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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO(S).5437-5438/2012

M/S. ANANDA SOCIAL AND EDUCATIONAL TRUST ……..APPELLANT(S)

VERSUS

THE COMMISSIONER OF INCOME TAX & ANR.      ……..RESPONDENT(S)

WITH  

CIVIL APPEAL NO.4702/2014  

CIVIL APPEAL NO.1727/2020 (@SLP(C) NO.25761/2015)

O R D E R  

CIVIL APPEAL NO(S).5437-5438/2012

We  have  heard  learned  counsel  appearing  for  the

parties and perused the impugned Judgment(s) and Order(s)

passed by the High Court of Karnataka.   

In our considered view, the reasons assigned by the

High  Court  in  passing  the  impugned  judgment(s)  and

order(s)  need  no  interference  as  the  same  are  in

consonance with law.  

Accordingly, there is no merit in these appeals and

they are dismissed.

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CIVIL APPEAL NO.4702/2014  

This appeal has been preferred by the appellant -

Director of Income Tax against the impugned judgment and

order passed by the Delhi High Court holding that a newly

registered  Trust  is  entitled  for  registration  under

section 12AA of the Income Tax Act, 1961 (for short, the

‘Act’) on the basis of its objects, without any activity

having been undertaken. Section 12AA of the Act reads as

follows :  

“12AA.  Procedure  for  registration.  -  (1)  The [Principal  Commissioner  or]  Commissioner,  on receipt  of  an  application  for  registration  of  a trust  or  institution  made  under  clause  (a)  or clause (aa) or clause (ab) 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.

(1A)  All  applications,  pending  before  the [Principal  Chief  Commissioner  or]  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 [Principal Commissioner or] Commissioner and  the  [Principal  Commissioner  or]  Commissioner may proceed with such applications under that sub-

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section from the stage at which they were on that day.

(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) or clause (ab) of sub- section (1) of section 12A.

(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 [Principal Commissioner or] 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.

[(4) Without prejudice to the provisions of sub- section (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  it  is  noticed  that  the activities  of  the  trust  or  the  institution  are being carried out in a manner that the provisions of  sections  11  and  12  do  not  apply  to  exclude either  whole  or  any  part  of  the  income  of  such trust  or  institution  due  to  operation  of  sub- section  (1)  of  section  13,  then,  the  Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution:  

Provided  that  the  registration  shall  not  be cancelled under this sub-section, if the trust or institution  proves  that  there  was  a  reasonable cause for the activities to be carried out in the said manner.]

The  above  section  provides  for  registration  of  a

trust. Such registration can be applied for by a trust

which has been in existence for some time and also by a

newly registered trust. There is no stipulation that the

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trust should have already been in existence and should

have  undertaken  any  activities  before  making  the

application for registration.  

In  brief,  section  12AA  of  the  Act  empowers  the

Principal Commissioner or the Commissioner of the Income

Tax on receipt of an application for registration of a

trust to call for such documents as may be necessary to

satisfy himself about the genuineness of activities  of

the  trust  or  institution   and  make  inquiries  in  that

behalf; it empowers the Commissioner to thereupon register

the trust if he is satisfied about the objects of the

trust or institution and genuineness of its activities.   

In  the  present  case,  the  trust  was  formed  as  a

society on 30.05.2008 and it applied for registration on

10.07.2008 i.e. within a period of about two months.  

No activities had been undertaken by the respondent

Trust before the application was made. The Commissioner

rejected the application on the sole ground that since no

activities have been undertaken by the trust, it was not

possible to register it, presumably because it was not

possible to be satisfied about whether the activities of

the trust are  genuine. The Income Tax Appellate Tribunal,

Delhi  (for short, the ‘Tribunal’) reversed the orders of

the Commissioner. The Revenue Department approached the

High Court by way of filing an appeal. The High Court

upheld  the  order  of  the  Tribunal  and  came  to  the

conclusion that in case of a newly registered trust even

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though  there  was  no  activities,  it  was  possible  to

consider whether the trust can be registered under section

12AA of the Act. This judgment is assailed before us.  

Section 12AA undoubtedly requires the Commissioner

to  satisfy  himself  about  the  objects  of  the  trust  or

institution and genuineness of its activities and grant a

registration only if he is so satisfied. The said section

requires  the Commissioner to be so satisfied in order to

ensure that the object of the trust and its activities are

charitable since the consequence of such registration is

that  the  trust  is  entitled  to  claim  benefits  under

sections 11 and 12 of the Act. In other words, 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.  

It  was  argued  before  us  that  the  Commissioner  is

required to be satisfied about two things – firstly that

the objects of the trust and secondly, its activities are

genuine. If there have been no activities undertaken by

the trust then the Commissioner cannot assess whether such

activities are genuine and therefore, the Commissioner is

bound to refuse the registration of such a trust.  

We have given our anxious consideration to the above

submissions made by Ms. Aishwarya Bhati, learned Senior

Counsel appearing for the appellant – Director of Income

Tax and find that it is not possible to agree with the

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same. 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.

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We therefore find that the view of the Delhi High

Court in the impugned judgment is correct and liable to be

upheld.  

Ms. Bhati, learned Senior Counsel for the appellant,

fairly drew our attention to a judgment of the Allahabad

High  Court  in  IT  Appeal  No.36  of  2013  titled  as

“Commissioner  of  Income  Tax-II  vs.  R.S.  Bajaj  Society”

which has taken the same view as that of the Delhi High

Court in the impugned judgment. The Allahabad High Court

has also referred to a similar view taken by the High

Courts of Karnataka and Punjab & Haryana.  

Apparently, a contrary view has been taken by the

Kerala High Court in the case of  Self Employers Service

Society vs. Commissioner of Income Tax  – (2001) Vol.247

ITR  18.  That  view  however  does  not  commend  itself.

However,  the  facts  in  Self  Employers  Service  Society

(Supra)  suggest that the Commissioner of Income Tax had

observed that the applicant for registration as a Trust

had  undertaken  activities  which  were  contrary  to  the

objects of the Trust.  

In the result, we find that there is no reason to

interfere with the impugned judgment of the High Court of

Delhi. The appeal is, accordingly, dismissed.

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CIVIL APPEAL NO.1727/2020 (@SLP(C) NO.25761/2015)

Leave granted.  

In  this  case,  the  Trust  which  applied  for

registration under section 12AA of the Income Tax Act,

1961, was found not to have spent any part of its income

on charitable activities. The Commissioner of Income Tax,

therefore, refused the registration of 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 in matters referred

to above.

For the reasons stated earlier, we are of the view

that the 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

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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.  

The appeal is, however, dismissed.  

....................CJI [S.A. BOBDE]

.....................J [B.R. GAVAI]

.....................J [SURYA KANT]

NEW DELHI; FEBRUARY 19, 2020.