TMI Blog2017 (9) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord 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. - ITA No. 285, 286, 287, 288, 289, 1156, 1157, 1158, 1159, 1160 /Kol /2016 - - - Dated:- 30-8-2017 - Shri Aby.T Varkey, Judicial Member And Shri Waseem Ahmed, Accountant Member By Assessee : Shri J.P. Khaitan, Sr. Advocate Shri Pratyush Jhunjhunwala, Advocate By Revenue : Shri G. Hangshing CIT-DR ORDER Per Bench:- These are ten appeals by different assessee(s) are directed against the different orders of Commissioner of Income Tax (Exemptions)-Kolkata u/s 12AA(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide dated 15.12.2015 30.03.2016 respectively for assessment year 2006-07 onwards. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii)Krishna Charity Trust 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has held that the activities of the trusts are ingenuine. Only benefit 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption u/s 11 of the Act which was duly extended to it. Thus, it is clear that out of several years only in one year the benefit 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,000 75,000 Accounting year 2013-14 Aditya Bagla Son of MR. Vinod Bagla, Kailashpuri, Hanuman Nagar, Kanker Bagh, Patna-20 Bihar Cash 42,350 The Bharat Sevashram Sangha, 211, Rash Behari Avenue, Kolkaata-19 Cheque 10,000/- 52,359 Accounting year 2014-15 Sruti Seva Trust, P.O. Anaikatti, Coimbatore-641108 Cheque 15,50,000 Bihar School of Yoga, Ganga Darshan, Munger, Bihar- 811201 Cheque 25,000/- 15,75,000 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) read with Explanation 1, to any other trust or institution registered under section 12AA, being contribution with a specific direction that they shall form part of the corpus of the trust or institution, shall not be treated as application of income for charitable or religious purposes. From the amendment, we find that income authorities were conscious about the application of income out of corpus fund which shall not be treated as obligation but the same is applicable from 01.04.2018.Thus, it is clear prior to 01.04.2018 the money donated as corpus will amount the application of income. b) In this connection, we also find support guidance from the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Sarladevi Sarabhai Trust No.2 reported in 172 ITR 698 (Guj), wherein it was held as under:- When a donor-trust which is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was held as under:- Under Section 12AA of the Act, the Commissioner, at the relevant time in the year 1999 had called for all documents and information from the respondent-assessee to satisfy himself about the genuineness of the activities of the institution and after making enquires had passed the order registering the said institution and giving it the benefit under Section 12A of the Act, which made the institution eligible for exemption from the provisions of Sections 11 and 12 of the Act. Under Section 12AA(3) of the Act, the Commissioner was to be satisfied about the activities of the said institution and if they were not genuine and the same were not being carried out in accordance with the objects of the institution he could pass the order cancelling the registration. It cannot be disputed that the respondent-assessee is engaged in carrying out its 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 reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to claim any such exemption or exclusion of its income from the total income of the previous year. The Income-tax Act through section 12A has made it obligatory for charitable trusts and institutions to get themselves registered with the income-tax authorities failing which the benefit of exemption of income-tax would be denied. The requirement of registration being procedural is prescribed under section 12AA of the Act which reads as under:- Procedure for registration. 12AA. (1) The [***] [Principal Commissioner of] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 12AA, which lays down the procedure for registration, does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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