Withdrawl of Exemption u/s 12A and taxability of capital funds lying at the time of withdrawl

[Gopal Krishan Gupta]

Earlier trust has been registered u/s 12A  and its entire income has been exempt. However, Registration of trust has been cancelled by department.  Now IT deptt. wants to levy tax on the ground that : 

Since registration of trust has been withdrawn and it will be tentamount to transfer of assets from registered trust to unregistered trust. Hence, income has not been applied for specified objects and capital funds( Assets - Liabilities) lying at the time of withdrawl is taxable.  

I wish to add here that entire income has been utilised for specified objects during exemption. 

[DR.MARIAPPAN GOVINDARAJAN]

Whether you have got clarified in the above issue? If not please inform.

AI Summary

Withdrawal of exemption: whether cancellation treats trust assets as transferred, triggering taxability of capital funds. Whether cancellation of a trust's income tax exemption registration constitutes a transfer rendering the capital fund (assets minus liabilities) at the time of withdrawal taxable, or whether capital and income applied to specified objects during the exemption period remain protected despite withdrawal of registration.