Yashaswi Academy for Skills Vs PCIT (ITAT Pune)

Pune ITAT Restores U/s 12AA/12AB Registration – Skill Development Institution Held to be Engaged in ‘Education’ Despite Serious Allegations

Summary: The Pune ITAT partly allowed the assessee’s appeal by setting aside the Principal CIT (Central)’s order cancelling registration under Sections 12AA and 12AB of the Income-tax Act, 1961 and directing restoration of the registrations. The Revenue had cancelled the registration following a survey alleging sham transactions, diversion of charitable funds to trustees and related parties, commercial manpower supply, hotel and restaurant operations, unreasonable salaries, loans to related concerns, and that the assessee functioned merely as a facilitator under apprenticeship schemes rather than carrying out charitable educational activities. The Tribunal first upheld the jurisdiction of the Pr. CIT (Central) to exercise cancellation powers after transfer of jurisdiction under Section 127, relying on CBDT Notification No. 70/2014 and the CBDT clarification dated 19.01.2024. However, on merits, it held that the assessee’s dominant activity was imparting education through structured skill development and apprenticeship programmes, which falls within “education” under Section 2(15). It further held that acting as a facilitator in Government-recognised skill development programmes and receiving administrative fees did not convert the institution into a commercial enterprise. Accordingly, the Tribunal held that cancellation under Sections 12AA(3), 12AA(4) and 12AB(4) was not justified and restored the registrations.

The Pune ITAT has set aside the order of the Principal CIT (Central) cancelling the registration granted to Yashaswi Academy for Skills under sections 12AA and 12AB, holding that the cancellation was not legally sustainable on the facts of the case.

The Revenue had cancelled the registration after a survey, alleging that the assessee had indulged in sham transactions, diverted charitable funds for the benefit of trustees and related parties, provided manpower on a commercial basis, operated hotels and restaurants, paid unreasonable salaries, advanced loans to related concerns, and acted merely as a facilitator under apprenticeship schemes rather than carrying out charitable educational activities.

The Tribunal first upheld the jurisdiction of the Pr. CIT (Central) to exercise powers of cancellation after transfer of jurisdiction under section 127, distinguishing earlier Tribunal decisions on the basis of CBDT Notification No. 70/2014 and the CBDT clarification dated 19.01.2024.

However, on merits, the Tribunal held that the dominant activity of the assessee was imparting education through structured skill development and apprenticeship programmes, which squarely falls within the expression “education” under section 2(15). Merely acting as a facilitator in Government-recognised skill development programmes or receiving administrative fees from industry partners did not convert the institution into a commercial enterprise. Following the principles laid down by the Supreme Court in Ahmedabad Urban Development Authority, the Tribunal held that the assessee continued to pursue charitable educational objects and was entitled to exemption under sections 11 and 12. It also distinguished the decisions of the Kerala High Court in Mahatma Gandhi Charitable Society and Annadan Trust on facts.

Accordingly, the Tribunal held that the Pr. CIT (Central) was not justified in cancelling the registrations under sections 12AA(3), 12AA(4) and 12AB(4) and directed that the registrations be restored. The assessee’s appeal was partly allowed.

Cases Discussed

1. Yashaswi Academy for Skills Vs PCIT (ITAT Pune)

2. Ahmedabad Urban Development Authority (Supreme Court)

3. Mahatma Gandhi Charitable Society (Kerala High Court)

4. Annadan Trust (Kerala High Court

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal filed by the assessee is directed against the order dated 29.09.2025 passed by the Ld. Pr. CIT-(Central), Pune u/s 12AA(3) & 12AA(4) and 12AB(4) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

2. Facts of the case, in brief, are that the assessee Yashaswi Academy for Skills (in short ‘YAS’) was incorporated as a ‘Non-profit organization’ u/s 8 of the Companies Act, 2013 on 20.03.2014. The main object of YAS as per the Memorandum of Association (MOA) is to promote, execute and implement skill development. The relevant part of the MOA which has been reproduced by the Ld. PCIT(C) read as under:

3. In addition to the above object, the assessee has various ancillary objects in order to attain the main objects.

4. The assessee was granted registration u/s 12AA of the Act by the CIT(E), Pune on 21.06.2016 subject to the conditions namely “in terms of Section 12AA(3), if the activities of the trust/institution are found to be not genuine or not being carried out in accordance with the objects of the trust/institution, the registration granted vide this order shall be liable for cancellation.” The registration certificate issued u/s 12AA of the Act was valid till 31.03.2021 (Α.Υ.2021-22).

Further, due to change of registration related provisions and compliances due to introduction of section 12AB of the Act w.e.f. 01.04.2021 (relevant to A.Y.2022-23 and onwards), the assessee e-filed Form-10A for renewal of its registration as required under section 12AB r.w.s 12A(1)(ac)(i) of the Act. The registration was granted by the Central Processing Centre (CPC), Bengaluru in automated manner on 28.05.2021 which is valid from A.Y.2022-23 to AY 2026-27. The assessee has been filing its return of income showing total income at Rs.Nil after claiming exemption u/s 11 & 12 of the Act. The assessee has been claiming in the return of income that it is engaged into ‘Educational Activities’.

5. A survey action u/s 133A of the Act was conducted by ITO(Exemption), Ward-2, Pune on 06.03.2024. During the course of survey action, various incriminating documents and information were gathered. As a result of survey action and subsequent post-survey enquiries it was found that the activities carried out by the assessee are not genuine and / or are not being carried out in accordance with the objects of the trust for which it was granted the registration. It was also found that the assessee had been providing benefits to its trustees and related persons as per section 13(3) of the Act and concerns of the related persons by misappropriating its funds. The assessee was further found to be engaged in non-charitable activities which were admitted by the trustee/director of the assessee in his statement and also filed an affidavit reconfirming the same. Accordingly, it was noticed that the assessee had been consistently violating the provisions of the Income Tax Act as well as the conditions of the registration making itself liable for cancellation of its registrations granted u/s 12AA and 12A(1)(ac)(i) r.w.s 12AB of the Act as applicable to the respective years.

