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TMI Blog2016 (2) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee trust in getting the same registered in the name of trustee of the assessee trust while buying the BMW car instead of getting it registered in the name of the assessee trust and it has been stated in the audited accounts for the financial year 2008-09 of assessee trust in ‘Schedule P -Notes forming part of Accounts' The audited accounts for the financial year 2008-09 was signed on 17th September 2009 in which above note was incorporated and signed by the Trustees and the auditors of the assessee Trust. This clearly evidences on the touch stone of preponderance of probabilities that there was a mistake happened at the time of purchase of the BMW car whereby it got registered in the name of the trustee instead of the assesssee trust although it was purchased by the assessee trust and once the mistake was detected, the steps were initiated to correct the mistake and to transfer the motor car in the name of the assessee trust. CIT(A) has rightly allowed the exemption u/s 11 of the Act to the assessee trust by passing a well reasoned order. We find no infirmity in the orders of the CIT(A) and accordingly we uphold the same and hold that the assessee trust is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (Hereinafter called the AO ) that the objects of the assessee trust is to provide monetary, medical and other assistance and help to the needy, deserving and poor people who are suffering from cancer in particular and other diseases in general and cannot afford the medical/surgical treatment recommended by the specialist and thereby help them, as far as possible, to lead a healthy and normal life. During the course of assessment proceedings, the AO observed that the assessee trust has purchased BMW Car from the funds of the trust in the personal name of the trustee Shri Abdul Qadir Kazi vide bill dated 20.3.2009 from M/s Navnit Motors for ₹ 32,20,000/- for which the payment has been made by the trust from the funds of the trust. Hence, in the opinion of the A.O., the funds of the trust amounting to ₹ 32,20,000/- have been diverted and used for the benefit of excluded persons as covered within the provisions of section 13(1)(c)(ii) and section 13(2)(g) read with section 13(3)(cc) of the Act for which notice dated 25th November 2011 was issued u/s 142(1) of the Act to the assessee trust asking to furnish a reply as to why it should not be concluded that funds of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts for the year 2008-09 and since the operating expenses of the car were very high, it was decided to sell the car. The sale proceeds were credited directly to the assessee trust bank accounts and corresponding changes were made in the assessee trust balance sheet. The car had a large logo of the assessee trust stuck on each side to indicate that it belonged to the trust. The car was driven by an official driver employed by the trust. It was also submitted by the assessee trust that the activities of the assessee trust are genuine and in accordance with its mission to fight cancer. The assessee trust submitted that it has played a pivotal role in the battle against the dreaded disease of cancer and the same is recognized by leading national and international agencies. The assessee trust also submitted that the ICICI bank loan account statements clearly mentioned that the assessee trust is the applicant and the asset was always intended to be the official property of the assessee trust and loan has been availed by the assessee trust. 5. The A.O. after considering the contentions of the assessee trust referred to section13(1)(c)(ii),13(2)(g) and 13(3)(cc) of the Act and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- 5.3.1 Regarding Purchase of BMW Car: The AO had proposed cancellation of exemption u/s. 11 on account of applicability of section 13 for purchase of BMW Car from the funds of the Trust in the personal name of the trustee. A. O. has also observed that Trust funds to the extent of ₹ 32,20,000/- have been diverted and used for the benefit of excluded persons. Accordingly after considering the submissions made by the assessee vide letter dated 02.12.2011 and 13.12.2011, it is held that the provisions of section 13(1)(c)(ii) and section 13(2)(g) r.w.s. 13(3)(cc)are attracted to the Trust. Against the same, Assessee, through its authorized representatives had submitted vide letter no. UA/08/JUNE/IT/2012 dated 26th June, 2012 that the Learned Assessing Officer had erred in withdrawing the exemption granted to the trust u/s 11. Further, as per the provisions of Section 12AA of the Income Tax Act clearly state that the registration u/s 12 AA granted to a trust can only be revoked by the Commissioner of Income Tax or Director of Income Tax (Exemption), if he is satisfied that the activities of the trust or institution to whom registration was granted are not genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice raised by M/s Navnit Motors. Further, the AO states that buying of such luxury car for the use of influential donor is against the basic concept of charity and nothing stopped the assessee trust from purchasing a decent car in ₹ 10-12 lacs range such as a Honda City or Toyota Corolla, for the use of the trust and its guests/ donors. The AO's advice may apparently appear to be very sound but in the context of exemption u/s 11 is not relevant for the reason that there is no bar in buying such cars except that the user should be for the purposes of the trust. The A.O. has not given any finding that the car was used for non-trust purposes. In view of the Hon. Bombay High Court decision in CIT v. Dilip Singh Sardarsingh Bagga (1993) 201 ITR 995 wherein it was held that registration under the Motor Vehicles Act is not an essential pre-requisite for the acquisition of ownership of the motor vehicles and in view of the fact that the loan for purchasing the car was taken in the name of the trust and not in the name of the trustee, I am of the considered view that there is no contravention of provisions of section 13. 