2020 (2) TMI 1293 - SUPREME COURT

Exemption u/s 11 - entitled for registration under section 12AA - Charitable activity u/s 2(15) - HELD THAT:- 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. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.

We therefore find that the in view FOUNDATION OF OPHTHALMIC & OPTOMETRY RESEARCH EDUCATION CENTRE [2012 (8) TMI 777 - DELHI HIGH COURT] that a newly registered Trust is entitled for registration under section 12AA on the basis of its objects, without any activity having been undertaken is correct and liable to be upheld.

Registration u/s 12AA - found not to have spent any part of its income on charitable activities - object of the provision in question 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.

In the present case, what has been found is that the Trust had not spent any amount of its income for charitable purposes. This is 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. Undoubtedly the inaction in carrying out charitable purposes might also become actionable depending on other circumstances; but we are not concerned with such a case here.

In these circumstances, we leave it upon the Commissioner of Income Tax to consider the issue by exercising his powers under sub-section (3) of section 12AA, if the facts justify such actions.