6. The Ld. Pr.CIT(C) noted that the Assessing Officer i.e. ITO(Exemption), Ward-2, Pune had submitted a proposal to the CIT(Exemption), Pune for cancellation of registration granted to the assessee which was duly endorsed by the Addl. CIT(Exemptions) Range, Pune vide letter no. Pn/Addl. CIT(Exemp)/12AA/630 dated 28.08.2024. Subsequently, upon centralization of the case to the charge of DCIT, Central Circle-2(2), Pune, a proposal for cancellation of the registration of the assessee was transferred to the Ld. Pr.CIT(C) vide letter no. Pn/CIT(E)/centralization/YAS/2024-25/3101, dated 31.12.2024 by the office of the CIT(E), Pune.

7. The Ld. Pr.CIT(C) on going through the same observed that there have been series of violations and repetitive violations in this case which can be broadly outlined as under:

8. He, therefore, issued a show cause notice asking the assessee to submit its explanation as to why the registration granted u/s 12AA of the Act dated 21.06.2016 should not be cancelled within the provisions of section 12AA(3) & 12AA(4) of the Act (applicable upto A.Y. 2021-22) and also the registration granted u/s 12A(1)(ac)(i) r.w.s 12AB of the Act (applicable for A.Y 2022-23 to 2026-27) should not be cancelled on account of specified violations u/s 12AB(4) of the Act. The assessee in response to the same filed detailed submission contending that it is a company incorporated as Non-Profit Organization engaged in charitable activities within the provisions of section 2(15) of the I.T. Act, 1961 and no income was diverted for the benefit of its trustees / settlers.

9. However, the Ld. Pr.CIT(C) was not satisfied with the explanation / submission given by the assessee and held that the activities of the assessee trust are not genuine and there are diversions of income for the purposes other than that of the assessee trust. Further, the activities carried out by the assessee are not found to be charitable in nature.

10. The first objection of the Ld. Pr.CIT(C) is that the assessee is engaged in siphoning of money on account of sham transactions which are not genuine activities and are also not in accordance with its stated objects. The Ld. Pr.CIT(C) noted that during the course of survey action, suspicious financial transactions for mobilizing manpower with M/s. HUF India Pvt. Ltd. (hereinafter may be referred as to HUF) had been found which is a subsidiary of Germany based company named HUF HULSBECK & FURST GMBH & CO. KG. The company-HUF is engaged in manufacturing of remote-controlled access and authentication of cars & automobiles. It has a manufacturing plant at Chakan, Pune. During the course of survey action, it was noticed that between F.Y. 2017-18 and 2020-21, the assessee had received substantial sums amounting to Rs.13.12 crore from HUF. However, the assessee had no such transactions with this party from December, 2020 onwards. Shri Vishwesh Kulkarni, Chairman and MD of the assessee was questioned about these transactions while recording his statement on oath. In reply, he stated that the assessee (YAS) had contract for supplying manpower & trainees to HUF. He further stated that on instructions of Shri Sunil Garg, MD of HUF, the assessee (YAS) raised additional invoices of trainees other than the regular invoices to generate cash for out-of-pocket expenses for HUF. For this purpose, Shri Sunil Garg had given names of some of the individuals and concerns to pay the amounts corresponding to the fake/additional invoices raised by YAS. Further, these amounts were debited by the assessee in its books as payments for professional fee / consultancy charges to the individuals and concerns named by Shri Sunil Garg. Shri Vishwesh Kulkarni also stated that after removal of Shri Sunil Garg from HUF, the assessee came to know that there was no such instruction given by the management of HUF to Shri Sunil Garg to generate cash. This led to discontinuation of business from HUF. He therefore held that during the course of survey action Shri Vishwesh Kulkarni has admitted that YAS was indulged in sham transactions by raising fake bills on account of manpower/trainee supply to HUF and subsequently siphoning off the funds in form of bogus professional fees/consultancy charges shown to be paid to certain individuals and concerns.

11. The Ld. Pr.CIT(C) noted that during the course of survey action the said facts were cross verified from the management of HUF. Statement of Shri Yogesh Ramdas Labade, CFO of HUF company was also recorded u/s 131 of the Act wherein he stated that HUF was engaged into business transactions with the assessee during the tenure of Mr. Sunil Kumar Garg as MD. HUF executed a contract with YAS to supply trainees, which was terminated by it after finding irregularities as mentioned in the FIR No.0380 dt. 14.03.2022 filed in Chakan Police Station. He provided a copy of the FIR to the survey team. He also stated that Shri Sunil Garg (then MD), Shri Nikhil Agrawal (then CFO) and Mr. Sandeep Wani (then Operation and administration Head) were involved in various irregular/fraudulent transactions in association with the assessee. He also confirmed that HUF had made payment of Rs.2,12,80,701/- to YAS towards actual supply of manpower/trainees, the year-wise details of which is as under:

Year (F.Y)	Amount (Rs.)
2016-17	29,88,518/-
2017-18	33,39,669/-
2018-19	79,78,184/-
2019-20	54,75,462/-
2020-21	14,98,868/-
Total	2,12,80,701/-

12. He noted that during the survey action it was found that the assessee had received total payment of Rs.13,12,20,437/- against which only Rs.2,12,80,701/-was towards supply of manpower/trainees during the F.Y. 2016-17 to 2020-21. This clearly establishes that payments received over and above of Rs.2,12,80,701/-were against bogus bills raised by the assessee. Shri Yogesh Ramdas Labade also submitted a copy of email dated 26.08.2020 informing discontinuation of business association with HUF. Further, during the course of survey action, statement of Shri Rajnikant Shivaji Khandebharat was also recorded u/s 131 of the Act. Shri Rajnikant Shivaji Khandebharat is an ex-employee of the assessee, who was caught by staff of HUF India Pvt. Ltd. with bogus invoices in the year 2020 which led to the expose of the scam and revealed the engagement of the assessee in raising fake invoices. Shri Rajnikant Shivaji Khandebharat was working as field officer who was removed by the assessee after exposure of the scam. Shri Rajnikant Shivaji Khandebharat explained the modus operandi of the assessee with HUF and submitted copy of fake bills raised by YAS as well as Maharashtra Industrial Services (Prop. Concern of Shri Vishwesh Kulkarni) with name of dummy trainees. He also submitted copy of a police complaint lodged and other documents in support of his statement. He confirmed to the survey team that names mentioned in the fake bills were never sent for training to HUF and the said scam was carried out by Shri Vishwesh Kulkarni with the help of key persons of HUF viz. Mr. Sunil Kumar Garg, Mr. Nikhil Agrawal, Mr. Sandeep Wani and Mr. Vishal Tamotia to siphon off the money. During the post survey verification, it was further found that the assessee had made payments to Mr. Sunil Garg, Mr. Nikhil Agarwal, and their family members & business concerns on account of professional fee/consultancy charges/rent etc. The assessee submitted the details of payments made to the said persons or their concerns during the F.Y.2016-17 to 2019-20 amounting to Rs.15,65,65,766/-. He, therefore held that the assessee was involved in malpractice of raising fake bills in addition to its regular bills to HUF with intent to further siphon off the funds on account of claiming bogus professional fees/consultancy charges/rental income, etc. Rejecting the explanation of the assessee that it was misled by Shri Sunil Garg for executing the transactions and took immediate corrective action by terminating all engagements with HUF, he noted that the activities of the assessee were against the intent of its creation as well as the charitable purposes defined under section 2(15) of the Act.

