Cancellation of Registration of Charitable and Religious Trusts by Commissioner

In following situations Commissioner is Empowered for Cancellation of Registration of Trust both Charitable and Religious Institution.

1. Commissioner Empowered to Cancel Registration of Charitable and Religious Trusts under Section 12AA [Section 12AA (3) & (4)]

(Applicable upto 31.5.2020 (further made applicable till 31.3.2021 by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020))

Where a trust or an institution has been granted registration under section I2AA(1)(b) or has obtained registration at any time under section 12A as it stood before the amendment by the Finance (No. 2) Act, 1996, the Principal Commissioner or the Commissioner of Income-tax can cancel the registration under the following two sub-sections:

(1)        Sub-section (3) of section I2AA if certain conditions mentioned therein are satisfied.

(2)        Sub-section (4) of section I2AA if benefit of exemption under sections 11 and 12 is not available due to the operation of section 13(1).

(1) Cancellation of Registration under Section 12AA(3)

As per section 1 2AA, the registration once granted to a trust or institution shall remain in force till it is cancelled by the Principal Commissioner or Commissioner.

Consequently, the Principal Commissioner or Commissioner can after giving reasonable opportunity of being heard to the concerned trust or institution, pass an order under section I2AA(3) in writing cancelling the registration under the following two circumstances:

(a)        the activities of a trust or institution are not genuine; or

(b)        the activities are not being carried out in accordance with the objects of the trust or institution.

Only if either or both the above conditions are met, would the Principal Commissioner / Commissioner be empowered to cancel the registration, and not otherwise.

However, no order under section 12AA (3) shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

(2) Cancellation of Registration under Section 12AA (4)

Where a trust or an institution has been granted registration, and subsequently it is noticed that—

(a)        the activities are being carried out in such a manner that,—

(i)         its income does not ensure for the benefit of general public;

(ii)        it is for benefit of any particular religious community or caste (in case it is established after commencement of the income-tax Act);

(iii)       any income or property of the trust is applied for benefit of specified persons like author of trust, trustees, etc.; or

(iv)       its funds are invested in prohibited modes,

then the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution.

Further, where a trust or an institution has been granted registration under section 12AA(1)(b) or has obtained registration at any time under section 12A and subsequently it is noticed that the trust or institution has violated requirements of any other law which was material for the purpose of achieving its objects, and the order, direction or decree, by whatever name called, holding that such violation has occurred, has either not been disputed or has attained finality, the Principal Commissioner or Commissioner may, by an order in writing, cancel the registration of such trust or institution after affording a reasonable opportunity of being heard.

However, registration shall not be cancelled under section 12AA (4) if such trust or institution proves that there was a reasonable cause for the activities to be carried out in the above manner.

2. Commissioner empowered to Cancel Registration of Charitable and Religious Trusts under Section 12AB [Section 12AB (4) & (5)] (Applicable w.e.f. 1.4.2021)

The Principal Commissioner or the Commissioner of Income-tax can cancel the registration under the following two sub-sections:

(1)        Sub-section (4) of section 12AB if certain conditions mentioned therein are satisfied.

(2)        Sub-section (5) of section 12AB if benefit of exemption under sections 11 and 12 is not available due to the operation of section 13(1) or non-compliance of requirement of any other law.

(1)  Cancellation of registration under Section 12AB (4)

Where registration of a trust or an institution has been granted under section 12AB(1)(a) or 12AB (1)(b) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard.

(2) Cancellation of registration under section 12AB (5)

Without prejudice to the provisions of section 12AB (4), where registration of a trust or an institution has been granted under section 12AB(1)(a) or 12AB(1)(b) and subsequently, it is noticed that—

(a)        the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of section 13(1); or

(b)        the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of section 12AB(1)(b)(i), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality,

then, the Principal Commissioner or the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution.