HM Journal

Trusts and Societies to be careful for bogus corpus donations

Judgment Name – Commissioner of Income Tax (Exemptions), Kolkata Vs. Batanagar Education and Research Trust

Judgment Date – 2nd August, 2021

Citation – Civil Appeal No. 4451 of 2021

Facts

  1. The respondent is a trust registered under Section 12AA of Income Tax Act.
  2. In a survey conducted on an entity named School of Human Genetics and Population Health, Kolkata under Section 133A of the Act, it was prima facie observed that the Trust was not carrying out its activities in accordance with the objects of the Trust.  A show cause notice was, therefore, issued by the CIT (Commissioner of Income Tax) on 04.12.2015.
  3. Reply was filed by respondent but CIT invoked the provisions of Section 12AA (3) of the Act and cancelled the registration granted under Section 12AA of the Act w.e.f. 01.04.2012. Consequently, the approval granted to the Trust under Section 80G of the Act was also cancelled.
  4. The trust went to appeal before tribunal but tribunal upheld the order of CIT.
  5. The trust again went to appeal to High Court and High Court concluded that the respondent (appellant herein before supreme court) has not been able to prove any complicity of the appellant trust in any illegal, immoral or irregular activity of the donors. Hence, the appeal by CIT.

Observation by Supreme Court in Para 11

“These answers also show that donations were received by way of cheques out of which substantial money was ploughed back or returned to the donors in cash. The facts thus clearly show that those were bogus donations and that the registration conferred upon it under Sections 12AA and 80G of the Act was completely being misused by the Trust.  An entity which is misusing the status conferred upon it by Section 12AA of the Act is not entitled to retain and enjoy said status.  The authorities were therefore, right and justified in cancelling the registration under Sections 12AA and 80G of the Act”

Judgment:

Allowed the appeal and restored the order passed by CIT and Tribunal.

Official Link to the Judgment –

https://main.sci.gov.in/supremecourt/2019/17350/17350_2019_33_1501_28957_Judgement_02-Aug-2021.pdf

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