13. The Ld. Pr.CIT(C) noted that section 12AA(3) of the Act empowers the Commissioner to withdraw the registration granted u/s 12AA if he is satisfied that (a) the activities of the trust or institution are not genuine, and/or (b) are not being carried out in accordance with the objects of the trust or Institution. The instant case is covered within the both limbs of Section 12AA(3) i.e. activities of the trust are not genuine as well as not being carried out in accordance with its declared objects and therefore, in contravention of the provisions of section 12AA(3) of the Act and therefore, registration of the assessee u/s 12AA of the Act is liable for cancellation. For the above proposition he relied on the observation of the Hon’ble Apex Court in the case of Ananda Social & Educational Trust reported in CIT [2020] 114 com693/272 Taxman 7/426 ITR 340 (SC) where the Hon’ble Court held that:

“9. Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12 of the Act. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable, the Commissioner is entitled to refuse and in fact, bound to refuse such registration”

14. He accordingly held that since the activities of the assessee are found to be not genuine and also not being carried out in accordance with the objects of the trust therefore it has violated the provisions of section 12AA(3) of the Act making itself liable for cancellation of registration granted u/s 12AA of the Act.

15. The next objection of the Ld. Pr.CIT(C) is that the assessee has not applied its income wholly and exclusively for the objects for which it is established but for the benefits of its trustees / related persons.

16. The Ld. Pr.CIT(C) noted that during the course of survey action it was found that the income of the assessee is being used for providing direct or indirect benefit to its settlors/trustees and their related concerns and the said benefits had been claimed by the assessee as its application of income. From the various details found during the course of survey he observed that the personal expenses of Shri Abhishek Kulkarni have been booked by the assessee as its application of income towards charitable objects. He gave certain examples of transactions which are personal and luxurious in nature and have no connection to the activities of the assessee. Rejecting the explanation given by the assessee that the payments made to credit card of Shri Abhisekh Kulkarni is reimbursement of expenses incurred by him on behalf of the company on cost to cost basis without any benefit derived by him, he held that the action of the assessee by giving monetary benefit directly to Shri Abhishek Kulkarni by booking his personal expenses as its application falls within the provisions of section 13(1)(c) of the Act. Therefore, the assessee has violated the provisions of section 12AA(3) & (4) of the Act and also section 12AB(4) of the Act which makes it liable for cancellation of its registration granted u/s 12AA and 12A(1)(ac) (i) of the Act.

17. The third objection of the Ld. Pr.CIT(C) is that the salary of employees who are working for other group concerns has been booked in the hands of YAS. He noted that although the various employees are getting salary from the assessee, however, they are working at the corporate office where 15 concerns are being run actively and the assessee used to take care of works of other concerns of group. Therefore, by bearing cost of salary and other expenses of the employees who are working for the other group concerns, the assessee provides benefit to its related concerns / persons specified u/s 13(3). He, therefore, was of the opinion that the assessee has violated the provisions of section 12AA(3) & (4) as well as 12AB(4) of the Act which make the assessee liable for cancellation of its registration granted u/s 12AA and 12A(1)(ac) r.w.s. 12AB of the Act.

18. The fourth objection of the Ld. Pr.CIT(C) is that the assessee society has given loans and advances to the directors and their concerns.

19. The Ld. Pr.CIT(C) observed from the financial statements of the assessee that it has advanced huge amount of loans to various concerns of Yashashwi Group including proprietary and partnership concerns of Shri Vishwesh Prabhakar Kulkarni. The assessee in its audit report submitted before the Registrar of Companies (ROC) has shown loans & advances given by it to the proprietary concerns of the director and also to the other related concerns. However, disclosures made by the assessee before the Income-tax department in its statutory audit report filed in Form-10B does not show any such transaction with the related parties and categorically mentioned “NO” such transaction. According to the Ld. Pr.CIT(C), providing loans and advances by the assessee to its related concerns/parties during financial year 2017-18 till the date of survey action which were either accumulated by claiming exemption u/s 11 of the IT Act, 1961 or borrowed by the assessee by taking loans shows that the assessee has diverted its funds to the specified persons and their concerns for their business activities which does not align with the stated objects of the assessee.

20. The next objection of the Ld. Pr.CIT(C) is that the salary has been paid to specified persons/related persons without reasonable cause.

21. He observed that during the course of survey action it was found that the assessee had paid salary to relatives of the directors and also other employees who are not on the payroll of the assessee-YAS. It was also found that the assessee has paid unreasonable amount of salary to Smt. Shobha Kulkarni who is wife of Shri Vishwesh Kulkarni & mother of Shri Abhishek Kulkarni. Mr. Vishwesh Kulkarni and Mr. Abhishek Kulkarni, both are the directors of the assessee. During the survey action, it was gathered that Smt. Shobha Kulkarni is one of the active partners in M/s. Reliable Industrial Services which is engaged into labour supply business. At the same time, she runs a beauty parlor as her proprietary concern under the name and style of “Femina Flaunts Studio Salon”. During survey, Smt. Shobha Kulkarni was questioned about her role and responsibility in YAS. She admitted in her statement recorded u/s 131 of the Act that she is not actively engaged in the activities of YAS and she only signs the documents as directed by her husband Shri Vishwesh Kulkarni.

