Cancelled Trust's registration on account of receiving bogus donations

Last updated: 05 August 2021

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The Supreme Court upheld the cancellation of Batanagar Education and Research Trust's registration under Section 12AA of the Income Tax Act. This decision followed observations that the trust received bogus donations, with funds being 'ploughed back' to donors. The court found this to be a clear misuse of trust status, rejecting the trust's argument that they had no obligation to verify donation sources.

Court :
Supreme Court of India

Brief :
In Commissioner of Income Tax (Exemptions), Kolkata v. Batanagar Education and Research Trust [Civil Appeal No. 4451 of 2021], the Commissioner of Income Tax (Exemptions), Kolkata ('the Appellants') and the Tribunal had directed for cancellation of the registration of Batanagar Education and Research Trust ('the Respondents') under Section 12AA of the Income Tax Act, 1961 ('IT Act') after a survey was conducted on School of Human Genetics and Population Health, Kolkata wherein it was observed that the Respondents were receiving bogus donations from the respective entity.

Citation :
Civil Appeal No. 4451 of 2021

In Commissioner of Income Tax (Exemptions), Kolkata v. Batanagar Education and Research Trust [Civil Appeal No. 4451 of 2021], the Commissioner of Income Tax (Exemptions), Kolkata ('the Appellants') and the Tribunal had directed for cancellation of the registration of Batanagar Education and Research Trust ('the Respondents') under Section 12AA of the Income Tax Act, 1961 ('IT Act') after a survey was conducted on School of Human Genetics and Population Health, Kolkata wherein it was observed that the Respondents were receiving bogus donations from the respective entity.

The Respondent's council pleaded that the Respondents had no obligation on their part to verify the source of funds and there lied no evidence so as to prove that these donations were used for any illegal or immoral activity.

The Hon'ble Supreme Court ruled against the Respondent's submission and held that the Respondents were receiving bogus donations since the same were issued through cheques which were ploughed back and a substantial amount of these donations were sent back to the donors.

It further noted that the Appellants were right in cancelling the registration under Section 12AA and 80G of the IT Act as it led to clear case of misuse of the trust status.

FAQ :

The trust's registration was cancelled because it was found to be receiving bogus donations, which constituted a misuse of its trust status.

Investigations revealed that donations were made via cheques that were subsequently 'ploughed back' to the donors, indicating fraudulent activity.

The Supreme Court ruled against the trust's submission that they had no obligation to verify the source of funds, implying such verification is necessary.

The cancellation of registration was under Section 12AA, and the court also noted the relevance of Section 80G of the Income Tax Act, 1961.

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Judgement posted by

Bimal Jain

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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