Newly Incorporated Trust entitled to 12AA benefits even in the Absence of any Activities: SC [Read Judgment]

While upholding the Delhi High Court Judgment, the Supreme Court of India has ruled that, Newly Incorporated Trust entitled to get Section 12AA of the Income Tax Act benefits even in the Absence of any Activities.

In the present case, the Newly Incorporated trust, Ananda Social and Educational 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 were undertaken by the Trust before the application was made. The Commissioner rejected the application on the sole ground that since no activities had been undertaken by the trust, it was not possible to register it, presumably because it was not possible to be satisfied with whether the activities of the trust were genuine or not.

The Income Tax Appellate Tribunal, Delhi reversed the orders of the Commissioner. The Revenue Department approached the High Court of Delhi by way of filing an appeal. The High Court upheld the order of the Tribunal and concluded that in case of a newly registered trust even though there were no activities, it was possible to consider whether the trust can be registered under section 12AA of the Act.

The three-judge bench comprising of Chief Justice of India S.A. Bobde, Justice B.R. Gavai and Justice Surya Kant while dismissing the appeal held, “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 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.”