Section 12A

Section 12A — the law in short

What the courts have decided on section 12A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ACIT v Ahmedabad Urban Development Authority Supreme CourtCuts both ways
  We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
  Only if the fees are pitched above cost. Charging on a cost or nominal mark-up basis is not trade, commerce or business; charges noticeably higher than cost are. Even permissible commercial activity must be carried on in the actual course of achieving the general public utility object, and receipts from it must stay within 20 per cent of total receipts.
• Ananda Social and Educational Trust v CIT Supreme CourtHelps taxpayerValidity unconfirmed
  Our trust was formed weeks ago and has done nothing yet. Can registration be refused for that?
  No. Registration cannot be refused merely because a newly formed trust has not started activities. 'Activities' includes proposed activities, so at the registration stage the Commissioner looks at whether the objects are genuinely charitable and whether the proposed activities are genuine.
• CIT v Rajasthan and Gujarati Charitable Foundation Supreme CourtHelps taxpayerSuperseded by amendment
  We treated a building's full cost as application of income. Can we also claim depreciation on it?
  Yes on the law as it stood, but read the editor's note before using this for a current year. The Court held that treating the whole acquisition cost as application under s.11(1)(a) does not bar a s.32 depreciation claim on the same asset, rejected the double benefit objection, and allowed the depreciation to be carried forward.
• CIT v Dawoodi Bohara Jamat Supreme CourtCuts both waysValidity unconfirmed
  The Commissioner has refused my trust registration under section 12AA because our objects are tied to one religious community — can he refuse registration on that ground?
  No, not at the registration stage on this reasoning. The Supreme Court held on 20 February 2014 that section 13 is an exception to sections 11 and 12, so whether it bites is examined when exemption is claimed, not when registration is decided. On the merits the Court corrected both sides. Section 13(1)(b) is not confined to trusts that are purely charitable; a composite religious and charitable trust is not outside it merely because it is composite. But on these objects — food served on community occasions, a madarsa, help to the needy — the benefit was not channelled to the Dawoodi Bohra community alone, so section 13(1)(b) was not attracted and the appeals were dismissed.
• ACIT v Saurashtra Kutch Stock Exchange Ltd Supreme CourtHelps taxpayer
  A binding decision that covers my point was never considered when my order was passed. Is that a mistake apparent from the record?
  Yes. The Supreme Court held that non-consideration of a decision of the jurisdictional High Court or of the Supreme Court can be a mistake apparent from the record, and upheld the Tribunal recalling its own order on that ground. The section actually applied was s.254(2); the same test - patent, manifest and self-evident - is the one used under s.154.
• ACIT v Surat City Gymkhana Supreme CourtHelps taxpayer
  My trust already has registration under section 12A. Can the Assessing Officer go behind it and re-examine whether the objects are charitable?
  The Supreme Court dismissed the Revenue's appeals against a Gujarat High Court order that answered no, but it did so on a narrow ground. The Tribunal had held that the club's objects fell within general public utility under section 2(15) and that registration under section 12A was a fait accompli preventing the Assessing Officer from probing the objects further. The High Court dismissed the Revenue's appeals in limine as covered by Hiralal Bhagwati v. CIT. The Supreme Court found that both questions were concluded by that decision, which the Revenue had never challenged and which had attained finality. The appeals were therefore dismissed with no costs.
• CIT v Gujarat Maritime Board Supreme CourtHelps taxpayerValidity unconfirmed
  My body is a statutory authority, not a trust under any public trust law. Can it still be registered as a charitable institution under section 12A?
  Yes. The Supreme Court dismissed the Revenue's appeal and held that the Gujarat Maritime Board was entitled to registration under section 12A. Its predominant purpose is the development of minor ports in Gujarat, its management and control lie essentially with the State Government, and sections 73 to 75 of its own statute show it has no profit motive and must apply its income to that purpose. That is an object of general public utility within section 2(15). Section 10(20) and section 11 operate in different spheres, so ceasing to be a local authority after the 2002 amendment did not preclude the claim. The Court was concerned with registration, not application of income.
