2019 (10) TMI 1539 - AT - Income Tax

Exemption u/s 11 - cancelling the registration granted u/s.12AA - sale proceeds from sale of land for development - HELD THAT - Neither in the written submissions nor before the Tribunal nor in the reply to the show cause issued by the CIT(E) it has been mentioned or explained by the appellant that the sale proceeds from sale of land for development have been used or will be used for the development of charitable objects of the trust. Therefore this factum was sufficient for CIT(E) for satisfying himself that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the Trust. In this situation the CIT (E) has very well empowered to pass order under section 12AA(3) of the Act cancelling the registration. We reached to a logical conclusion that the CIT(E) was right in cancelling the registration granted to the assessee on 7.5.2012 as the Pujari of the trust changed the original trust deed granted in 1948 and subsequent trust deed in 1987 against the wishes of the founder. The reasons stated by the appellant for sale of land of the trust for development is also not genuine bonafide and thus it is crystal clear that the activities of the trust were not genuine as it has violated the objects of the trust as well as the transferring the property of the trust without any good cause against the interest of trust. Accordingly grounds of the assessee being devoid of merits is dismissed.

Summary

Issues:
Cancellation of registration granted under section 12AA of the Income Tax Act based on violation of trust deed and objects of the trust.

Analysis:
The appeal was filed against the order cancelling the registration granted under section 12AA of the Income Tax Act. The Assessee argued that the registration was granted based on a new trust deed in 2005, rendering earlier deeds irrelevant. The Assessee contended that there was no violation of law in executing a new trust deed and authorizing the sale of trust land. The Assessee cited a Supreme Court judgment to support their case, emphasizing that the cancellation was unjustified.

The Revenue, represented by the CIT (DR), argued that the cancellation was justified as the trust violated the original trust deed by changing it in 1987 and 2005 without informing the department. The Revenue highlighted that the trust sold land belonging to the Deity, leading to legal actions against the trust. The Revenue contended that the registration was rightly cancelled due to violations of the trust's objects.

The Tribunal noted the Supreme Court's judgment dismissing a related investigation order. The main issue was whether the CIT(E) was right in cancelling the registration. The Tribunal observed that the Income Tax Officer recommended cancellation based on the creation of a new trust deed in 2005 against the founder's wishes and unauthorized sale of trust land. The Assessee's justification for the land sale was deemed insufficient. The Tribunal found no evidence that the sale proceeds were used for trust development, supporting the CIT(E)'s decision to cancel the registration.

In conclusion, the Tribunal upheld the cancellation of registration, stating that the trust violated the original trust deeds and transferred property against the founder's wishes. The Tribunal found the trust's activities not genuine, leading to the dismissal of the appeal.

In summary, the Tribunal affirmed the cancellation of registration under section 12AA of the Income Tax Act due to violations of trust deeds and objects, supported by the failure to justify the sale of trust land for development.