Safiya Malik

The Supreme Court has dismissed a petition filed by the Commissioner of Income Tax (Exemptions) challenging the grant of registration under Section 12AA of the Income Tax Act, 1961, to M/s International Health Care Education and Research Institute. The court upheld the orders of the Income Tax Appellate Tribunal (ITAT) and the Rajasthan High Court, affirming that proposed charitable activities can be considered for registration under Section 12AA. The court declined the revenue’s request to refer the issue to a larger bench for reconsideration, citing existing Supreme Court precedents that have already settled the matter.

The case originated from an order passed by the Commissioner of Income Tax (CIT), who had rejected the trust’s application for registration under Section 12AA on the ground that there was no evidence of charitable activities being undertaken. The CIT found that while the trust had applied for registration, it had not provided sufficient proof of actual charitable work, and its financial records did not substantiate any such claims. The CIT also observed that documents such as receipts for donations and expenditures on charitable activities were either missing or unverifiable. Consequently, the application was denied.

Aggrieved by the rejection, the trust filed an appeal before the ITAT. The Tribunal examined the trust’s application and financial records and held that the CIT had erred in refusing registration based solely on the absence of past charitable activities. The Tribunal observed that the trust had been recently established and was still in the process of setting up its charitable operations. It ruled that under Section 12AA, the Commissioner is required to assess whether the trust’s objectives are genuinely charitable in nature and whether the proposed activities align with those objectives. The Tribunal held that an absence of past activities does not preclude an entity from obtaining registration, provided its intended activities are bona fide and charitable.

The Tribunal reversed the CIT’s decision and directed the grant of registration to the trust. The revenue department, dissatisfied with this ruling, challenged it before the Rajasthan High Court. The High Court dismissed the revenue’s appeal, affirming the Tribunal’s reasoning and holding that the registration process under Section 12AA focuses on the objects and proposed activities of the trust rather than past operations.

The revenue then approached the Supreme Court, arguing that the ITAT and High Court had erred in granting registration to a trust that had not conducted any charitable activities. The revenue relied on the Kerala High Court’s decision in Self Employers Service Society v. CIT (247 ITR 118), which held that a trust must demonstrate actual charitable work before being eligible for registration. It contended that merely stating an intention to undertake charitable activities in the future should not be sufficient to qualify for tax exemption.

The Supreme Court examined the applicability of Section 12AA and considered whether the requirement of charitable activity includes proposed activities or is limited to past work. The court recorded that “the period of limitation prescribed under Section 34(3) of the Act, 1996, would reckon only from the date the signed copy of the award is delivered to the party making the application for setting it aside.”

The court referred to its previous ruling in Ananda Social and Educational Trust v. CIT (2020) 17 SCC 254, which stated that for the purpose of registration, the term "activities" includes proposed activities. The judgment in Ananda Social held that “since Section 12AA pertains to the registration of the trust and not to assess what a trust has actually done, the term ‘activities’ in the provision includes ‘proposed activities.’” The court noted that in Ananda Social, it was held that a trust seeking registration must demonstrate that its objectives are charitable in nature and that the proposed activities align with those objectives.

The revenue urged the court to reconsider Ananda Social and refer the issue to a larger bench. The Additional Solicitor General appearing for the revenue argued that “having regard to the specific provision of Section 12AA and more particularly the language, the ultimate findings recorded by the Court in Ananda Social run contrary to the very object of Section 12AA.” He contended that “the statement of law contained in para 12 of Ananda Social, which states that ‘activities’ includes ‘proposed activities,’ is prima facie incorrect.”

The Supreme Court rejected this contention, stating that “it will be too much for this Court to refer the matter to a larger bench doubting the correctness of the judgment in Ananda Social.” The court held that the purpose of Section 12AA is to assess whether the trust’s objectives and proposed activities are charitable and genuine. The court observed that “mere registration under Section 12AA does not automatically entitle a trust to claim exemption under Sections 10 and 11 of the Income Tax Act. When a return is filed by any trust claiming exemption, it is for the assessing officer to examine all materials and determine whether the exemption is genuinely claimed.”

The Supreme Court issued the following directives:

• The petition filed by the revenue is dismissed.

• The decision of the High Court affirming the ITAT’s ruling is upheld.

• The registration granted to the trust under Section 12AA stands confirmed.

• The revenue cannot deny registration on the sole ground that the trust has not yet conducted charitable activities.

The court recorded that “with the aforesaid, this petition stands disposed of.”

Case Title: Commissioner of Income Tax (Exemptions) v. M/s International Health Care Education and Research Institute
Case Number: Special Leave Petition (Civil) No. 4564/2025
Bench: Justice J.B. Pardiwala and Justice R. Mahadevan

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