Cancellation of Registration

In order to ensure that the trust or institution do not deviate from their objects, section 12AA of the Income-tax Act has been amended, so as to provide that

(i) at the time of granting the registration to a trust or institution, the Principal Commissioner or the Commissioner shall, inter alia, also satisfy himself about the compliance of the trust or institution to requirements of any other law which is material for the purpose of achieving its objects;

(ii) Where a trust or an institution has been granted registration under 12AA 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. However, no such order will be passed without giving an opportunity of being heard to the trust or institution.

Grounds for cancellation of exemption certificates are:

  • If the income is not applied for benefit of public [Sec 13(1)(a)]
  • If income is applied for the benefit of any particular religious community or caste [Sec. 13(1)(b)]
  • If applied for the benefit of persons specified in Sec 13(3) [Sec. 13(1)(c)]
  • If the funds are applied in modes other than those specified in Sec 11(5)
  • Violation of Any other laws

Registration can be refused for violation of other laws

  • At the time of initial registration
  • At any point of time after registration if such violation is noted
  • Violation of the laws is undisputed or attained finality
  • Reasonable opportunity of being heard is provided

New grounds of cancellation, as amended (proposed) by finance act 2020.

The Finance Act 2020 proposed that all trusts or institutions registered under existing 12AA/80G/10(23C) provisions are required to apply for re-validation within three months from 1st June 2020. If they fail to do so, their registration will stand cancelled after expiry of 3 months as calculated from 1st June 2020.

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