John Foundation Vs DCIT (ITAT Hyderabad)
Suspicion cannot cancel Trust Registration – Mere Assumptions no ground to cancel Trust Registration u/s 12AB(4) John Foundation vs. DCIT
Hyderabad ITAT quashed cancellation of registration u/s 12AB(4) by Pr. CIT(Central), Hyderabad, holding that the action was based on suspicion rather than evidence.
Assessee , a registered charitable trust since 2007, was engaged in educational & welfare activities. During search, it was found that books received free from foreign donors were supplied to Ben Holistic Enterprises Pvt. Ltd., a company linked to trustee’s family, which sold them at margins of 25% to 50%. PCIT(Central) treated this as misapplication of trust property, undue benefit to specified persons u/s 13(3) & violation of objects. Registration was cancelled u/s 12AB(4)(ii) from AY 2022-23 with consequential application of s.115TD.
Assessee contended that Books were sold to Ben Holistic at about ₹700 per copy & proceeds were received in full, sometimes on credit. Entire receipts were applied towards charitable objects like construction of schools, children’s home, hospital maintenance & skill training. Trust deed itself permitted import, sale & distribution of educational/religious books. There was no evidence that donors directed free distribution of books. Even if treated as activity of “General Public Utility”, receipts from such activity were less than 20% of aggregate income, hence exemption u/s 11 was available. Explanation on “specified violation” in s.12AB(4) introduced by Finance Act, 2022 was applicable only from AY 2023-24 onwards & could not be used for AY 2022-23.
