In a recent case, the Calcutta High Court has held that registration of charitable trust under Section 12AA(3) of the Income Tax Act cannot be cancelled in absence of valid ground and dismissed the Income Tax dept’s appeal.
M/S Gobind Ram Goel Charitable Trust, the respondent-assessee is a Trust registered under Section 12AA of the Income Tax Act and donations given to it are exempt under Section 80G with effect from 01.04.2012.
The assessee Trust was established on 10.08.2007 and is predominantly engaged in the activities of medical relief and upliftment of the poors. The assessee Trust was registered under Section 12AA of the Income Tax legislation vide order dated 05.05.2008 and was granted exemption under Section 80G vide proceedings dated 05.07.2013.
The assessee has been filing regularly its return of income within due date under Income Tax Section 139(1) claiming exemptions under Section 11 of the Act, 1961. A survey of the premises of a donor namely ‘School of Human Genetics and Population Health’ under Section 133A was conducted on 27.01.2015. During the survey operations, statement of Smt. Moumita Raghavan, Treasurer of SHGPH, was recorded.
As per statement, she accepted donations and returned the same after retaining commission. As per list produced by her, donation of Rs.1,12,00,000/- during the assessment year 2013-14 was given by SHGPH to the respondent assessee. As an offshoot of the aforesaid survey in the premises of SHGPH, a survey under Section 133A of the Act, 1961 was conducted in the premises of the respondent assessee on 11.09.2015 and statement of Managing Trustee namely Sri Anand Agarwal was recorded by the survey team.
A show-cause notice was issued by the CIT (E) to the respondent assessee requiring him to show cause as to why registration under Section 12A/12AA of the Act may not be cancelled by invoking provisions of Section 12AA(3). The respondent assessee replied to the notice.
The Commissioner of Income Tax (Exemption) [ CIT (E)] cancelled the registration of the respondent-assessee on the ground that the respondent-assessee has not received a corpus donation of Rs.1,12,00,000/-. The Income Tax Exemption Commissioner has not disputed the application of the fund by the respondent-assessee towards charitable objects of the Trust.
The sum of Rs.1,12,00,000/- received by the assessee as a donation towards corpus from SHGPH was treated as a general donation received by the Trust and accordingly an application was filed by the respondent-assessee before the Settlement Commission under Section 245C of the Act. Thus, the aforesaid sum of Rs.1,12,00,000/- received as a donation from SHGPH was treated as a general donation. The tax was accordingly paid by the respondent Trust.
The respondent assessee filed an appeal which was allowed by the Income Tax Appellate Tribunal. Aggrieved with the order of the ITAT, the Revenue has filed the present appeal.
The Income Tax Appellate Tribunal has recorded that “the registration granted to a trust under section12A of the Act could be cancelled only after fulfilling the conditions stipulated under Section 12AA(3) of the Act viz (a) if the Commissioner is satisfied that the activities of the trust/institution are not genuine, and (b) the activities are not being carried out in accordance with the objects of the trust/institution. We find that there is neither an allegation by the CIT(E) in the impugned order nor facts exist which can justify coming to a satisfaction regarding the existence of both the aforesaid conditions.”
The Tax tribunal viewed that “the cancellation of the registration granted to the assessee under section12A of the Act cannot be sustained and the impugned order passed under Section 12AA(3) of the Act is hereby quashed.”
A division bench of Calcutta High Court Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj dismissed the appeal since no ground for cancellation of registration of the respondent-assessee under Section 12AA(3) has been made out by the Revenue.
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