22. He further noted that Miss Abhilasha Kulkarni, daughter of Shri Vishwesh Kulkarni had been getting salary whereas it was learned during the survey action that she was in United Kingdom for pursuing her studies. Furthermore, Shri Vishwesh Kulkarni failed to justify such excessive and unreasonable salary paid by YAS to his wife and daughter without actually rendering of services. Moreover, admission of Smt. Shobha Kulkarni that she does not have active participation in affairs of YAS and only signs as instructed by her husband, also revealed that related persons have been given direct benefits by the assessee by booking bogus/unreasonable salary expenses in its hand. In view of the above, he held that providing the benefits to the related persons and further claim of such benefits as application of its income are violation of the provisions of section 12AA(3) & (4) of the Act as well as clause (a) & (e) to Explanation of Section 12AB(4) of the Act of the Act which makes the assessee liable for cancellation of its registration u/s 12AA and 12A(1)(ac) r.w.s 12AB of the Act.

23. The next objection of the Ld. Pr.CIT(C) is that repair and maintenance of the building owned by the directors and/or related concern are booked by YAS. The Ld. Pr.CIT(C) observed that during the survey it was noticed that Yashaswi House, Lane No. 15, Prabhat Road, Pune-04 was being used as corporate office of Yashaswi Group to manage and control the business activities of all the concerns of the Group. However, renovation, repair & maintenance charges were booked in the hands of the assessee only. Shri Vishwesh Kulkarni in his statement recorded during the course of his survey had stated that Yashaswi House is owned by him and is being used for business activities of the assessee without charging any rent. Therefore, whatever recurring expenses of the building incurred had been booked in the hands of the assessee. The Ld. Pr.CIT(C) further noted that the assessee had also booked renovation expenses of building owned by a trust named Yashaswi Education Society at Pimpri Chinchwad, Pune which is registered under The Bombay Trust Act, 1950. Shri Vishwesh Kulkarni and his family members are the trustees/settlers of the trust Yashaswi Education Society, which is engaged into running and managing of a college under the name and title of International Institute Management Science (IIMS), Pimpri Chinchwad, Pune. He observed from the submission of Shri Vishwesh Kulkarni made during the survey action that the assessee had claimed expenses under head ‘Repair & Maintenance’ of building of Rs.67,94,795/- and Rs.7,37,38,213/- for F.Y.2022-23 and 2023-24, respectively. Similarly, it claimed expenses under the head ‘Repair & Maintenance – Others’ of Rs.1,20,07,183/- and Rs.1,05,73,368/ for F.Y.2022-23 and 2023-24, respectively. In addition, it was also found that many of the computers shown purchased in the hands of the assessee during F.Y.2021-22 have been delivered to one Mr. Pawan Sharma belonging to IIMS, Chinchwad, Pune for utilization of Yashaswi Education Trust. Shri Vishwesh Kulkarni in his statement recorded during the survey action had also admitted that all expenses for renovation work of Yashaswi Education Society had been borne by YAS. In view of the above he observed that the assessee diverted its income by showing such expenses as its application towards the objects to provide direct benefits to the specified persons/their concerns. Booking of those expenses in the hands of the assessee as its application of income, which are also not in accordance with objects of the trust, are violations of provisions of section 12AA(3) & (4) of the Act as well as under specified violation of 12AB(4) of the Act which makes the assessee liable for cancellation of its registration granted u/s 12AA and 12AB r.w.s 12A(1)(ac) of the Act.

24. The next objection of the Ld. Pr.CIT(C) is that the income earned from hotels and related activities are income from profits and gains of business, which is not incidental to attain its objectives. He noted that during the course of survey action, it was found that the assessee is running a restaurant named “Amit Garden Restaurant” in the premises of MSIHMCT at 412C, Shivaji Nagar, Deep Bangla Chowk, Senapati Bapat Road, Pune and extension part at 412/D, Shivaji Nagar, Pune named as Amit Garden Restaurant (also called Yashaswi Academy for Skill (Food Lab)) in collaboration with Maharashtra State Institute of Hotel Management and Catering Technology (MSIHMCT). The undertaken premises consist of 30 rooms hotel, a banquet hall, cafeteria, auditorium, etc. at Shivajinagar. The income generated from the hotel business was shown by the assessee in its books of account as part of its total income received from charitable activities. According to the tripartite agreement executed between Maharashtra State Institute of Hotel Management and Catering Technology (MSIHMCT) as first party, Maharashtra State Board of Technical Education (MSBTE) as second party and Yashaswi Academy for Skills (YAS) as third party, and they mutually agreed to impart on the job training to aspirants in the field of Hotel Management, Bakery & Food production, etc. wherein roles and responsibilities of the assessee were very much defined. He noted from the agreement that it was assessee’s responsibility to generate revenue from the infrastructure of the MSIHMCT by deciding competitive rates.

25. The Ld. Pr.CIT(C) noted that during the survey action, it was found that the rates charged by the assessee were at market rates and/or higher than the market rates. The said restaurant was run like any other restaurant of the market. No facility by way of discount/concession was offered by the assessee to students/trainees. The said restaurant was accessible to all. From the details of staff working at the restaurants gathered during the course of survey action, it was found that all of them were working on the payroll of the assessee and no one was found working as a trainee to get on-the-job training. Therefore, the income of the assessee from the above activity was found not incidental to attainment of its objects. According to the Ld. Pr.CIT(C) as per the provisions of section 2(15) of the Act, business of running a restaurant does not come within the purview of charitable activity. The role of the assessee as per the agreement was to implement various skill development programs in the areas of Food & Beverages, Housekeeping, Bakery, Cookery, Front Office etc. However, in the guise of skill development, the assessee was found running restaurants and hotel, which was neither the object of the assessee nor incidental to attain its objects. He, therefore, held that the assessee has focus on commercial activities rather than training/skill development for which infrastructure of MSIHMCT has mainly been given to the assessee to operate. The Ld. Pr.CIT(C) referred to the letter issued by Maharashtra State Board of Technical Education (MSBTE) on 01.03.2024 wherein the assessee was directed to stop running hotel/restaurant from the premises as the same had not been approved in the MOU. The MSBTE also clarified in the letter that the Board had conducted an inquiry and found that running a hotel and similar activities were not part of the MOU. He, therefore, held that the assessee runs hotel and similar activities in the guise of skill development and on the job training, which is not incidental to attainment of its objectives. The same is also not in accordance with the objects of the assessee. The Ld. Pr.CIT(C) therefore, held that the registration granted u/s 12AA & 12AB r.w.s 12A(1)(ac) of the Act to the assessee is liable for cancellation on account of violation of the provisions of section 12AA(3) of the Act (applicable for registration granted u/s 12AA of the Act valid by 31.03.2021) as well as 12AB(4) of the Act (applicable for registration granted u/s 12A(1)(ac)(i) of the Act from 01.04.2021 onwards).

