Jagdish Matanhelia Memorial Trust, Pratapgarh, applied for registration as a charitable trust to avail tax exemption benefits under the Income-tax Act, 1961. The Commissioner of Income Tax (Exemption), Lucknow examined the application, the objects of the trust, and the activities carried out.

The registration was disputed on the ground that the authority was not satisfied regarding the charitable nature of the objects or the genuineness of activities. Aggrieved by the decision, the trust preferred an appeal before the Income Tax Appellate Tribunal.

Issues Involved

Whether the trust was entitled to registration under Section 12AA, particularly:

  • Whether the objects of the trust were charitable in nature
  • Whether the activities of the trust were genuine
  • Scope of inquiry permissible at the stage of registration

Petitioner’s (Assessee-Trust’s) Arguments

The trust contended that it was established for charitable purposes and that its objects clearly fell within the definition of “charitable purpose” under the Act. It was submitted that the Commissioner had exceeded jurisdiction by examining issues beyond the scope of Section 12AA and by not properly appreciating the trust’s objectives and activities.

 Respondent’s (Revenue’s) Arguments

The Revenue supported the decision of the Commissioner, arguing that registration under Section 12AA is not automatic and requires satisfaction regarding the genuineness of activities and charitable nature of objects. It was contended that the authority had valid grounds to question the eligibility of the trust for registration.

Court Order / Findings (ITAT)

The Tribunal examined the statutory framework governing registration of charitable trusts. It reiterated that at the stage of granting registration under Section 12AA, the Commissioner is required to examine primarily:

  1. The objects of the trust
  2. The genuineness of its activities

The authority is not expected to conduct a detailed assessment of income or application of funds, which is a matter for assessment proceedings. The Tribunal evaluated whether the Commissioner’s decision adhered to these legal principles and adjudicated the matter accordingly.

Important Clarification

The ruling reinforces that registration proceedings focus on the foundational eligibility of a trust, not on quantification of exemption. Once objects are charitable and activities are genuine, registration should ordinarily be granted. Detailed scrutiny of income utilization arises only at the stage of assessment under Sections 11 and 12.

Link to download the order –https://itat.gov.in/public/files/upload/1582192246-JAGDISH-127(CIT).pdf

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