• Chamber of Tax Consultants v CIT (Exemptions) High CourtHelps taxpayer
  The CIT (Exemptions) refused our trust's registration under s.12AB because the trust deed has no irrevocability or dissolution clause, and treated our 'Yes' in Row 6 of Form 10AB as false information. Is that a lawful ground of refusal?
  No, on both counts. Section 12AB tells the Commissioner what to satisfy himself about — the objects, the genuineness of the activities, and compliance with other laws material to achieving the objects — and an express irrevocability clause is not among them and cannot be implied. A public charitable trust is irrevocable by operation of law unless the deed itself reserves a power of revocation. And an answer the Department's own e-filing utility compelled the applicant to give cannot be turned against it as 'false or incorrect information'. The Bombay High Court quashed the rejections before it and also quashed every other order rejecting renewal on the same grounds.
• Andhra Pradesh State Civil Supplies Corporation Ltd v ITO High CourtHelps taxpayer
  The trust held an investment that breaches s.11(5) read with s.13(1)(d). Does that cost us exemption on everything, or only on the income from that investment?
  Only on the income from that investment. The Telangana High Court read ss.11 and 13 together and held that the legislature did not intend the denial of s.11 to extend to the entire income; only the income from the investment made in violation of s.13(1)(d) is liable to tax. It agreed with the Bombay, Delhi and Karnataka High Courts, which had all taken that view.
• CIT (Exemptions) v Shree Sai Baba Sansthan Trust High CourtHelps taxpayer
  Our trust is religious and charitable and holds 80G approval. Can the officer tax our hundi collections under s.115BBC?
  No. Section 115BBC(2)(b) takes a trust created or established wholly for religious and charitable purposes out of the charge, except for a donation given with a specific direction that it is for a university or other educational institution or a hospital or other medical institution run by the trust. The Court held that whether the trust is religious and charitable is determined from the trust deed, and that s.80G registration is a separate and independent question which cannot be used to deny that character. Rs 159.12 crores of hundi collections out of Rs 228.25 crores of donations stayed outside s.115BBC(1).
• Chotanagpur Diocesan Trust v Union of India High CourtHelps taxpayerValidity unconfirmed
  My 148A(b) notice describes an enquiry but nothing was attached. Can I insist on the material?
  Yes. The Jharkhand High Court held the Department is duty-bound and mandatorily required to supply all material information, the enquiry conducted and the supporting documents along with the s.148A(b) notice; a three-page narration with no enclosures does not discharge that obligation.
• Trust for Reaching the Unreached v CIT High CourtHelps taxpayer
  Our audit report was not e-filed with the return and exemption was denied. Can the delay be condoned?
  Yes. The requirement to furnish the audit report with the return is procedural and directory, so exemption under ss.11 and 12 cannot be refused merely for late filing. The Commissioner's refusal to condone was set aside because the s.119(2)(b) discretion must be exercised equitably and judiciously, not on an exclusively pro-revenue view.
• DIT (Exemption) v Keshav Social & Charitable Foundation High CourtHelps taxpayer
  My trust could not produce all its donors. Can the Assessing Officer treat the donations as cash credits under section 68 and deny exemption under section 11?
  No, on these facts. The Delhi High Court dismissed the Revenue's appeal, holding that no substantial question of law arose. Section 68 had no application because the trust had itself disclosed the Rs.18,24,200 of donations as its income, and every receipt other than a corpus donation is income in a trust's hands. There was therefore full disclosure. The trust had filed a list of donors, and the failure to file a complete list or to produce the donors does not by itself support an inference that unaccounted money was being introduced as donations - particularly where more than 75% of the donations had admittedly been applied to charitable purposes and the trust was registered under section 12A.
• Jhaverbhai Patel Research Centre v CIT (Exemptions) ITATHelps taxpayer
  Our Form 10AB went in 38 days after the Charity Commissioner's order instead of 30, and the CIT (Exemptions) rejected it on that ground and on how we had spent our money. Is there a way back?
