No revocation of trust’s registration where siphoning of income not proved

1.  The assessee was a charitable public trust engaged in running educational institutions having registration under section 12A (a). A search and seizure operation was carried out in the case of the trust wherein it was revealed that the assessee trust was collecting huge capitation fees from students at the time of admission. It was also revealed that the income of the trust was not correctly accounted in its books of account and that the trust was conducting its activities in a manner so as to earn profit which was not in accordance with the objects. Further, the trust had also been receiving anonymous donations and the trustees were diverting the unaccounted funds of the trust for their own benefit.

2.  Thus, the Commissioner passed an order withdrawing the registration granted to assessee under section 12A(a) invoking the provisions of section 12AA(3).

3.  The ITAT on appeal held as under:

From our above discussions it is evident that the activities conducted by the assessee Trust are only promoting education within the ambit of Section 2(15) of the Act. The Trust was not engaged in any other activity other that promoting Education. The allegations of the Revenue that the Trust was collecting capitation fees, Donations, siphoning of undisclosed income of the Trust for the benefit of the Trustees can at the most be taxed in the hands of the Trust or the Trustees as the case may be and may even trigger penal action against the Trustees in accordance with Law. Moreover no conclusive findings by cogent evidence are established by the Revenue to prove that the Trustees have siphoned out undisclosed income of the Trust. It is also not established before us by the Revenue that the trustees who have received funds by siphoning the undisclosed income of the trust are brought to tax. Based on these facts and the case laws discussed herein above, we are of the considered view that the Ld. CIT is not justified in withdrawing the registration granted U/s.12A(a) of the Act by invoking the provisions of section 12AA(3) of the Act. Such Act of the Revenue will only affect the poor students who are studying in the institution by paying nominal and normal fees and also other students thereby defeating the very purpose of these provisions of the Act, which are enacted with the intention of promoting education in the country. Therefore, we hereby quash the order of the Ld. CIT dated 09.06.2014 withdrawing the registration granted U/s.12A(a) of the Act.

In the result ,the appeal of the assessee is allowed.