Mere denial of sec. 11 relief won’t invalidate trust registration

Mere fact that an income is not exempt under section 11 would not render Tamil Nadu Cricket Association's registration under section 12AA liable to be cancelled

The High Court held as under:

1) If a particular activity of the institution appeared to be commercial in character, and it was not dominant, then it was for the Assessing Officer to consider the effect of section 11 of the Act in the matter of granting exemption on particular head of receipt;

2) The mere fact that the said income does not fit in with section 11 of the Act would not, by itself lead to the conclusion that the registration granted under section 12AA is bad and, hence, to be cancelled;

3) Only possible enquiry under section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust;

4) If any income arising on the activities is not in accordance with the objects of the trust, the assessee's income, at best, might not get the exemption under section 11 of the Act. But this, by itself, would not result in rejection of the registration as 'trust' under section 12AA of the Act;

5) The question as to whether the particular income qualified under section 11 of the Act or not was not the same as activity being genuine or not which was relevant for cancellation of registration;

6) Thus, the tribunal was not right in upholding the cancellation of registration under Section 12AA(3) granted to Tamil Nadu Cricket Association - TAMIL NADU CRICKET ASSOCIATION V. DIRECTOR OF INCOME-TAX (EXEMPTIONS) (2013) 40 taxmann.com 250 (Madras)