal (ITAT) which allowed the appeal filed by the respondent holding that the issue raised in the appeal was covered by the decision of the jurisdictional High Court and directed the CIT(E) to grant registration in favour of the respondent Association under Section 12AA of the Act.
The Revenue challenged the order of the ITAT before the Hon’ble High Court.
The Hon’ble High Court observed that perusal of the provisions of Section 12AA(1)(b)(i) would show that the Principal Commissioner or the Commissioner has to satisfy himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, and has to pass an order in writing registering the trust or institution and a copy of the order so passed will be sent to the applicant.
The Hon’ble High Court noted that the Co-ordinate Bench of the Court had considered the issue and held that the said provision nowhere empowers the Commissioner of Income Tax to assess the objects vis-a-vis the books of accounts and even otherwise, it is not to be seen at this stage as to whether the fulfillment of the charitable trust would eventually benefit the members of the society.
In the said judgment, the Co-ordinate Bench had further noted that the Hon’ble High Court of Rajasthan and Allahabad High Court had held that at the stage of Section 12A, the Commissioner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No.10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this Stage, it is not proper to examine the application of income.
The Hon’ble High Court further noted that the against the decision of the Co-ordinate Bench hereafter, against the order passed in the said tax appeal i.e. in Chhattisgarh Urology, review petition was filed by the Revenue and ultimately, the review petition was also dismissed against which SLP was filed but was also dismissed by the Apex Court.
As a result, the Hon’ble High Court held that the order of the ITAT relying upon the order of the Co-ordinate Bench which holds the field, was in accordance with law, as the ultimate object of the respondent Association was extension of medical facilities to the public at large.
Not satisfied by the dismissal of the appeal by the Hon’ble High Court, the Revenue challenged the order of the Hon’ble High Court before the Hon’ble Supreme Court by way of filing a Special Leave Petition.
Before the Hon’ble Supreme Court, the submission of the Revenue was that for the purpose of according registration under Section 12AA of the Income Tax Act, 1961, the Commissioner’s satisfaction is not limited to the objects of the Trust or Institution, but also to the genuineness of its activities as required under Sub Clause(i) of Clause(a) of the Act.
It was submitted that while rejecting the application seeking registration, the Commissioner in its order, had found that the activities of the respondent trust were not genuine.
It was contended that while reversing the order of the Commissioner, neither Income Tax Appellate Tribunal (ITAT) nor the High Court, had dealt with that aspect of the matter.
The Hon’ble Supreme Court admitted the SLP of the Income Tax Department and issued notice.
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