Section 12AA of Income-Tax Act, 1961

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Section 12AA of Income-Tax Act, 1961 deals with Procedure for Registration

Contents

From the Act

Section 12AA(1)

(1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall—

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he -

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

Section 12AA(1A)

(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.

Section 12AA(2)

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) [or clause (aa) of sub-section (1)] of section 12A.]

Section 12AA(3)

[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]

Recent Cases / Related Cases / Case Laws

  • Commissioner of Income Tax-II Vs M/s Krishi Utpadan Mandi Samiti, Civil Appeal No.7040 of 2012, Supreme Court of India judgement delivered on September 27, 2012
  • December 2011: [2011] 16 LNIN 331 (Chennai - Trib.): Where assessee society, managed by highly qualified persons, filed an application for registration under section 12AA after 21 years of its formation, assessee's plea of ignorance of law could not be accepted and, thus, registration could not be granted to it with retrospective effect
  • December 2011: [2011] 16 LNIN 270 (Chennai - Trib.): If object of assessee-trust is to run educational institution and assessee has been carrying on that activity alone, construction of buildings and purchase of property, cannot be ground to deny registration under section 12AA to assessee
  • December 2011: [2011] 16 LNIN 285 (Punjab and Haryana): While examining application seeking registration under section 12AA, manner of application of funds of trust do not fall within purview of Commissioner
  • May 2011: Delhi: Registration granted u/s. 12A on 4-12-1974 to an assessee-trust could not be cancelled/withdrawn by Authorities u/s. 12AA(3)
    • There was no power vested with the Commissioner to cancel or withdraw the registration granted to the assessee under section 12A(a) in the year 1974 - [2011] 11-42
  • Self Employers Service Society Vs CIT [2001] 247 ITR 18 (Kerala): When no charitable object is carried out in first year - Where none of the charitable objects mentioned in the bye-laws were carried out by the society in the first year of its functioning, and the only activities carried out were only for the purpose of generating income for its members, the Commissioner would be justified in rejecting the application for registration
  • M K Nambyar Saarc Law Charitable Trust Vs Union of India [2004] 269 ITR 556/140 LNIN 616 (Delhi): Application for registration cannot be rejected merely because income is applied outside India - Section 12AA does not refer to activities in India or outside India; therefore, so far as income which is applied outside India is concerned, it is not relevant criterion for rejecting the application for registration
  • Self Employers Service Society v. CIT [2001] 247 ITR 18 (Ker.): When no charitable object is carried out in first year - Where none of the charitable objects mentioned in the bye-laws were carried out by the society in the first year of its functioning, and the only activities carried out were only for the purpose of generating income for its members, the Commissioner would be justified in rejecting the application for registration.
  • M.K. Nambyar Saarc Law Charitable Trust v. Union of India [2004] 269 ITR 556/140 Taxman 616 (Delhi): Application for registration cannot be rejected merely because income is applied outside India - Section 12AA does not refer to activities in India or outside India; therefore, so far as income which is applied outside India is concerned, it is not relevant criterion for rejecting the application for registration.
  • Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of Income-tax (Exemptions) [2006] 155 Taxman 466 (Kar.): Scope of Commissioner’s powers - For purpose of registration under section 12AA, what authorities have to satisfy themselves about is genuineness of activities of trust or institution and how income derived from trust property is applied to charitable or religious purpose, and not nature of activity by which income was derived by trust.
    • Mere registration under section 12AA would not, in itself, be a ground, much less a conclusive proof, for excluding such income described in sections 11 and 12 from the total income of the person/assessee or trust from income of the previous year. If the trust or the institution is not registered under section 12AA, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 or section 12. A reading of provisions of sub-clauses (a) and (b) of section 12AA makes it clear that the Commissioner has to satisfy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the Commissioner would either grant the certificate or would reject the prayer. On mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit.
    • A cumulative reading of sections 11, 12 and 13 leaves no manner of doubt that exemption under the aforesaid provisions can be claimed with respect to the income derived by the trust or the institution, which is being run for a charitable purpose and, therefore, while considering the registration under section 12AA, the scope of enquiry of the Commissioner would be limited to the aforesaid extent.
  • CIT v. Red Rose School [2007] 163 Taxman 19 (All.): Registration under section 12AA does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability, but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the Commissioner shall remain restricted to the examination as to whether the assessee, who has moved the appli­cation for registration under section 12A, is actually in the activities which are genuine. Genuineness of the activities of the trust or the institution has to be seen, keeping in mind the objects thereof, which necessarily means that the Commissioner shall satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust or the institution. In other words, if establishing and running a school is the object of the society, as given in its bye-laws, it has to be satisfied that the society has established the school where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this.
  • Society for the Promotion of Education, Adventure Sport & Conservation of Environment v. CIT [2008] 171 Taxman 113 (All.): Non-consideration of application for registration within time fixed by section 12AA(2) would result in deemed grant of registration.

Related Sections from the Act

  • Section 11: Income from property held for charitable or religious purposes
  • Section 12: Income of trusts or institutions from contributions
  • Section 12A: Conditions as to registration of trusts, etc.

Sections of the Indian Income Tax Act, 1961


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