26. The next objection of the Ld. Pr.CIT(C) is that cash withdrawals and cash payments have been claimed by the assessee on account of “Stipend Paid” to trainees.

27. The Ld. Pr.CIT(C) noted that during the course of survey action it was noticed from the cashbook that there were withdrawals of cash throughout the year and subsequent payments mainly with narration “Being Stipend paid”. During the survey action, Shri Vishwesh Kulkarni was asked while recording his statement to explain the utilization of the cash as the same was not the petty cash expenses. However, Shri Vishwesh Kulkarni didn’t give satisfactory explanation by just saying that it had been advised by the auditor to pass such entry. During the course of survey action, cash of Rs.84,96,900/- was also found physically in the cabin of Shri Vishwesh Kulkarni whereas as per the trial balance of the assessee, cash in hand position was of Rs.2,91,92,817/-. On being questioned, he stated in his statement that he would submit the reconciliation after going through the books of accounts. Further, during the post survey, the assessee submitted a reconciliation in respect of cash found physically and cash as per its books of accounts.

28. However no documentary evidence submitted by the assessee to prove the genuineness of such huge cash payments as stipend. He noted that under the NAPS, NATS and other such schemes, the apprentice’s stipend was payable by way of electronic mode directly to the apprentice’s verified bank account. Under, the National Apprenticeship Promotion Scheme (NAPS), it is a Direct Beneficiary Transfer (DBT) scheme with the Government of India (GoI) support going directly to the apprentices account instead of reimbursement to the establishment as earlier. If establishment chooses not to take the benefit of reimbursement, considered as a non-DBT contract, the stipend was payable to the account of the assessee electronically and not in cash. He noted that the assessee in its reply vide letter dated 27.03.2025 stated that it is providing structured training and skill development under government-approved apprenticeship programs like NEEM, NAPS etc under the Ministry of Skill Development. The assessee further stated that there has been no diversion of funds for non-charitable purposes and it has been incurred towards operational necessities such as stipend disbursements, local procurement, and emergency expenses. It has not misused for personal benefits of directors, or related parties. However, he noted that the above explanation of the assessee was not supported with any documentary evidences. He, therefore, issued a show cause notice asking the assessee to submit relevant documents to justify and prove genuineness of the cash payment made on account of stipend.

29. In reply, the assessee submitted documents for the payment of stipend out of cash withdrawals on 17.09.2025. The Ld. Pr.CIT(C) noticed from the details that the cash vouchers contain cash payments details till F.Y.2023-24. In addition to that no other documents to prove the genuineness of the apprentices worked with the respective establishments, copy of agreement with the apprentices and establishments, identity of apprentices, application forms of the apprentices, muster sheet and other documents to verify the terms and conditions of the agreement regarding payment of stipends, identity of the trainees as well as genuineness of the cash payments were furnished. The assessee has also not submitted any explanation on claim of cash payments, which are against guidelines of NAPS Scheme and other similar Schemes which give mandate the establishment to pay stipend through electronic mode and not in cash. Thus, the assessee failed to satisfactorily explain and justify such huge cash withdrawals and claim of subsequent payments as stipend to the trainees. According to the Ld. Pr.CIT(C) the said activities carried out by the assessee are no longer said to be genuine and in accordance with its objects. He, therefore, held that the assessee has made specified violation of the law as per section 12AB (4) of the Act and therefore, its registration u/s 12AB r.w.s 12A(1)(ac) is liable for cancellation.

30. The next objection of the Ld. Pr.CIT(C) is that the activities carried out by the assessee are not charitable in nature. He noted that the assessee is incorporated under the Companies Act 2013 on 20.03.2014 as ‘Not for Profit Organization”. The assessee-YAS holds registration under Sec 12AA/12AB of Income Tax Act 1961 and also having 80G registration. The company on the strength of its registration has regularly been claiming exemption u/s 11 & 12 of the IT Act in its ITR by showing that it is engaged into charitable activity i.e. Education. However, in result of the survey findings, it was noticed that the assessee is mainly working as manpower supplier as well as Facilitator/Third-Party-Aggregator (TPA)/Agent for industry partners to implement government sponsored skill development schemes mainly NEEM, NAPS, etc.

31. The Ld. Pr.CIT(C) noted that during the course of survey it was seen that no physical infrastructure like classroom, educational equipment, etc. were found at any of the premises. It was gathered that the assessee is only giving orientation to trainees/students about the industry before sending the fresher trainees to industry for on-the-job training. No skill development course is conducted for these students. On being enquired from the directors of the assessee regarding its activities, it was informed that the activities relating to apprenticeship, registration of students, submission of compliance on portal, training activities are being conducted only at branch office of the assessee at IIMS, S. No. 169/A, Chinchwad, Opp. Elpro International, Chinchwad, Pune. He referred to the statement of Smt. Jayashree Sandeep Sakpal working as Apprentice Compliance Head of the assessee at S. No.169/A, Chinchwad, Opp. Elpro International, Chinchwad, Pune wherein she explained the process of registration of apprentices / trainees. She stated that YAS approaches to the educational institutions for supply of apprentices. Thereafter, as per requirement, the students are being sent to the companies. The respective company completes the scrutiny process and sends the data of the selected students to YAS for further procedure. Subsequently, selected students come to Apprentice Compliance Department of YAS at Chinchwad office where their data is uploaded on the government portal and contract letters are given to the students with direction to join the companies/industry partners. In order to provide students/trainees to the industry, YAS charges service charge from the respective companies/Industry partners.

