Srinivasan Charitable and Educational Trust Vs PCIT (ITAT Chennai)
Chennai ITAT: Section 12AA Registration Cannot Be Cancelled Merely on Uncorroborated Allegation of Capitation Fee Collection
The Chennai ITAT quashed the order cancelling the registration of Srinivasan Charitable and Educational Trust under section 12AA(3), holding that registration of a charitable trust cannot be withdrawn merely on the basis of uncorroborated loose sheets, third-party statements, and suspicion regarding alleged collection of capitation fees.
The Principal CIT had cancelled the Trust’s registration retrospectively after a search, alleging that the Trust had collected capitation fees based on loose sheets recovered from third-party premises, statements of certain employees, and electronic records. The Tribunal found that the Trust continued to run recognised educational institutions and a hospital, provided scholarships and free medical treatment, and had even expanded its charitable activities by establishing additional educational institutions in subsequent years. These undisputed facts demonstrated that the core charitable activities remained genuine and continued in accordance with the Trust’s objects.
The Tribunal observed that the alleged capitation fee collection rested primarily on uncorroborated loose sheets recovered from third parties, whose evidentiary value was doubtful. The Revenue had failed to independently verify the alleged transactions by examining parents or obtaining reliable corroborative evidence. The seized material did not conclusively establish that the Trust itself had collected capitation fees or that any such amounts had reached the Trust. The Tribunal also noted inconsistencies in the statements relied upon by the Department and found that the evidence was insufficient to conclude that the Trust’s activities had become non-genuine.
Emphasising the distinction between assessment proceedings and registration proceedings, the Tribunal held that cancellation under section 12AA(3) is justified only where the activities of the trust are not genuine or are not carried out in accordance with its charitable objects. Even if individual transactions are disputed, such issues may be examined in assessment proceedings or while determining exemption under sections 11 and 12, but they do not automatically justify cancellation of registration. Since the Revenue failed to establish any fundamental deviation from the Trust’s charitable objects, the Tribunal set aside the cancellation order and restored the Trust’s registration.
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