TaxTMI 
TaxTMI 
2026 (2) TMI 1180
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....ile impugning the order of ld. CIT (E) took us through the written submissions filed by the Trust and available on page Nos. 1 to 24. He pointed out that assessee Trust was enacted in 1978 under the name and style of Maharaja Jagat Singh Medical Relief Society, Beas. It was registered with Registrar of Firms and Societies, Punjab. It was granted registration u/s. 12A of the Income Tax Act as well as 80G. This registration was granted on 18.12.1978 and copy of the registration is available on page No. 104 to 106 of the Paper Book. The assessee Society, later on made changes in its name and the expression 'Beas' has been deleted. This change has also been recognized by the Registrar of Firms and Societies on 16.03.2011 and a fresh certificate was given which is available on page 40 of the Paper Book. The ld. counsel for the assessee has apprised us with the objects of the society and we briefly take note of such objectives as under : OBJECTS OF SOCIETY MEMORANDUM OF ASSOCIATION OF MAHARAJ JAGAT SINGH MEDICAL RELIEF SOCIETY: I. The name of the Society shall be Maharaj Jagat Singh Medical Relief Society. II. The Registered Office of the Society shall be si....
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....Charan Singh Charitable Hospital, Sikanderpur( Haryana) (iii) Bhota Charitable Hospital, Bhota ( Himachal Pradesh) and (iv) Dera Hospital (Beas) 3.2 The ld. counsel for the assessee has also made compilation in tabular form exhibiting the details of Out Patients as well as major and minor operations carried out in different hospitals of the assessee Trust. Such details are placed on page No. 2. With the help of these details, it was demonstrated before us that right from 1978 till 2026, it has been carrying out yeoman service to the mankind in the field of medical relief. For completeness of the facts, we deem it appropriate to take note of these details also: 3.3 The ld. counsel for the assessee further apprised us that in order to fulfil various obligations under different laws, it has complied with all conditions and obtained registration according to the requirements. Details of such Registration Certificates are being placed in the Paper Book as Annexure 9 to 15. The details of such registrations are being noticed as under : (i) Registration with Ministry of Home Affairs under FCRA with validity up to 01/01/2027 (Annexure 9). (ii) Regi....
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...., she issued Show Cause Notice to Shri Vikas Badhan and ultimately accepted the donation from this person because these donations were made from salary income. The ld. CIT(E), thereafter, made a detailed examination of the donations received from Shri Kailash Rajwani. It is observed by ld. CIT(E) that Shri Kailash Rajwani was a non-resident taxpayer in financial year 2021-22. He is holding a valid Indian Passport. He was having a company registered in Dubai and China, named as Suhrab Trading LLC. Money was transferred from the account of his father Shri Nand Lal to his NRE Account in India with Axis Bank and from there, he has made donations to the assessee Trust. The ld. CIT(E) thereafter issued notice to Shri Kailash Rajwani u/s. 133(6), namely, it is a notice requiring the donor to give information. In response to the notice, Shri Kailash Rajwani has given submissions through the assessee Trust which has been partly reproduced by the ld. CIT(E) on page 7. The ld. CIT(E) was of the view that source of these donations is from a foreign country and therefore, assessee ought to have reported under FCRA. The ld. CIT(E) was of the view that these donations are of doubtful character an....
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.... a person* as a gift for his personal use, if the market value, in India, of such article, on the date of such gift is not more than such sum as may be specified from time to time by the Central Government by the rules made by it in this behalf. • (ii) of any currency, whether Indian or foreign; (iii) of any security as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 and includes any foreign security as defined in clause (o) of Section 2 of the Foreign Exchange Management Act,1999. Explanation-A donation, delivery or transfer of any article, currency or foreign security referred to in this clause by any person who has received it from any foreign source, either directly or through one or more persons, shall also be deemed to be foreign contribution within the meaning of this clause. Explanation 2 - The interest accrued on the foreign contribution deposited in any bank referred to in sub-section (1) of Section 17 or any other income derived from the foreign contribution or interest thereon shall also be deemed to be foreign contribution within the meaning of this clause. Explanation3-Any amount received, by any per....
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....er of the association or company referred to in point (g). • (i) Individuals or associations who have been prohibited from receiving foreign contribution. Q.4 Can foreign contribution be received in rupees? • • Ans. Yes. Any donation, delivery or transfer received from a 'foreign source' whether in rupees or in foreign currency is construed as 'foreign contribution' under FCRA, 2010. Such transactions including interest on foreign contribution or income derived from foreign contribution even in rupees term are considered as foreign contribution. • • Q.5 Will interest or any other income earned from foreign contribution (FC) be considered foreign contribution? • Ans. Yes. It will become part of F.C. Please see Explanation 2 under Question 1. • • Q.6 Whether interest or any other income earned out of foreign contribution be shown as fresh foreign contribution receipt during that year or not? • Ans. No. The interest or any other income earned out of foreign contribution should be shown against Column 2(i)(b) in the annual return (Form FC-4) duri....