32. The Ld. Pr.CIT(C) noted that during the course of survey proceedings, Statement of Shri Vishwesh Kulkarni, Chairman and Director of YAS was also recorded wherein he stated that YAS is mostly working as a facilitator or intermediary for the Govt. to implement its various schemes. He further stated that YAS is mostly helping in implementing NEEM (National Employability Enhancement Mission), NAPS (Nation Apprenticeship Promotion Scheme) and NATS (National Training Scheme). For providing the services as Facilitator (for NEEM) or Third-Party Aggregator (for NATS & NAPS), the assessee charges administration fee from the concerned industries as per the agreement with them. Further, during the survey action, Shri Vishwesh Kulkarni was questioned to explain as to how the above role of the assessee comes under the domain of charitable activities. In reply, Shri Vishwesh Kulkarni admitted that activities of the assessee are similar to its other profit-making concerns viz. Reliable Industrial Services (Partnership Firm), Yashaswi Manpower Services (Prop. Concern), which are engaged in supplying of manpower, Shri Vishwesh Kulkarni also intended to surrender 12A/12AA registration certificate of the assessee in absence of any charitable activity.

33. In addition to the above, during the post-survey verification, it was further found from the incriminating impounded data back-up that there were folders in the name of “Business Associates”. In the said folders, there were various copies of agreements executed by the assessee for implementation of NEEM and NAPS Schemes with third parties.

34. The Ld. Pr.CIT(C) further noted that Shri Vishwesh Kulkarni submitted an affidavit voluntarily offering to surrender the registration granted to Yashaswi Academy for Skills u/s 124(1)(ac)(i) of the Income-tax Act, 1961 with immediate effect valid from A.Y.2022-23. Further, during the post-survey action, while analysing the facts gathered during the survey action, it was found that there was no change in the nature of activities carried out by the assessee prior to F.Y.2021-22. During the earlier years also, the assessee was mainly working as Third Part Aggregator/Facilitator/Agent in mobilization of the manpower for industry partners. Therefore, he was of the opinion that the activities carried out prior to F.Y.2021-22 by the assessee were also non charitable activities, hence, not eligible for claim of exemptions u/s 11 & 12 of the Act.

35. The next objection of the Ld. Pr.CIT(C) is regarding supply of contractual labour by the assessee. The Ld. Pr.CIT(C) observed that during the survey action it was noted that the assessee supplies contractual labour to its industry partners which is not in accordance with objects of the assessee. He referred to the statement of Shri Jitendra Polekar recorded during the survey action, wherein he stated that as on the date of survey action, YAS had provided 619 contractual labourers to various industry partners. Shri Jitendra Polekar was looking after payroll department of the Yashaswi Group. It was also found that the assessee is engaged in supply of contractual labour to the industry partners and such activity is not a charitable activity. The same is also not in accordance with the objects of the assessee for which it was granted registration u/s 12AA/12A of the Act.

36. The next objection of the Ld. PCIT is that the Salary Benchmarking Services and Other Services provided by the assessee to M/s. GKN Sinter Metal Pvt. Ltd is not charitable in nature and also not in accordance with its objects. He noted that during the course of survey action, statement of Shri Nikhil Darekar, Manager HR of M/s. GKN Sinter Metals Pvt Ltd., who is one of the industry partners of the assessee, was recorded on oath u/s 131 of the Act. It was found from the statement of Shri Nikhil Darekar that the assessee had conducted Salary Benchmark Survey and other services for M/s. GKN Sinter Metal Pvt. Ltd. which is not commensurating with the objects of the assessee. Further, on being cross examined Shri Vishwesh Kulkarni admitted in his statement recorded on oath on 11.06.2024 that the assessee had provided Salary Benchmarking Services to M/s. GKN Sinter Metals Pvt. Ltd. and other companies too. From the invoices of M/s. GKN Sinter Metal Pvt. Ltd. raised by the assessee, he noted that the assessee had raised various bills in the name of services provided to M/s. GKN Sinter Metal Pvt. Ltd. which are not in accordance with its approved objects. He therefore held that the activities carried out by the assessee are beyond its objects and commercial in nature. To maximize its profits the said activities are neither relating to the assessee’s objects nor being incidental to the attainment of its objects.

37. In view of the various violations and non-charitable activities carried on by the assessee, the Ld. Pr.CIT(C) issued a show cause notice asking the assessee to explain as to why the registration granted u/s 12AA should not be cancelled. Rejecting the various explanations given by the assessee and relying on various decisions the Ld. Pr.CIT(C) cancelled the registration granted u/s 12AA by observing as under:

38. Aggrieved with such order of the Ld. PCIT the assessee is in appeal before the Tribunal by raising the following grounds:

The following grounds are taken without prejudice to each other On facts and in law,

1) The order passed by the learned Pr. CIT(C), Pune dated 29.09.2025 u/s 12AA(3) and 12AA(4) and 12AB(4) is barred by limitation and hence, the same may be declared null and void.

2) The learned Pr. CIT(C), Pune erred in cancelling the registration granted to the assessee company u/s 12AA and section 12AB of the Act, without appreciating that the power to cancel registration under Section 12AB(4) is vested exclusively with the Principal Commissioner/Commissioner of Income Tax (Exemption) vide CBDT Notification and the exercise of such powers by the Ld. Pr. CIT(C) was without jurisdiction and hence, the order passed u/s 12AA(3) and 12AA(4) and u/s 12AB(4) may kindly be declared null and void.

3) The learned Pr. CIT(C), Pune failed to appreciate that the jurisdiction to cancel the registration u/s 12AA and 12AB could not be transferred from CIT(E) to the Pr. CIT(C) and hence, the order passed u/s 12AA(3) and 12AA(4) and 12AB(4) is invalid in law and hence, the same may be declared null and void.

4) The order passed by the learned Pr. CIT(C) u/s 12AA(3) and 12AA(4) and 12AB(4) is invalid in law since the same has been passed in violation by the provisions of section 12AA(5) and hence, the said order passed by the learned CIT(C) be declared null and void.

5) Without prejudice to the ground No.4, the assessee submits that the learned Pr. CIT(C) erred in cancelling the registration granted u/s 12AA vide order dated 21.06.2016 which was valid upto 31.03.2021 u/s 12AA(3) and 12AA(4) without appreciating that no order u/s 12AA(3) and 12AA(4) could be passed after 31.03.2021 and hence, the order passed by the learned CIT(C) is invalid in law and the same may be declared null and void.

6) The order passed by the learned Pr. CIT(C) dated 29.09.2025 be declared null and void since the show cause notices issued dated 10.02.2025 and 13.08.2025 were invalid in law.

