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COMMISSIONER OF INCOME TAX AND DIRECTOR OF INCOME TAX Versus RAM KISHAN KULWANT RAI CHARITABLE TRUST

2015 (5) TMI 652 - DELHI HIGH COURT

Registration under Section 12A cancelled - Whether AO could have rendered findings questioning the exemption under Section 12-A enjoyed by the assessee, on the basis of the donation which was made to the Ram Krishna and Sons Charitable Trust? - Held that:- The AO in the present case noticed that after the donation of the institution to the assessee on 26.05.2002 a significant portion of income i.e. fee collection etc., was donated to the RKSCT. Now, when the notice was issued under Section 12A b .....

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an explanation better than the one it argued that the AOs reasoning was not supported by law as he was not the authority to doubt such expenditure. The obligation required of a charitable trust enjoying the benefit of tax exemption under Section 12A is clearly categorical in that it has applied for registration under Section 80G(5) towards its charitable activities. - In these circumstances the DIT (Exemption) was certainly within her rights to insist on a proper explanation which in the .....

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e and as such rendered any proposed action for revocation unwarranted.The matter is remitted to the DIT (Exemption) for fresh examination after consideration of such material as the assessee may choose to place on record within the next four weeks. - ITA 1312/2010, ITA 1322/2010 - Dated:- 14-5-2015 - MR. S.RAVINDRA BHAT AND MR. R.K.GAUBA, JJ. For The Appellant : Mr.Rohit Madan, Adv., Mr.N.P.Sahni, Sr.Standing Counsel and Mr.Nitin Gulati,Jr.Standing Counsel. For The Respondent : Mr.Sandeep Mittal .....

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Charitable Trust. 2. The question of law which arises in ITA 16/2013 is: Whether in the circumstances of the case ITAT was justified in setting aside the order of the Director of Income Tax (Exemption), which had cancelled the assessee s registration under Section 12A. 3. Brief facts are that the assessee was registered as trust on 01.02.2001. Its application for registration as a charitable trust was granted on 27.12.2001. On 30.06.2002 the assessee received the IILM Undergraduate Business Sch .....

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ere carried in appeal; the CIT (Appeals) confirmed them. On further appeal the Income Tax Appellate Tribunal (ITAT) granted relief to the assessee. The ITAT reasoned that the AO was not empowered to comment either on the correctness or otherwise of the certificate which had been granted under Section 12A and that the appropriate statutory authority in that regard was the Director of Income Tax (DIT) (Exemption). Against the orders of ITAT, Revenue s appeals have arisen in ITA 1312/2010 & 132 .....

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e answered against the Revenue and in favour of the assessee. 5. The second question which arises for consideration in ITA No.16/2013 is as to the legality of the revocation of the certificate under Section 12-A ordered by the DIT (Exemption). The order took note of the decision of the AO for AY 2003-04 and 2004-05 and thereafter the concerned authorities appears to have issued show cause notice to the assessee on 03.12.2009. The assessee appears to have responded on 26.05.2010, and relied almos .....

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any impact on the other proceedings. Being a charitable institution, there is obligation on its part to conduct its activities in more transparent and reliable manner. General public, even Government agencies are looking towards charitable organizations for various philanthropic purposes. As a consequence of such trust voluntary donations and grants are being given to such charitable institutions to carry philanthropic activities for the benefit of the general public and society at large. Furthe .....

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luntary received whereas in actual conduct, the assessee society has repaid crores of rupees year after year to the institution which transferred the educational institution i.e. IILM Undergraduate Business School (IILM-UBS). The entire transaction of transfer and the so called donation to such institution is nothing but a colorable device to subvert the provision of the law and to gain benefits among specified person u/s 13 of the Income Tax Act, 1961. The activity of the Trust does not fall wi .....

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t does not quality for registration u/s 12A. Accordingly, registration granted u/s 12A to the assessee society is cancelled from A.Y. 2003-04. 6. In appeal, the ITAT accepted the assessee s contention and held as follows: The bare perusal of the clause would reveal that registration already granted to the assessee can be cancelled if the activities of the trust are not genuine or the activities of the trust are not carried on in accordance with the objects of the trust. The Ld. DIT in order to d .....

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ing benefit under Section 12A. Let us take a hypocritical example. The assessee, if not acquired the institution by donation and it had not donated a sum of ₹ 4.43 crore to RKSCT then probably there would be no prejudice to the revenue and there could be no grievance. The receipt ought to be received by RKSCT and it would then treated as application of income by that trust towards its objects. Ld. DIT has not pointed out as to how donations made by assessee are not in accordance with the o .....

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rs for asstt. Year 2003-04 to 2006-07. On due consideration of the facts and circumstances, we do not find any ground or cancellation of registration. Therefore, we allow the appeal of assessee and quash the order of Ld. DIT, the registration already granted to the assessee is restored back. 7. We have heard the counsel for the parties. Whilst there can be quarrel with the ITAT s generalization that the Director of Income Tax, in order to hold that the exemption certificate under Section 12A has .....

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