On August 2, 2021, the Hon’ble Supreme Court of India ordered for Cancellation of Registration of Batanagar education and Research Trust (Trust) on the ground of misuse of status conferred under section 12AA and 80G of the Income Tax Act, 1961.

Fact of the Case:- At the time of conducting a survey on an entity named as Human Genetics and Population Health, Kolkata (“SHG&PH”), it has been observed that the Trust was not carrying its activities in the manner specified and the major part of corpus donation was not genuine and basically to increase the amount of capital reserve in the balance sheet to avail the loan from the bank. The major part of donation received was returned back to the donors through intermediaries after a certain percentage of commission.

SHG&PH is one of the trustees from whom the Trust has received bogus donations. SHG&PH, source of income was the money received in the form of donations from corporate bodies as well as individuals.  The donations received were returned by cheque/ RTGS in the name of companies or organizations specified by intermediaries.

Decision of the Court

The Hon’ble Court held that the intention of the legislature to grant registration u/s 12AA and 80G of the Act is to give the benefit us/ 11 to encourage medical relief to the poor and needy persons, to promote education among masses, and to support to the poor section of the society.  But unfortunately, a lot of time and even in the present case, these provisions have been misused for personal need and for the benefit of Trustee/ members of the trust. The Hon’ble Court held that, along with misusing provisions of the Act, the Trust also has challenged the cause of the constitutional provisions by maintaining certain well-needed objectives.

The Trust has violated the objects of the Trust by converting cheque received as a donation in cash and giving back the substantial money in cash to the donor. The Hon’ble Court concluded that status is given under section 12AA and 80G of the Act has been completely misused by the Trust by receiving bogus donations and is not entitled to retain and enjoy said status, thus ordered for cancellation of registration of the Trust.

Source- CIT (Exemptions) Vs Batanagar Education And Research Trust (Supreme Court of India), Appeal Number : Civil Appeal No. 4451 of 2021, Date of Judgement/Order : 02/08/2021

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