s.12AA inquiry limited to objects and activities; refusal under s.12A overruled for missing dissolution clause

ITAT held that the scope of inquiry under s.12AA is limited to satisfaction about the trust's objects and genuineness of activities; since DIT(E) recorded no adverse findings on those matters but refused registration solely because the trust deed lacked a dissolution clause, the DIT(E) exceeded the statutory scope. The DIT(E)'s refusal to grant registration under s.12A was set aside and the matter decided in favour of the trust.

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Issues: Whether the refusal to grant registration under Section 12A of the Income-tax Act, 1961 on the sole ground that the trust deed lacks a dissolution clause is valid, and whether registration under Section 12A should be granted to the assessee trust.

Analysis: Section 12AA limits the Registrar's/Commissioner's enquiry to satisfying himself about the objects of the trust and the genuineness of its activities before granting or refusing registration under Section 12A. The impugned order refused registration solely because the trust deed did not contain a dissolution clause; no adverse finding was recorded regarding the objects of the trust or the genuineness of its activities. The statutory provisions cited (Sections 11, 12, 12A, 12AA of the Income-tax Act, 1961 and relevant provisions of the Bombay Public Trusts Act, 1950) show that absence of a dissolution clause, without any demonstration that the trust's objects or activities are not genuine, falls outside the permissible scope of enquiry under Section 12AA.

Conclusion: The refusal to register the trust under Section 12A on the sole ground of absence of a dissolution clause is not valid. Registration under Section 12A is to be granted to the assessee trust.

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