1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S).5437-5438/2012 M/S. ANANDA SOCIAL AND EDUCATIONAL TRUST APPELLANT(S) VERSUS COMMISSIONER OF INCOME TAX & ANR. RESPONDENT(S) WITH CIVIL APPEAL NO.4702/2014 CIVIL APPEAL NO.1727/2020 (@SLP(C) NO.25761/2015) ORDER CIVIL APPEAL NO(S).5437-5438/2012 We have heard learned counsel appearing for parties and perused impugned Judgment(s) and Order(s) passed by High Court of Karnataka. In our considered view, reasons assigned by High Court in passing impugned judgment(s) and order(s) need no interference as same are in consonance with law. Accordingly, there is no merit in these appeals and Signature Not Verified Digitally signed by they are dismissed. SANJAY KUMAR Date: 2020.02.26 16:47:39 IST Reason: 2 CIVIL APPEAL NO.4702/2014 This appeal has been preferred by appellant - Director of Income Tax against impugned judgment and order passed by Delhi High Court holding that newly registered Trust is entitled for registration under section 12AA of Income Tax Act, 1961 (for short, Act ) on basis of its objects, without any activity having been undertaken. Section 12AA of Act reads as follows : 12AA. Procedure for registration. - (1) [Principal Commissioner or] Commissioner, on receipt of application for registration of 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 trust or institution as he thinks necessary in order to satisfy himself about genuineness of activities of trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about objects of trust or institution and genuineness of its activities, he- (i) shall pass order in writing registering trust or institution; (ii) shall, if he is not so satisfied, pass order in writing refusing to register trust or institution, and copy of such order shall be sent to applicant : Provided that no order under sub-clause (ii) shall be passed unless applicant has been given reasonable opportunity of being heard. (1A) All applications, pending before [Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before 1st day of June, 1999, shall stand transferred on that day to [Principal Commissioner or] Commissioner and [Principal Commissioner or] Commissioner may proceed with such applications under that sub- 3 section from 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 expiry of six months from end of month in which application was received under clause (a) or clause (aa) or clause (ab) of sub- section (1) of section 12A. (3) Where trust or 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 Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently [Principal Commissioner or] Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard. [(4) Without prejudice to provisions of sub- section (3), where trust or 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 Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that activities of trust or institution are being carried out in manner that provisions of sections 11 and 12 do not apply to exclude either whole or any part of income of such trust or institution due to operation of sub- section (1) of section 13, then, Principal Commissioner or Commissioner may by order in writing cancel registration of such trust or institution: Provided that registration shall not be cancelled under this sub-section, if trust or institution proves that there was reasonable cause for activities to be carried out in said manner.] above section provides for registration of trust. Such registration can be applied for by trust which has been in existence for some time and also by newly registered trust. There is no stipulation that 4 trust should have already been in existence and should have undertaken any activities before making application for registration. In brief, section 12AA of Act empowers Principal Commissioner or Commissioner of Income Tax on receipt of application for registration of trust to call for such documents as may be necessary to satisfy himself about genuineness of activities of trust or institution and make inquiries in that behalf; it empowers Commissioner to thereupon register trust if he is satisfied about objects of trust or institution and genuineness of its activities. In present case, trust was formed as society on 30.05.2008 and it applied for registration on 10.07.2008 i.e. within period of about two months. No activities had been undertaken by respondent Trust before application was made. Commissioner rejected application on sole ground that since no activities have been undertaken by trust, it was not possible to register it, presumably because it was not possible to be satisfied about whether activities of trust are genuine. Income Tax Appellate Tribunal, Delhi (for short, Tribunal ) reversed orders of Commissioner. Revenue Department approached High Court by way of filing appeal. High Court upheld order of Tribunal and came to conclusion that in case of newly registered trust even 5 though there was no activities, it was possible to consider whether trust can be registered under section 12AA of Act. This judgment is assailed before us. Section 12AA undoubtedly requires Commissioner to satisfy himself about objects of trust or institution and genuineness of its activities and grant registration only if he is so satisfied. said section requires Commissioner to be so satisfied in order to ensure that object of trust and its activities are charitable since consequence of such registration is that trust is entitled to claim benefits under sections 11 and 12 of Act. In other words, if it appears that objects of trust and its activities are not genuine that is to say not charitable Commissioner is entitled to refuse and in fact, bound to refuse such registration. It was argued before us that Commissioner is required to be satisfied about two things firstly that objects of trust and secondly, its activities are genuine. If there have been no activities undertaken by trust then Commissioner cannot assess whether such activities are genuine and therefore, Commissioner is bound to refuse registration of such trust. We have given our anxious consideration to above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for appellant Director of Income Tax and find that it is not possible to agree with 6 same. purpose of section 12AA of Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, Commissioner is bound to satisfy himself that object of Trust are genuine and that its activities are in furtherance of objects of Trust, that is equally genuine. Since section 12AA pertains to registration of Trust and not to assess of what trust has actually done, we are of view that term activities in provision includes proposed activities . That is to say, Commissioner is bound to consider whether objects of Trust are genuinely charitable in nature and whether activities which Trust proposed to carry on are genuine in sense that they are in line with objects of Trust. In contrast, position would be different where Commissioner proposes to cancel registration of Trust under sub-section (3) of section 12AA of Act. There Commissioner would be bound to record finding that activity or activities actually carried on by Trust are not genuine being not in accordance with objects of Trust. Similarly, situation would be different where trust has before applying for registration found to have undertaken activities contrary to objects of Trust. 7 We therefore find that view of Delhi High Court in impugned judgment is correct and liable to be upheld. Ms. Bhati, learned Senior Counsel for appellant, fairly drew our attention to judgment of 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 same view as that of Delhi High Court in impugned judgment. Allahabad High Court has also referred to similar view taken by High Courts of Karnataka and Punjab & Haryana. Apparently, contrary view has been taken by Kerala High Court in case of Self Employers Service Society vs. Commissioner of Income Tax (2001) Vol.247 ITR 18. That view however does not commend itself. However, facts in Self Employers Service Society (Supra) suggest that Commissioner of Income Tax had observed that applicant for registration as Trust had undertaken activities which were contrary to objects of Trust. In result, we find that there is no reason to interfere with impugned judgment of High Court of Delhi. appeal is, accordingly, dismissed. 8 CIVIL APPEAL NO.1727/2020 (@SLP(C) NO.25761/2015) Leave granted. In this case, Trust which applied for registration under section 12AA of Income Tax Act, 1961, was found not to have spent any part of its income on charitable activities. Commissioner of Income Tax, therefore, refused registration of Trust. Income Tax Appellate Tribunal reversed decision of Commissioner of income Tax on basis of judgment of Delhi High Court in matters referred to above. For reasons stated earlier, we are of view that object of provision in question is to ensure that activities undertaken by Trust are not contrary to its objects and that Commissioner is entitled to refuse registration if activities are found contrary to objects of Trust. In present case, what has been found is that Trust had not spent any amount of its income for charitable purposes. This is case of not carrying out objects of 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 inaction in carrying out charitable purposes might also become actionable depending on other circumstances; but we are 9 not concerned with such case here. In these circumstances, we leave it upon Commissioner of Income Tax to consider issue by exercising his powers under sub-section (3) of section 12AA, if facts justify such actions. appeal is, however, dismissed. CJI [S.A. BOBDE] J [B.R. GAVAI] J [SURYA KANT] NEW DELHI; FEBRUARY 19, 2020. Ananda Social And Educational Trust v. Commissioner of Income-tax & Anr