  Yes, though what you get is a remand and not registration. The Mumbai Tribunal held that the delay should not be visited on the trust — the Charity Commissioner's order had reached it late, and measured from receipt the application was within thirty days — and that the authority must adopt a liberal and justice-oriented approach. It also rejected the second ground, holding that a scholarship paid in India, in rupees, to an Indian student who then studies abroad is not an application of income outside India. It did not itself pass an order condoning the delay: it set aside the CIT (Exemptions)'s order, restored the application to him to be decided on its merits, and allowed the appeal for statistical purposes.
• Hemkunt Foundations v PCIT ITATHelps taxpayerValidity unconfirmed
  The PCIT cancelled our 12A registration after a survey. Was he even allowed to do that?
  No, on both counts here. Authority to grant or cancel registration under s.12AB lies with the CIT (Exemption), not the Principal Commissioner, and the 'specified violation' clause in s.12AB(4) took effect on 1 April 2022, so it cannot be applied to conduct in financial year 2020-21 or 2021-22.
• Lala Sher Singh Memorial Jeevan Vigyan Trust Society v PCIT (Central) ITATHelps taxpayer
  The PCIT has cancelled our registration under s.12AB(4) for 'specified violations' said to have occurred in years going back to 2015-16. Can s.12AB(4) reach back that far?
  The Delhi Tribunal held it cannot. The concept of a 'specified violation' in the Explanation to s.12AB(4) was brought in with effect from 1 April 2022, so it cannot be applied to alleged violations of assessment years 2015-16 to 2021-22. The Tribunal also held that the cancellation was passed by the wrong officer: under the CBDT notifications constituting the Commissioner (Exemptions), it is that Commissioner and not the PCIT (Central) to whom the Assessing Officer is subordinate who deals with a trust's registration. The cancellation orders were quashed.
• Grow Foundation v CIT (Exemption) ITATHelps taxpayerValidity unconfirmed
  My trust's application in Form 10AB for final approval under s.80G(5) was rejected as time-barred. Do the CBDT circulars extending the date save it?
  Yes, on this decision. The Tribunal held that the application could not be rejected merely because it was not filed by 30 September 2023, that date having been arrived at through CBDT Circular No.6/2023 and then further extended to 30 June 2024 by CBDT Circular No.7/2024. The rejection was set aside and the matter restored to the CIT (Exemption) for de novo consideration on merits.
• ACIT v Shri Dadasaheb Gawai Charitable Trust ITATHelps taxpayer
  The Assessing Officer has taxed all our donations under s.115BBC because some donors did not turn up when summoned. What does the section actually require us to keep?
  A record of the identity of the donor showing name and address, and such other particulars as may be prescribed. The Nagpur Tribunal held that a trust which maintains names, addresses, PAN and Aadhaar details of its donors has discharged its burden, and that s.115BBC cannot be invoked merely because the Assessing Officer doubts the donors. Where summonses went unanswered or came back unserved, it was for the Assessing Officer to ask the trust to produce those donors before treating the whole of the donations as anonymous.
• Versova Kokni Sunni Jamat Trust v CPC ITATHelps taxpayerValidity unconfirmed
  We have no 12A registration. Is a corpus donation given for buying property taxable in our hands?
  No. A voluntary contribution made with a specific direction that it form part of the corpus is a capital receipt, and that character does not depend on the trust holding registration under s.12A or s.12AA. The addition of Rs 8,99,811 was deleted.
• ACIT v Armee Infotech ITATHelps taxpayerValidity unconfirmed
  The Assessing Officer says my s.80GGC deduction fails because he cannot trace what the party did with the money, and because the party did not file its return. Does the section require me to answer for that?
  No. Section 80GGC requires a contribution, otherwise than in cash, to a political party registered under s.29A of the Representation of the People Act 1951, by an assessee who is not a local authority or a Government-funded artificial juridical person. Nothing in the Act puts the donor under an obligation to ensure how the donee uses the funds, and an enquiry directed at that is misdirected.
• CBDT Circular 7/2024 CBDT Circulars & InstructionsHelps taxpayer
  Our Form 10AB was rejected for late filing. Does the CBDT let us apply again?
  Yes, but only within the window this circular opened. The due date for Form 10A and Form 10AB was extended to 30 June 2024, and entities whose Form 10AB was rejected solely for late filing or for filing under the wrong section code could file fresh applications within that extended time.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.