Can AT direct Commissioner to grant registration u/s 12AA when it was denied earlier?

1. Issue: The issue under consideration is whether the Appellate Tribunal has the power  under section 254(1) to pass an order directing CIT to grant registration under section 12AA or should it remand the case to the CIT for deciding the matter afresh.

Case: CIT (Exemptions) v. Reham Foundation [2019]

2. Facts of the case: An appeal was preferred by Revenue to challenge the order of the Appellate Tribunal directing registration of the trust, where registration under section 12AA has been denied  by the Commissioner of Income-tax (CIT).

3. Relevant provision of the Income-tax Act, 1961: Section 12AA sets out the procedure for registration of trusts or institutions. Registration of a trust requires satisfaction of the Principal CIT/CIT. In case the Principal CIT/CIT is not  satisfied or refuses  registration, then, the appeal lies to the Appellate Tribunal under section 254.

4. High Court’s Observations: A perusal of section 254 shows that the Appellate Tribunal has the power to pass such orders, as it thinks fit. The powers under section 254 is to be read along with other provisions of the Act. Section 12AA requires satisfaction about the genuineness of the activities and the object(s) of a trust by the CIT before its registration.

Case where the Appellate Tribunal can direct registration of the trust without remand to the CIT

The High Court opined that the Tribunal can pass an order directing the CIT to grant registration, considering the specific facts of the case, where –

  • the CIT has refused to accept the application for registration of trust after recording its finding , on the basis of the material on record before him, that the activities and  object(s) of the trustare not genuine; and
  • the Appellate Tribunal, on the basis of the same material on record, comes to the conclusionthat the order of the CIT is perverse since it has been passed ignoring, misconstruing or misinterpreting such 

In such a case, the Appellate Tribunal can direct registration of the trust without remanding the matter to the CIT, since such remand  would be an empty formality as the CIT  cannot go against   the conclusion arrived at and recorded by the Appellate Tribunal.

In view of the unfettered power of the Appellate Tribunal in terms of  section 254(1), the Tribunal can very well record its satisfaction on the genuineness of the activities and object(s) of the trust and direct registration of the trust without remand of case to the CIT, in case such satisfaction is recorded on the basis of documents and material already available on record at the stage of examination by the CIT.

Cases where the Appellate Tribunal has to remand the case to the CIT :

In the following cases, however, the Appellate Tribunal has to remand the case to the CIT –

  • Where the Appellate Tribunal records such satisfaction on the basis of material or documentary evidence which was not available before the CIT while exercising his powers under section 12AA;and
  • Where the CIT rejects the application on a technical ground without recording its opinion on  facts or genuineness of the activities and object(s) of the trust and such decision is overturned by the Appellate Tribunal, the case has to be remanded to the CIT for recording satisfaction in terms of section

The onus on the Appellate Tribunal to remand the matter in cases indicated hereinabove is in view  of the strict interpretation of the powers of the CIT under section 12AA; if the Appellate Tribunal is given wide powers to direct registration of trust in all or any circumstance, it would render the provisions of section 12AA ineffective, which again cannot be the intention of the Legislature.

5. High Court’s Decision: The High Court held that the Appellate Tribunal while hearing an appeal under section 254(1) in a matter where registration under section 12AA has been denied by  the  CIT, can itself pass an order directing the CIT to grant registration, only in case the Tribunal disagrees with the opinion of the CIT as regards the genuineness of the activities and object(s) of the trust, on the basis of  material already on  record before the  CIT.  However,  the said power is not to be exercised by the Appellate Tribunal as a matter of course and remand to the CIT is to be made where the Appellate Tribunal records a divergent view on the basis of the material which has been filed before the Appellate Tribunal for the first time.

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