Charitable Trust's Registration For Income Tax Exemption To Be Decided Based On Proposed Activities & Not Actual Activities : Supreme Court

The Supreme Court reiterated that when a charitable trust applies under Section 12-AA of the Income Tax Act (“Act”) for income tax exemptions (under Sections 10 and 11), the tax authorities should decide on the registration based on the charity's "proposed activities" than its actual activities, as stated in the Ananda Social case. The Court, however, clarified that mere registration under Section 12-AA would not entitle a charitable trust to claim exemption under Sections 10 and 11 respectively of the Act, 1961, and the authorities can decline the grant of exemption if the materials produced by the trust do not seem convincing for grant of exemption. “When a return is filed by any trust claiming exemption it is for the assessing officer to look into all the materials and satisfy itself whether the exemption has been claimed genuinely or not. If the assessing officer is not convinced it is always open for him to decline grant of exemption.”, the court observed. Rejecting the department's argument that authorities should consider the trust's actual activities rather than its proposed activities when granting an exemption, the Court declined to refer the Ananda Social verdict to a larger bench for reconsideration.A bench of Justices JB Pardiwala and R Mahadevan heard the case where the Respondent, a charitable trust engaged in activities like education, medical aid etc. sought registration under Section 12-AA of the Act to seek exemption from income tax under Sections 10 and 11 of the Act. The Commissioner denied registration, citing a lack of evidence of actual charitable activities. The trust appealed, and the Appellate Tribunal reversed the Commissioner's decision, directing registration. The High Court upheld the Tribunal's order. The Commissioner then filed the Special Leave Petition in the Supreme Court. The issue pertained to the correct interpretation of Section 12-AA of the Act. Section 12AA of the Act deals with the procedure for registration of Trust or Institutions to claim benefits under sections 11 and 12 of the Act. It requires the Commissioner to satisfy himself about the objects of the trust or institution and the genuineness of its activities and grant a registration only if he is so satisfied. It also requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable. If it appears that the objects of the trust and its activities are not genuine, that is to say not charitable, the Commissioner is entitled to refuse and in fact, bound to refuse such registration. Before the Supreme Court, the Revenue contended that the view taken in Ananda Social required reconsideration by a larger bench because the Trust must adduce cogent material to the satisfaction of the Commissioner that the activities are genuinely charitable."we are of the view that it will be too much for this Court, to refer the matter to a larger bench doubting the correctness of the judgment in Ananda Social(supra)," the Court said.Affirming the High Court's decision and refusing to send the issue for reconsideration by a larger bench, the Court held that the tax authorities need to only ascertain the proposed activities of the trust before granting income tax exemption. However, the court provided an option to the authority to deny the grant of exemption upon registration, if found out that the materials produced by the trust were not genuine or didn't satisfy the requirements for the grant of exemptions.In Ananda Social, a three-judge bench comprising Justice SA Bobde, Justice BR Gavai and Justice Surya Kant observed :"The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust."Case Title: COMMISSIONER OF INCOME TAX EXEMPTIONS VERSUS M/S INTERNATIONAL HEALTH CARE EDUCATION AND RESEARCH INSTITUTECitation : 2025 LiveLaw (SC) 214Click here to read/download the orderAppearance: For Petitioner(s) : Mr. Raghavendra P. Shankar, ASG Mr. Karan Lahiri, Adv. Mr. Bhuvan Kapoor, Adv. Mr. S.K. Singhania, Adv. Mr. Nikhil Rohatgi, Adv. Mr. Rukhmini Bobde, Adv. Mr. Raj Bahadur, AOR Mrs. Anil Katiyar, AOR For Respondent(s) : Mr. Ritesh Agrawal, AOR Mr. Sanjai Pathak, Adv. Mr. Sunder Khatri, Adv. Ms. Priyanshi Sharma, Adv. Mr. Chirag...

Charitable Trust's Registration For Income Tax Exemption To Be Decided Based On Proposed Activities & Not Actual Activities : Supreme Court

Yash Mittal

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Yash Mittal

Charitable Trust's Registration For Income Tax Exemption To Be Decided Based On Proposed Activities & Not Actual Activities : Supreme Court

Yash Mittal

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Yash Mittal

This is a premium content
Available exclusively to
Our subscribers