High Court affirms 12AA registration for trust despite inactive status at application

The High Court of Madras upheld the decision of the Income Tax Appellate Tribunal granting registration under Section 12AA of the Income Tax Act to the assessee trust. The court emphasized that registration cannot be refused solely because the trust had not commenced activities at the time of application. The court clarified that Section 12AA focuses on the genuineness of the trust's objects and activities, not on operational status during application. Citing previous cases and a Gujarat High Court decision, the court ruled in favor of the trust, dismissing the Revenue's appeal and answering the legal question against the Revenue without awarding costs.

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Issues:
1. Entitlement for registration under Section 12AA of the Income Tax Act.

Analysis:
The High Court of Madras dealt with the issue of entitlement for registration under Section 12AA of the Income Tax Act in the present case. The Revenue filed an appeal against the order of the Income Tax Appellate Tribunal, questioning the grant of registration to the assessee trust. The key question raised was whether the tribunal was correct in holding that the trust is entitled to registration under Section 12AA of the Act.

The counsel for the Revenue acknowledged that a similar issue had been addressed by the court in a previous case, T.C.(A)No.579 of 2013, decided on 27.01.2014. In that case, the court had dismissed the appeal filed by the Revenue, emphasizing that the grant of registration cannot be refused merely because the trust had not commenced its activities at the time of application. The court highlighted that Section 12AA(1) focuses on the satisfaction of the Commissioner regarding the trust's objects and activities' genuineness, without mandating the trust to have started operations at the time of application. The power to cancel registration under Section 12AA(3) is available if the trust deviates from its stated objectives. The court also referenced a decision by the Gujarat High Court, concurring with its interpretation.

The court noted that a similar view was adopted in another case, T.C.(A)No.261 of 2014, dated 22.8.2014, where the same principle was upheld. Consequently, based on the precedent set by the previous judgments, the court in the present case upheld the decision of the tribunal and dismissed the Revenue's appeal. The court ruled in favor of the assessee trust, emphasizing that the Revenue cannot reject registration merely because the trust had not initiated its activities at the time of application. The judgment concluded by stating that the question of law was answered against the Revenue, and no costs were awarded.

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