8.3 Therefore, following the above discussion, ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was sold in the next year. Such an objection of the learned DIT(E) in the present case, cannot be the subject matter of cancellation of registration under section 12AA(3), firstly, it is still a dabatable matter which is subjudice, whether there is any violation of section 13 or any misuse of trust fund; secondly, even if the car has been purchased in the name of the trustee, then at the most, it needs to be examined within the scope of section 13, and if at all there is any violation, then the income of the previous year in which such a violation took place, gets excluded from the exemption provided under section 11 i.e., surplus income becomes taxable for that year. If there is any kind of misuse of trust funds by the trustee or a related person of the trustee, then the statute provides enough power to the Assessing Officer to forfeit the exemption and tax the surplus. However, in such a situation, it cannot be held that the entire activities of the trust have been rendered non-genuine or its activities are not carried out in accordance with the objects of the trust. Similar issue had also come up for consideration before the Bangalore Bench of the Tribunal in Krupanidhi Educat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of BMW car in the name of Mr A A Kazi, chairman cum trustee of the assessee trust. The assessee trust also submitted that depreciation on the said BMW car was also taken by the assessee trust under the Act and the car was ultimately sold in subsequent year and the sale proceeds were credited in the bank account of the assessee trust. The loan re-payments to ICICI bank was also paid from the bank account of the assessee trust as well as payment of the initial funds for the purchase of the BMW car was also paid from the bank account of the assessee trust and these all evidences that the said BMW car was purchased by the assessee trust for its activities and was owned by the assessee trust. The assessee trust submitted in paper book which is placed on record the following documents which inter-alia includes following documents and also duly certified by the assessee trust to be placed before the authorities below during the relevant proceedings relating to the assessee trust : 1. The copy of amended trust deed of the assessee trust 2. Audited accounts of the assessee trust for the financial year 2008-09 3. copies of ledger accounts of the assessee trust evidencing that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust. Pending such transfer formalities in the name of the Trust said motor car has been shown as fixed asset in the books of accounts. The audited accounts for the financial year 2008-09 was signed on 17th September 2009 in which above note was incorporated and signed by the Trustees and the auditors of the assessee Trust. This clearly evidences on the touch stone of preponderance of probabilities that there was a mistake happened at the time of purchase of the BMW car whereby it got registered in the name of the trustee instead of the assesssee trust although it was purchased by the assessee trust and once the mistake was detected, the steps were initiated to correct the mistake and to transfer the motor car in the name of the assessee trust. We have also observed that the registration of the assessee trust u/s 12AA of the Act was cancelled by the Revenue and one of the grounds for cancellation of registration of the assessee trust was the registration of the afore-stated BMW car in the name of the trustee and the Mumbai Tribunal in ITA No. 1782/Mum/2014 vide orders dated 16-07-2014 has restored the registration of the trust u/s 12AA of the Act by holding as under : 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal held that it cannot be the basis for cancellation of registration under section 12AA(3), at The Cancer Aid Research Foundation the most, it can be a violation of provisions of section 13. Thus, this objection of the learned DIT(E) cannot be held to be sufficient ground for cancellation of the registration. . 20. In view of the aforesaid discussion, we find that none of the objections and the grounds which have been taken by the learned DIT(E) in the impugned order for cancelling the registration can be held to be sustainable either on facts or in law, so as to hold that the activities of the trust are either not genuine or they are not being carried out in accordance with the objects within the scope of section 12AA(3). Moreover, nothing has been brought on record to show that the application of the income of the trust from year-to-year has not been made towards attainment of the objects i.e., for the charitable purposes. If no discrepancy has been found in the income and expenditure account and there is a proper application of income towards the objects in accordance with the provisions of section 11, then neither the charitable nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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