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TMI Blog2017 (9) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue as evidenced from the details submitted by the AR in the preceding paragraph and placed on record. The ld. DR has not brought anything on record contrary to the finding of ld. AR. Thus the amount of donation given by the assessee trust to the other trust is very much charitable activities. In this connection the CBDT has issued instruction No. 1132 date 05.01.1978 wherein it was clarified that the payment of a sum by one Charitable Trust to another for utilization by the donee-trust towards its charitable objects is proper application of income for a charitable purpose. No hesitation in reversing the order of ld. CIT(Ex) and accordingly the appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... st iv) Harsh Vardhan Charity Trust v) Lakshmis Trust vi) Nawal Kishore Kejriwal Charitable Trust vii) National Agricultural & Scientific Research Foundation viii) Ashoke Kumar Memorial Trust ix) Alwar Charity Trust x) Udaipur Charity Trust During the course of assessment proceedings for the year under consideration Assessing Officer observed that assessee is deriving mainly its income from source of investment such as interest, dividend from mutual fund etc. The impugned income of the assessee was applied by way of donations to a certain institutions which are part of group and having registration u/s 12A of the Act. During the course of assessment proceedings, Assessing Officer observed that all the 10 trusts have transferred corpus donation to one another in order to claim the benefit of exemption Section 11 of the Act. As such, no charitable activity was carried out by the group of trusts. Only small amount of money was given as donation to the outside trust just to show the genuineness of the activities so that the benefit of Section 11 of the Act could be claimed. In view of the above, AO in his assessment order u/s. 143(3) of the Act has denied the benefit of exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit u/s. 11 of the Act was denied on the ground that the donation received was subsequently given to another trust. vi) After AY 06-07 the assessee has been filing its return of income claiming exemption benefit u/s. 11 of the Act for all the AYs beginning from 2007-08 to 2015-16 respectively. All the returns filed by assessee after AY 06-07 were accepted by the Revenue up to AY 2014-15. However, Ld. CIT(Ex) disregarded the contention of assessee and cancelled the registration certificate u/s. 12AA(3) of the Act by observing as under:- "Based on the findings of Assessing Officer, Commissioner of Income Tax (Appeals), Hon'ble ITAT, Kolkata and considering the submission of the assessee. it is concluded- a) Rotational transactions as depicted in para (3) of this order, assessee was rotating donations from various group trusts just to show application of income. b) Assessee was not doing any charitable activity. Even if he has done, it is nominal only. c) Assessee has not performed as per the objectives of the trust for which purpose it was created. d) Activities of the trust were found to be in-genuine. e) No real charitable activities are done by assessee trusts, invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of exemption was not extended to the assessee. Therefore on the basis of one year the registration u/s. 12A of the Act cannot be cancelled. Even if it is presumed that the assessee has done something wrong in a year then it cannot be inferred that the trust is in-genuine. 5) Ld. CIT(Ex) has cancelled the registration certificate with effect from 01.04.2005 i.e. financial year 2005-06 corresponding to AY 2006-07. In this regard Ld. AR submitted that Ld. CIT(Ex) has no power to cancel the registration certificate w.e.f 01.04.2005 Ld. AR in support of assessee's claim relied on Circular No.1/2011 [F.No. 142/1/2011- SO(TPL)] dated 06.04.11. The relevant extract of the circular reads as under:- "7. Cancellation of registration obtained under section 12A 7.1 Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under section 12AA can be cancelled by the Commissioner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The necessary receipts & other supporting evidences are enclosed on pages 47 to 59 of the paper book. Ld. AR also submitted that the donation received by the assessee was allowed to be accumulated @ 15% in the AY 2006-07 which implies that the activities of the trusts were duly accepted by the Authorities Below in the assessment proceedings. The Hon'ble ITAT in assessee's own case in ITA No. 385/Kol/2014 vide order dated 16.9.2016 has also given their view for considering the amount of donation received by it which was accumulated to the extent @ 15% as per the provision of Section 11(1)(a) of the Act. Thus, the orders of AO and Ld. CIT(Ex) for the AY 2006-07 got merged with the order of ITAT. Thus, in such case, Ld. CIT(Ex) passed order u/s. 12AA(3) of the Act loses his jurisdiction. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 9. We have heard the rival contentions of both the parties and perused and carefully considered the material on record including the judicial pronouncements cited and placed reliance upon. In the instant case before Ld. CIT(Ex) cancelled the registration certificate granted by it u/s. 12A of the Act on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself a charitable and religious trust donates its income to another trust, provisions of section. 11(1 )(a) can be said to have been met out by such donor-trust and the donor-trust can be said to have applied its income for religious and charitable purposes, notwithstanding the fact that donation is subjected to any conditions that donee-trust will treat the donation as to its corpus and can only utilise the accrued income from the donated corpus for religious and charitable purposes, and that the question whether gifted income is to be utilised by donee-trust fully for its religious and charitable purposes or whether donee-trust has to keep intact the corpus of the donation and has to utilise only the income therefrom for its religious and charitable purposes would not make the slightest difference, so far as entitlement of the donor-trust for exemption under section 11(1) goes." c) Ld. CIT(Ex) has cancelled the registration certificate with effect from 01.04.2005 though he was delegated the power for cancellation of registration certificate with effect from Assessment Year 20011-12 as discussed above. Thus, in our considered view, Ld. CIT(Ex) has exceeded his jurisdiction by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s objects and the genuineness of the same has never been doubted. The allegation is regarding the alleged supply of the installation of the software and whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in cancelling the registration granted on 13.05.1999 w.e.f. the assessment year 2004- 05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011 and the assessee had incurred as much as 91.71% of the receipts for the assessment year 2004-05. Accordingly, keeping in view the peculiar facts and circumstances as noticed above, High Court are of the opinion that the Commissioner of Income Tax was not justified in passing the impugned order for withdrawing the exemption as admittedly, the respondent-assessee is carrying out educational activities by running a large number of educational institutions all over the country and, therefore, the questions of law sought to be raised do not arise." 9.1 The facts of the above case are similar to the instant case before us. In the instant case the assessee is a chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant;" From the above provisions, it is clear that the ld CIT(Exemption) before granting the registration certificate shall conduct necessary enquiries as he thinks fit in order to satisfy himself about the genuineness of activities of the trust. Once the ld CIT(Exemption) is satisfied with the genuineness of the activities then he will grant the registration certificate. In the instant case before us, we find that the activities of the trust have not been doubted except the corpus donation given by the assessee to other trusts. Thus in our view at the most the exemption u/s 11 of the Act will be denied to such donation. Thus, in such circumstances the registration u/s 12A of the Act cannot be cancelled. In this regard, we rely in the principles laid down by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. It is significant to mention that registration under s. 12AA does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the CIT shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under s. 12A, is actually in the activities which are genuine. Genuineness of the activities of the trust or the institution has to be seen, keeping in mind the objects thereof, which necessarily means that the CIT shall satisfy himself about the fact that the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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