2024 (7) TMI 147 - HC - Income Tax

Cancellation of registration u/s 12AA (3) - assessee has not received corpus donation - sum received by the assessee as donation towards corpus from SHGPH was treated as general donation received by the Trust - HELD THAT - CIT (E) has not recorded any finding disbelieving the application of fund by the respondent assessee towards the object of the Trust. Details of application of fund and receipts of donations were well furnished by the respondent assessee which have been reproduced by the ITAT in the impugned order. Thus application of fund by the respondent assessee towards object of the Trust out of the donations received is undisputed. Tribunal has recorded specific finding of fact in this regard. Even SHGPH has not named the respondent assessee but it was in the list furnished by SHGPH that the name of the respondent assessee figured showing donation. The alleged brokers were not examined by the Revenue so as to disbelieve the donations received by the respondent assessee. Instead the donations received by the respondent assessee were treated as general donations and accordingly it was subjected to tax under the Act 1961 in the hands of the respondent assessee. The findings recorded by the ITAT in the impugned order and more particularly the findings aforequoted; are findings of fact based on consideration of relevant evidences on record. Therefore we do not find any illegality or perversity in the impugned order of the ITAT. Decided in favour of the assessee and against the Revenue.

Summary

Issues:
Cancellation of registration under Section 12AA (3) of the Income Tax Act, 1961 based on alleged non-genuine activities and non-compliance with trust objectives.

Analysis:
1. The respondent, a Trust registered under Section 12AA of the Income Tax Act, claimed exemptions under Section 11 and Section 80G. A survey revealed a substantial donation received from another entity, which was later treated as a general donation by the respondent Trust. The Commissioner cancelled the registration of the respondent Trust under Section 12AA (3) due to discrepancies in the corpus donation received. The Trust paid taxes on the disputed donation and appealed the cancellation.

2. The Income Tax Appellate Tribunal (ITAT) found no evidence to support the cancellation. The ITAT highlighted that the Trust had accounted for all general donations and utilized them for charitable purposes. The ITAT noted that the Revenue did not prove any wrongdoing by the Trust, and the alleged discrepancies were not substantiated. The Tribunal concluded that the cancellation of registration was unjustified and quashed the order under Section 12AA (3).

3. The High Court upheld the ITAT's decision, emphasizing that the disputed donation was treated as general income and taxed accordingly. The court observed that the Trust had validly applied the funds towards its charitable objectives, which were supported by detailed records. The court noted that the Revenue failed to establish any malpractice by the Trust or its trustees. As there was no legal basis for cancelling the registration under Section 12AA (3), the court dismissed the appeal by the Revenue.

In summary, the High Court ruled in favor of the respondent Trust, rejecting the Revenue's appeal against the cancellation of registration under Section 12AA (3). The court found no evidence of non-genuine activities or non-compliance with trust objectives, affirming that the Trust had appropriately applied donations towards charitable purposes and had not engaged in any wrongdoing.