Key Takeaways: - Facts of the case - Issues and orders of the case - Observation of the case - Contentions at the forums - Conclusion and way forward

1. CANCELLATION OF REGISTRATION OF
TRUST U/S 12AA
Commissioner of Income Tax
(Exemptions), Kolkata
v.
Batanagar Education Research Trust
[2021] 129 taxmann.com 30 (SC)

2. LEGENDS USED
CIT Commissioner of Income Tax
HC High Court
ITAT Income Tax Appellate Tribunal
RTGS Real-Time Gross Settlement
SC Supreme Court
SCN Show Cause Notice

3. PRESENTATION SCHEMA
Facts of the Case Issues & Orders of the Case Observations of the case
Contentions at the forums Conclusion

4. FACTS OF THE CASE

5. GENERAL FACTS
Batanagar Education Research trust was
registered u/s 12AA and it is approved u/s
80G(vi) of Income Tax Act, 1961 on 6-8-2010
In a survey conducted on School of Human Genetics
and Population Health, it was observed that the
trust is not carrying on the activities according to the
objectives of the trust
The trust was receiving bogus donations for claiming
exemptions and it returns the money to the donors
classifying it as payment towards capital expenditure

6. ISSUES AND ORDERS OF THE
CASE

7. ISSUES
Whether the trust misused its
status conferred upon it by
Section 12AA of the Act.
Whether trust was not entitled
to retain and enjoy its status as
a trust and cancellation of
registration u/s 12AA and 80G
are justified.

8. ORDERS
CIT
Cancelled the registration
granted u/s 12AA and
approval u/s 80G of the Act
ITAT
The activities of the
Assessee were not genuine
and hence their registration
is liable to be cancelled u/s.
12AA of the Act,
HC
The trust is not involved in
any illegal activities of the
donor. Hence, the order of
cancellation of the
registration of the trust is
set aside.
Appeal was made to the
Honourable SC regarding
the same
In favour of revenue
In favour of assessee

9. OBSERVATIONS OF THE CASE

10. QUESTIONS RAISED BY THE DEPARTMENT
1. Please confirm the authenticity of the Corpus Donation.
2. Why are you saying that a major part of the donations received
were not genuine?
3. Who were the intermediaries and what were the modes of
returning the money?
4. In response to the earlier question you have stated that you were
"instructed". Who gave you the instruction?
5. The ledger copy for the period from 1-4-2014 to 4-9-2014 of your
trust having details of the donors is being shown to you to identify the
bogus donations along with bogus donors.
A questionnaire was issued to managing trustee whereby the following questions were raised

11. RESPONSE BY THE MANAGING TRUSTEE
1. Please confirm the
authenticity of the Corpus
Donation
• Donations that claimed
exemption u/s 11(1)(d) were
not genuine and were in the
nature of accommodation
entries, the reason being
• To show the amount as
capital reserve to procure
loans from banks
• Need of funds for
expansion of college.
2. Why are you saying that a
major part of the donations
received were not genuine?
• A part of donation received
for the above
accommodation entries was
returned back to the donors
through intermediaries
3. Who were the
intermediaries and what were
the modes of returning the
money?
• Mode - RTGS to the following
7 person
• Santwana Syndicate
• P.C. Sales Corporation
• Kalyani Enterprises
• Riya Enterprises
• Laxmi Narayan Traders
• Hanuman Traders
• Rani Sati Trade cum Pvt.
Limited
Section 11(1)(d) - Income in the form of voluntary contributions made with a specific direction, that they
shall form part of the corpus of the trust or institution, shall be fully exempt.
booked as capital expenditure
under the head Building

12. CONTD..
4. Who gave you the instruction to transfer the
money?
• Shri Gulab Pincha, was the key person to return
back the money received as bogus donation to
different parties and booking it as capital
expenditure.
• He collected the money receipts / 80G
certifications on behalf of the donors.
5. The ledger copy of your trust is being shown to
you to identify the bogus donations along with
bogus donors.
• Donation-I and II having total amount of Rs.
6,03,07,550/- is bogus and out of which Rs.
5,96,29,973/- was returned back through RTGS
to the above mentioned persons following the
instructions of the mediators.

13. CONTENTIONS AT THE
FORUMS

14. CONTENTIONS BY CIT
Society/Trust has misused the provision of Section 12AA and 80G(5) (vi).
They have violated the objects of the trust as converting cheque received
through corpus donation in cash beyond-the-objects. The society was found
to be involved in Hawala activities.
Corpus donation received is not voluntary, merely an accommodation entry
and fictitious.
Activities of the trust are not genuine as well as not being carried out in
accordance with its declared objects.
Even in-genuine and illegal activities carried on by assessee through money
laundering do not come within the conceptual framework of charity.
Therefore, the appeal is dismissed.

15. CONTENTIONS OF THE TRIBUNAL
• The Managing Trustee of
the Assessee admitted that it
got donations and returned
to donors in cash.
• The statement given by the
Managing Trustee is already
been extracted.
• It is clear from the evidence
on record that the activities
of the Assessee were not
genuine and hence their
registration is liable to be
cancelled u/s 12AA(3) of the
Act, and was rightly cancelled
by the CIT
The appeal is therefore
dismissed
Section 12AA(3) – If the activities of the trust or institution are found to be non-genuine or its activities are
not in accordance with the objects for which such trust or institution was established, then the registration
can be cancelled.

16. CONTENTIONS OF HC
The respondent revenue has not been
able to establish the case so as to
warrant cancellation of the registration
of the appellant trust under section
12AA(3) of the Act
The Revenue also has not been able to
prove any involvement of the trust in
any illegal, immoral or irregular activity
of the donors.
Appeal allowed in favour of the assessee

17. CONCLUSION

18. FINAL RULING BY HONOURABLE SC
The answers given by the Managing trustee proves that the bogus funds were received and a
part of it were returned to the donors in cash.
Hence, it is clear that the registration conferred upon by the trust u/s 12AA and 80G of the
Act was misused by the trust.
The HC did not attempt to understand or consider the views of CIT and ITAT whether they
are correct or valid.
The order passed by CIT and Tribunal were right and they are restored.
Hence the registration of the trust stands cancelled.

19. WAY FORWARD
The benefit under section 11 and section 12 have been provided with an intent of
promoting the welfare of the society. However if such status is being misused for
other illegal activities, such status is likely to be cancelled and be subject to serious
consequences.

20. Thank You!
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