Interpretation of Section 12AA of Income Tax Act

The legal case revolves around the Court’s interpretation of Section 12AA of the Income Tax Act concerning the registration of Trusts. The focus lies on the Court’s analysis of the requirements for registration based on the Trust’s objects and activities, shedding light on the nuances of the law. Follow along for a deeper dive into the legal intricacies at play in this significant case.


  • The High Court upheld the order of the Tribunal regarding the registration of a newly registered trust.
  • The Court concluded that even if there were no activities, it was still possible to consider the trust for registration under section 12AA of the Act.
  • The judgment is being challenged before the Supreme Court.

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  • Appellant – Director of Income Tax filed an appeal against the Delhi High Court’s judgment regarding registration of a newly registered Trust under section 12AA of the Income Tax Act.
  • The High Court held that registration is allowed based on the Trust’s objects even if no activity has been undertaken.
  • The appeal pertains to the interpretation of the provisions of the Income Tax Act related to registration of Trusts.

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  • The term ‘activities’ in the provision includes ‘proposed activities’.
  • The Commissioner is bound to record the finding if activities are not genuine and not in line with trust objects.
  • Registration cannot be granted if no activities have been undertaken by the trust.
  • Purpose of Section 12AA is to register trusts with genuine charitable objects and activities.
  • High Court’s view is correct in requiring verification of charitable trust objects and activities.
  • Contrary view by Kerala High Court exists in Self Employers Service Society vs. Commissioner of Income Tax.
  • Commissioner must be satisfied about both the trust’s objects and activities being genuine for registration.
  • Refusal of registration is necessary if objects and activities of the trust are not charitable.
  • Income Tax Appellate Tribunal reversed Commissioner’s decision based on Delhi High Court judgment.
  • Section 12AA of the Act allows for the registration of a trust upon application
  • There is no requirement for the trust to have already been in existence or undertaken activities before applying for registration
  • The Principal Commissioner or Commissioner of Income Tax may request documents to verify the genuineness of the trust’s activities
  • Registration can be sought by trusts that have been in existence for some time or by newly registered trusts
  • The case involves a Trust that did not carry out its stated objects and activities.
  • The Commissioner of Income Tax can refuse registration if the activities undertaken by the Trust are contrary to its objects.
  • In this case, the Trust did not spend any of its income on charitable purposes.
  • The inaction of not carrying out charitable purposes could be actionable depending on other circumstances.
  • The decision is left to the Commissioner of Income Tax.

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  • The appeal is dismissed
  • The Commissioner may consider exercising powers under sub-section (3) of section 12AA if the facts warrant such actions


Case Number: C.A. No.-005437-005438 / 2012

Click here to read/download original judgement

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