7) The learned Pr. CIT(C) erred in holding that the assessee was not engaged in charitable activities and thus, the registration granted u/s 12AA and 12AB was required to be cancelled.

8) The learned Pr. CIT(C) erred in holding that-

a. The assesse company was mainly engaged as a Third Party Aggregator (TPA) / Facilitator / Agent for mobilizing the candidates and other procedural work w.r.t. implementation of the Apprenticeship Programs with a core intent to receive professional service charges and hence, such activities could not be said to be charitable in nature as laid down in section 2(15) of the Act.

b. The assessee was engaged in subcontracting of its work under NEEM, NAPS, etc. which resulted in violation of its agreements executed with the concerned Government Departments and also the conditions on which the assessee company was granted registration u/s 12AA/12AB of the Act.

c. The activities carried out by the assessee were not in accordance with its stated objects for which it was registered and hence, the assessee was not entitled to registered u/s 12AA/12A(1)(ac)(i) r.w.s. 12AB of the Act.

d. The assessee was supplying contractual labour to its industry partners which was not in accordance with the objects of the assessee and hence, the registration granted to the assessee was required to be cancelled.

e. The assessee had carried out salary benchmarking services and other services for GKN Sinter Metal Pvt. Ltd. which were beyond the objects of the assessee company and were commercial in nature.

f. The assessee was not engaged in the activities of providing education and was merely working as an agent for mobilizing manpower.

8) The learned Pr. CIT(C) erred in not appreciating that the assessee was engaged providing educational to the trainees and hence, there was no reason to hold that the assessee was not engaged in carrying out educational activities.

9) The learned Pr. CIT(C) erred in not appreciating that the assessee was appointed by Government authorities to provide theoretical training to the trainees and for which all the relevant evidences were submitted to him and therefore, there was no reason to hold that the assessee was not engaged in providing education.

10) The Ld. Pr. CIT(C) failed to appreciate that the activity of providing contractual labour or carrying out benchmarking and other services was incidental to the main objects of the assessee and hence, there was no reason to hold that the assessee had carried out commercial activities and therefore, the cancellation of registration on the said ground was not justified at all.

11) The Ld. Pr. CIT(C) erred in not appreciating that there was no prohibition on the assessee for engaging any third parties and the assessee had not violated provisions of any law or agreement entered into with Governmental Authorities and hence, the cancellation of the registration on this ground is not justified at all.

12) The Ld. Pr. CIT(C) erred in not appreciating the voluminous details provided by the assessee in the form of details of teaching faculties as well other details to prove that it was actively engaged in providing basic as well a theoretical training to the trainees and hence, it is not justified on his part to hold that the assessee was not engaged in providing education.

13) The learned CIT(C) erred in holding that the assessee had indulged in sham transaction by raising fake invoices in the name of HUF India Pvt. Ltd. with an intention to siphon off the funds by claiming bogus expenses and the said activity could not be said to be charitable in nature u/s 2(15) of the Act.

14) The learned Pr. CIT(C) further erred in holding that the assessee had carried out non genuine and illegal activity of money laundering which could not be considered as charitable in nature and therefore, the registration granted was required to be cancelled.

15) The learned Pr. CIT(C) erred in holding that the activities carried out by the assessee were not genuine and the same were not carried out in accordance with the objects of the Institution and therefore, the registration granted was required to be cancelled.

16) The learned Pr. CIT(C) failed to appreciate that the transactions carried out by the assessee with HUF India Pvt. Ltd. were under external pressure and misrepresentation of facts and no benefit was received therefrom by the trustees or related parties and therefore, there was no reason to cancel the registration on that ground.

17) The Ld. Pr. CIT(C) erred in not appreciating that the correct facts in respect of the transactions entered into by the assessee with HUF India Pvt. Ltd. and there was no reason to cancel the registration granted on the said ground.

18) The learned Pr. CIT(C) erred in holding that the assessee had debited personal expenses of Shri Abhishek Kulkarni as an application of income which resulted in violation of the provisions of section 13(1)(c) and accordingly, the registration granted was required to be cancelled.

19) The learned Pr. CIT(C) erred in holding that by debiting the personal expenses of Shri Abhishek Kulkarni, the assessee had violated the provisions of section 12AA(3) and 12AA(4) and also section 12AB(4) and hence, the registration granted was required to be cancelled.

20) The Id. Pr. CIT(C) failed to appreciate that Shri Abhishek Kulkarni had incurred expenses on behalf of the assessee which were reimbursed to him and hence, it was not a case of incurring any personal expenses of Shri Abhishek Kulkarni and accordingly, there was no violation of the provisions of section 13(1)(c) of the Act and hence, the cancellation of the registration on the said ground was not justified at all.

21) The learned Pr. CIT further erred in holding that the employees of the assessee were also working for other concerns owned by Kulkarni Family and therefore, the cost incurred to that extent could not be considered as an application of income towards the charitable objects and therefore, it resulted in violation of the provisions of section 12AA(3) and 12AA(4) as well as section 12AB(4) and accordingly, the registration granted was required to be cancelled.

22) The learned Pr. CIT failed to appreciate that the salary paid to the employees was only in respect of the work carried out by them for the assessee and simply because some of the employees were also working for the other entities owned by Kulkarni Family was not a reason to hold that the part of the salary paid was not towards the objects of the trust and hence, cancellation of registration on the said ground was not justified.

23) The Ld. Pr. CIT(C) erred in not appreciating that the salary paid to the concerned employees was commensurate with the work carried out by them for the assessee and hence, simply because they may have provided their services to other concerns of related persons did not imply that the assessee had provided benefit in violation of the provisions of section 13(1)(c).

24) The learned Pr. CIT further erred in holding that the assessee had diverted its funds to the specified persons and their concerns by not charging interest on the loans given which was not in accordance with the objects of the assessee company and hence, the registration granted was required to be cancelled on this ground.

25) The learned Pr. CIT further erred in holding that the assessee had paid salary to Mrs. Shobha Kulkarni and Ms. Abhilasha Kulkarni which was unreasonable / bogus and thereby had provided benefits to the related persons and accordingly, the provisions of section 12AA(3) and 12AA(4) were attracted as well as was clauses (a) and (e) to explanation of section 12AB(4) were attracted and therefore, the registration granted to the assessee was required to be cancelled.

