The Delhi High Court has ruled that the registration granted to a society under section 12A of the Income Tax Act, 1961 cannot be revoked in the absence of evidence that the foreign contribution is likely to be used for personal gains or diverted for undesirable purposes.
The petitioner-society was formed in 1992 with the object of promotion of education in the field of technical/professional/paramedical/ law/teaching education/polytechnic etc. It was running the petitioner is running various colleges at Delhi, Gurgaon and Agra since 1994.
The petitioners’ request for registration under Section 12 of the Foreign Contribution (Regulation) Act, 2010 was rejected on ground that it is functioning on commercial basis for personal gains. Subsequently, the department withdrawn the registration granted under section 12A to the Assessee.
While analyzing the provisions of the Section 11 & 12 of the Income Tax Act, 1961, Justice Vibhu Bhakru, who penned the judgment, noted that a plain reading of the scheme of these provisions indicates that income derived from property which is held wholly for charitable and religious purposes is exempt from income tax subject to other conditions being complied. Section 12A of the Income Tax Act provides for registration of a trust or institution which claims exemption under Section 11 and 12 of the said Act.
Quashing the impugned orders, the Court said that “Notwithstanding the registration granted to the petitioner under the Income Tax Act, the permission sought by the petitioner could have been refused if there was any evidence to show that the foreign contribution is likely to be used for personal gains or diverted for undesirable purposes. But, as stated earlier, there is no material to indicate that these conditions were satisfied. There is no material which would justify the conclusion that the petitioners were likely to divert the foreign contribution for personal gains or utilise it for any undesirable purposes.”
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