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....ion made by a Citizen of India living in another country i.e. Non-Resident from his personal savings through normal banking channel is not treated as a foreign contribution. Hence, assessee was of the view that it was not required to be reported. Further, he drew our attention towards Question No.3 wherein certain category of individual institutions are being prohibited to receive foreign contribution. The assessee Trust does not fall in that category. Thereafter, ld. counsel for the assessee drew our attention towards page No. 10 to 22 of his Paper Book wherein he has made reference to various case laws and the propositions laid down therein. His emphasis was that assessee was not under any obligation to verify credentials of the donor to find out whether donor is of suspicious character or not. The role of ld. CIT(E) was to find out whether donations have been misused or not by the assessee Trust. No such finding has been recorded by the ld. CIT(E). 5.1 He drew our attention towards the judgement of Hon'ble Calcutta High Court in the case of CIT Vs Sanskriti Sagar ITA 46 of 2018. There was a Trust called 'Herbicure' which came into existence somewhere in 1993 and was alleg....
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....case may be, and subsequently,- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall- (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if h....
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.... of sub-section (4).]] 8. A perusal of above provision would indicate that it empowers the Pr. Commissioner or Commissioner to call for such document or information from the Trust or Institution or make such enquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation. If there is any specified violation, then he would pass an order in writing, cancelling the registration of such Trust, granted under sub-clause (a) (clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of Section 12AA. The Explanation appended to this Section further provides the meaning of expression ' specified violations'. These violations are contemplated in clause (a) to (g) of the Explanation extracted supra. 8.1 'Specified violation' is that if a Trust has been drawing income from the property held under a Trust, wholly or partly, which is charitable or religious in nature and such income has been applied other than for the objects of the Trust, meaning thereby, if income is not being applied for the objects of the Trust, then it would be construed a 'specified violation' on whose fulfilment, registration can be cancelled....
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.... (i) Examining the genuineness of Society (ii) Examining the activities of the Society are in accordance with the objects of the Society and are charitable. In this context, Reliance is placed on - "Commissioner of Income Tax-I, Ludhiana Vs. Ved Niketan Dham Public Charitable Trust, Ludhiana ITA 70 of 2013 (PB & HRY High Court) "A perusal of s. 12AA(3) of the Act, reveals that a precondition to cancellation of registration are findings that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. Thus, before cancelling registration, a CIT is required to record a finding that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. A perusal of the order passed by the CIT reveals that he did not record any finding as required by s. 12AA(3) of the Act. The Tribunal, therefore, rightly reversed the order passed by the CIT. "Commissioner of Income Tax Vs. IILM Foundation Academy" 389 ITR 148 (PB & HRY High Court)" "Charitable trust Registration under s. 12A -Object of providing education vis-a-vis incidental objects-At ....
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....ed to the assessee under s. 12A(l)(ac)(iii) on 18th July, 2023 and therefore, the same cannot be reappreciated-Since the facts which are being considered by the AO while determining the taxable income have not been approved by the Tribunal in its orders, CIT(Exemption) cannot use those very facts for branding the assessee as non-charitable Institution-Therefore, the impugned order is quashed-Revenue is directed to restore the registration under s. 12A(l)(ac)(iii) in the same terms and conditions as was granted on 18th July, 2023 and also dt. 31st July, 2006 which has been cancelled from asst. yrs. 2013-14 to 2015-16 upto 1st April, 2021" "Himachal Pradesh Environment Protection and Pollution Control Board Vs. Commissioner of Income Tax" ITA No.74/Chd/2009 (ITAT, Chandigarh)" 125 TTJ(Chd) 98 "Charitable Trust-Registration of trust under s. 12AA-Withdrawal- Assessee engaged in activities for the purpose of prevention, control or abatement of pollution-General public utility object and is covered by charitable activity under s. 2(15) in view of retrospective amendment introduced by the Finance (No. 2) Act, 2009-Any collection of fees or charges, in the course o....
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....on i.e. AY 2022 - 23. Section 12AB as applicable for the year under consideration i.e. AY 2022-23 - 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub- section (1) of section 12A, shall,- (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (Hi) or subclause (iv) or sub-clause (v) of the said clause,- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about- (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; and (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of su....
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....requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub section (1); and the order, direction or decree, by whatever name called, holding that such non- compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution.] The Lrd. CIT(E) while cancelling the registration of the Society has invoked Provisions of Section 12AB(4) as amended by the Finance Act, 2022 w.e.f. 01/04/2022 and the same is not applicable for the year under consideration i.e. AY 2022-23. [Reference is made to Para 5 of order appealed against]. In this context, Reliance placed on - "Aryan Educational & Charitable Trust Vs. Commissioner of Income Tax ITA No. 1136/Chd/2024(ITAT Chandigarh)" "Charitable trust-Registration under s. 12AA -Cancellation under s. 12AB(4)-CIT (Exemptions) has withdrawn the registration under s. 12AA granted to the assessee- trust by exercising powers under s. 12AB(4)(ii) on the basis of facts recorded in the as....
