M.M. Patel Charitable Trust Vs PCIT (Central) (ITAT Pune)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Pune has overturned the order of the Principal Commissioner of Income Tax (PCIT), which had canceled the registration of M.M. Patel Public Charitable Trust under Sections 12A and 12AB of the Income Tax Act, 1961. The decision provides a major relief to charitable institutions by reaffirming that tax exemptions cannot be withdrawn without strong and conclusive evidence of misconduct.
Background of the Case:
M.M. Patel Public Charitable Trust, which operates a medical college and hospital, was subjected to a search and seizure operation conducted by the Income Tax Department under Section 132 on August 25, 2022. During the search, authorities found incriminating documents and recorded statements of employees alleging that:
1. The trust was receiving capitation fees in cash from students.
2. It was involved in cashback transactions, where a portion of salaries paid to doctors and staff was allegedly refunded to the trust.
3. The trustees were misusing funds for personal gains rather than applying them solely for charitable purposes.
Based on these findings, the PCIT (Central), Pune issued a show cause notice and subsequently canceled the trust’s tax exemption status by withdrawing its registration under Section 12A (for the period FY 2019-20 to FY 2020-21) and under Section 12AB (from FY 2021-22 onwards).
