The court looked at the argument presented by the appellent side that the Commissioner is

required to be satisfied about two things – firstly that the objects of the trust and secondly, its
activities are genuine. If there have been no activities undertaken by the trust then the
Commissioner cannot assess whether such activities are genuine and therefore, the
Commissioner is bound to refuse the registration of such a trust. The court found that it is not
possible to agree with the above mentioned argument. The purpose of section 12AA of the
Act is to enable registration only of such trust or institution whose objects and activities are
genuine.

The court believed that "planned activities" were included in the definition of "activities"
under the section. That is to say, a Commissioner is required to assess whether the Trust's
goals are truly benevolent in character and if the Trust's planned actions are sincere in the
sense that they are consistent with those goals. The situation, however, would be different if
the Commissioner sought to revoke a Trust's registration according to subsection (3) of
Section 12AA of the Act. The Commissioner would then be required to document the
decision that a particular action or series of activities actually carried out by the Trust are not
genuine because they are not in line with the objectives of the Trust. Similarly, the situation
would be different where the trust has before applying for registration found to have
undertaken activities contrary to the objects of the Trust.

The court also reasoned on the two judgment provided by the appellent, “Commissioner of
Income Tax-II vs. R.S. Bajaj Society 1” which has taken the same view as that of the Delhi
High Court in the impugned judgment. A contrary view has been taken by the Kerala High
Court in the case of Self Employers Service Society vs. Commissioner of Income Tax 2, the
court observed that the facts in Self Employers Service Society suggest that the
Commissioner of Income Tax had observed that the applicant for registration as a Trust had
undertaken activities which were contrary to the objects of the Trust, so this judgment did not
commend itself w.r.t. the present case.

By these reasons the appeal was dismissed by the court.

1
ibid
2
ibid
CRITICAL ANALYSIS AND CONCLUSION

We should focus on section 12AA of the Act which empowers the Principal Commissioner or
the Commissioner of the Income Tax on receipt of an application for registration of a trust to
call for such documents as may be necessary to satisfy himself about the genuineness of
activities of the trust or institution and make inquiries in that behalf; it empowers the
Commissioner to thereupon register the trust if he is satisfied about the objects of the trust or
institution and genuineness of its activities.

In the present case, the 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.

In this case no activities had been undertaken by the respondent Trust before the application
was made. The Commissioner denied the application on the lone justification that the trust
had not yet engaged in any activities, making it impossible to register it and, presumably,
impossible to determine if such activities were legitimate. The Commissioner's directives
were overturned by the Delhi-based Income Tax Appellate Tribunal. The Tax Department
appealed to the Supreme Court and made a request there. The High Court supported the
Tribunal's decision and came to the judgement that it was possible to evaluate whether a
newly created trust might be registered under section 12AA of the Act even if there were no
operations.

In this case, the Trust which applied for registration under section 12AA of the Income Tax
Act, 1961, was found not to have spent any part of its income on charitable activities. The
Commissioner of Income Tax, therefore, refused the registration of Trust.

For the above mentioned reason, in my understanding the purpose of the relevant clause is to
ensure that the Trust's activities are not in conflict with its objectives. In the case at hand, the
Trust had not allocated any of its income for charitable purposes, so the Commissioner was
authorised to refuse registration if the Trust's activities were determined to be in conflict with
its objectives. This is an instance of failing to fulfil the Trust's purposes and refraining from
actions that are at odds with those purposes. These situations could develop for a variety of
causes, such as not finding ideal conditions for carrying out tasks. But, that must be resolved
on a case-by-case basis.
BIBLIOGRAPHY

Primary Sources

Citation for legislation

1. The Income- Tax Act, 1995

Citation for Cases

1. Commissioner of Income Tax-II vs. R.S. Bajaj Society3
2. Jagannath v. Union of India4
3. Self Employers Service Society vs Commissioner Of Income Tax5

Secondary sources
Citation for Books
1. Tax Audit. "The Concept of charitable income", Vol. 14, No.26.

2. Arnold, Steven H. 1989. "Indian Tax laws7”

Citation for Articles/Websites

1. https://indiankanoon.org/doc/196693316/

2.https://skatax.wordpress.com/2020/04/28/m-s-ananda-social-and-educational-trust-vs-cit-
supreme-court/

3. https://www.casemine.com/judgement/in/5e5756973321bc12b6bfda42#

3
ibid
4
(1997) 2 SCC 887
5
ibid
6
https://www.casemine.com/judgement/in/5e5756973321bc12b6bfda42#
7
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