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....or to be non genuine in the event of non submission of complete documents in context to source of income of the donor. In this context, kind attention of the Hon'ble Bench is drawn to Provisions of Rule 17AA and as prescribed the Society has been regularly filing every year all the requisite forms namely - (i) Form No. 9A alongwith Return of Income (ii) Form No. 10 alongwith Return of Income (iii) Form No.lOB alongwith Return of Income (iv) Form No.lOBD [Annual statement of Donors] detailing the following pre requisites - Name of Donor - Address of Donor - PAN, if available - Aadhaar No., if available (Annexure 18) It may be mentioned that filing Annual Form No.lOBD with details of Donors is to be submitted before the due date i.e. 31st May of the relevant year and all the forms mentioned supra have duly been accepted during proceedings before Lrd. CIT(E). Consolidated yearly list of average number of Donors is annexed (Annexure 19). In other words, Law casts duty on the donee in context to details of donors as prescribed by Form No.lOBD, which as stated supra was already in the d....
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....stified in cancelling registration without bringing on record any instance that the application filed for registration contains false or incorrect information. In cancelling the registration, the Lrd. CIT(E) has nowhere brought on record in the order appealed against that the Assessee has furnished false or incorrect information. As mentioned supra, the Society is registered both u/s. 12AA & 80G since inception and vide order dated 24/09/2021 the registration of the Society was renewed both u/s. 12AA & 80G for the years relevant to AY 2022-23 to AY 2026-27 (Annexure 20). Tenth Ground of Appeal - That the Lrd. CIT Exemptions has been unjustified in cancelling registration without bringing on record any instance of income derived being applied for non-charitable activity. As provided under the Provisions of Rule 17AA the Society is regularly filing Income Tax Returns based on books of accounts which are duly audited and Income Tax Return's filed for various years have duly been subjected to complete scrutiny over previous years and Assessments have been framed u/s. 143(3) with status of Charitable trust [Copies of Assessment Orders passed are annexed -A....
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.... Fifteenth Ground of Appeal - That the Lrd. CIT Exemptions has been unjustified in not appreciating that registration of Society is governed by the Provisions of Section 12AA and not as per Provisions of Section 68 of Income Tax Act, 1961. As mentioned supra vide 5th Ground of Appeal, Provisions of Section 12AA limit the scope of Lrd. CIT(E) to the extent of verification of - (i) Genuineness of the Society (ii) Activities of the Society are in accordance with objects of the Society and are Charitable While cancelling the said registration the Lrd. CIT(E) without quoting in the body of order appealed against has relied upon the Provisions of Clause (a) of first proviso to Section 68 in context to cash credit w.r.t. source of amount credited. Section 68 - Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided ....
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....IT(Exemption) did not consider the explanation offered by the assessee as to how the donation was received by cheque and it was credited to the bank account of the assessee and the donation was applied to the objects of the assessee-No opportunity of cross- examination was allowed to the assessee and therefore, the order was in violation of the principle of natural justice- Thus, the order passed by the CIT (Exemption) was wholly unsustainable" 10. In the light of above, if we peruse the facts and circumstances alongwith the findings recorded by the ld. CIT (E), then it would reveal that ld. CIT (E) has not attributed any specified violation committed by the assessee as contemplated in Section 12AB(4) of the Income Tax Act. We have discussed scope of Section 12AB(4) and pointed out each specified violation on whose occurrence the registration could be cancelled. Receipt of donation from a donee does not fall in any of the violations contemplated in Section 12AB(4) of the Act. The ld. CIT (E) has expressed her apprehension that this amount has been received from a foreign account and therefore, assessee ought to have reported it with the Ministry of Home Affairs as per regulation....
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....ce of credible evidence. The ld. CIT (E) was unable to lay her hand on any of the incriminating material except making comments on peripheral issues by expressing her apprehension or suspicion on one donation. But, then, she could use powers contemplated u/s. 131 of the Income Tax Act whereby presence of the donor can be ensured. Even by issuance of bailable warrants. She has just issued notice u/s. 133(6) which only provides a mechanism for collecting information and not ensuring the presence of witness or any other person. On the one hand, assessee has received the donation, on the other hand it cannot emphasize the donor to appear before any authority. It is not necessary that assessee has control over every donor. Therefore, to our mind, the ld. CIT (E) has erred in exercising her powers in this manner and cancelling the registration of a charitable institution which has been working for the medical relief of mankind since 1978. The ld. CIT (E) could not point out a finger on any of the activities carried out by the Trust in its four hospitals. It has also been demonstrated before us that the Trust has some understanding with the PGI for providing medical help to the needy. The....