26) The learned Pr. CIT(C) further erred in holding that the assessee had incurred repairs and maintenance expenses of the building owned by the Directors and/or the related concerns which resulted in providing benefit to the related persons and therefore, the assessee had violated the provisions of section 12AA(3) and (4) as well as provisions of section 12AB(4) and therefore, the registration granted to the assessee was required to be cancelled.

27) The learned Pr. CIT(C) failed to appreciate that the assessee had not provided any benefit to the related parties either in the form of salary or incurring of repairs and maintenance expenses and therefore, there was no reason to cancel the registration granted to the assessee.

28) The learned Pr. CIT(C) erred in not appreciating the reasons because of which the assessee had provided interest free advances to the Directors and their concerns and therefore, the cancellation of registration on the said ground was not justified.

29) Under the facts and circumstances of the case, the Ld. PCIT (Central) erred in passing the order of cancellation under section 12AA(3)/(4) and 12AB (4) based purely on assumptions and incorrect facts without properly appreciating that there was no violation of the provisions under Sections 11 to 13 of the Income Tax Act.

30) The Ld. Pr. CIT(C) erred in not appreciating that the expenditure incurred by the assessee on behalf of Yashawi Education Society was in the form of donation to the said charitable organization and hence, no benefit was provided by the assessee to the related persons by incurring the said expenses.

31) Without prejudice to the above grounds, the assessee submits that if at all, there is any violation of the provisions of section 13(1)(c), in that event, the income to that extent could be taxed but cancellation of registration granted u/s 12AA/12AB was not justified on the said issue.

32) The learned Pr. CIT(C) further erred in holding that the assessee was running a hotel which was a commercial activity and the same was not in accordance with the objects of the assessee and therefore, the registration granted was required to be cancelled.

33) The learned Pr. CIT(C) failed to appreciate that the assessee was not running the hotel on commercial basis and it was incidental to the main objects of the assessee and accordingly, there was no reason to cancel the registration on the said ground.

34) The learned Pr. CIT(C) failed to appreciate that the hotel activity carried out by the assessee was in furtherance to the objects of the trust and accordingly, there was no reason to cancel the registration on the ground that the said activity was carried out on commercial basis.

35) The learned Pr. CIT(C) erred in holding that the assessee had incurred expenditure on non genuine activity by showing the same as stipend paid in cash and therefore, the assessee had committed a specified violation as per section 12AB(4) and therefore, the registration granted was required to be cancelled.

36) The learned Pr. CIT(C) failed to appreciate that the assessee had paid stipend in cash to some of the trainees and the expenditure incurred was genuine and hence, the assessee had not committed any specified violation of law and accordingly, the cancellation of registration on the said ground was not justified.

37) The learned Pr. CIT(C) further erred in relying upon the affidavit of Shri Vishwesh Kulkarni wherein he had admitted that the assessee was not engaged in charitable activities without appreciating that the said affidavit was incorrectly given and the assessee had filed a retraction affidavit to that effect.

38) The learned Pr. CIT(C) erred in not appreciating that the assessee had not committed any specified violation as referred to in section 12AB(4) in any of the years and therefore, the cancellation of registration granted u/s 12AA and 12AB is not justified and the assessee prays for restoration of the registration granted to it.

39) The Ld. Pr. CIT(C) has erred in holding that the activities of the appellant are not genuine and are not being carried out in accordance with the objects of the Assessee company, despite extensive documentary evidence filed during the course of proceedings.

40) The Ld. Pr. CIT(C) erred in not appreciating the correct facts of the case while cancelling the registration granted to the assessee u/s. 12AA/12AB of the Act and accordingly, the registration granted may kindly be restored.

41) The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.

39. Ground of appeal No.1 by the assessee relates to the order of the Ld. Pr.CIT(C) cancelling the registration dated 29.09.2025 as barred by limitation.

40. The Ld. Counsel for the assessee submitted that a survey u/s 133A was conducted on the assessee on 06.03.2024 during which various incriminating documents and information was gathered and the Ld. Pr.CIT(Central) held that the same indicated the activities carried out by the assessee were not genuine and/or not being carried out in accordance with the objects of the assessee for which it was granted the registration. Subsequently, it has been mentioned by the Ld. Pr. CIT(C) that the ITO (E), Ward 2, Pune has submitted a proposal to the CIT(E), Pune vide letter dated 26.08.2024 for cancellation of the registration which was duly endorsed by Addl. CIT(E), Pune vide letter 28.08.2024. Subsequently, upon centralisation of the case to the charge of Ld. DCIT, Central Circle 2(2), Pune, the proposal for cancellation was transferred to the office of Ld. Pr. CIT(C), Pune by Ld. CIT(E), Pune vide letter dated 31.12.2024. The Ld. Pr. CIT(C) issued show cause notices on 10.02.2025 and 13.08.2025 and an order was passed on 29.09.2025 cancelling the registration.

41. The Ld. Counsel for the assessee referring to provisions of sub-section (5) of section 12AB drew the attention of the Bench to the same and submitted that no order cancelling the registration shall be passed after the expiry of 6 months calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner calling for document or information or for making any enquiry under clause (i) of sub-section (4).

42. Referring to clause (i) of sub-section (4) of section 12AB he submitted that as per the said provision the Principal Commissioner shall call for such documents or information from the Trust or Institution or make such enquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation.

43. He submitted that when survey was conducted on the assessee on 06.03.2024 it is logical that there would be some reason with the department for conducting the survey. Further, the survey action was conducted by the ITO(E), Ward 2, Pune which otherwise means that the Ld. CIT(E) has given the approval to conduct the survey. He submitted that the purpose of survey would be to make enquiry with regard to various issues. Referring to the order passed by the Ld. Pr. CIT(C) he submitted that the order mentions instances of specified violations noticed during the course of the survey action. Therefore, once the department finds out the instances of alleged specified violation in the survey proceedings, the time limit of 6 months from the end of the quarter should be considered from the date of conducting the survey action. Since the survey action u/s 133A was conducted in the instant case on 06.03.2024 therefore the order cancelling the registration ought to have been passed within a period of 6 months from 31.03.2024 which works out to 30.09.2024. However, the order cancelling the registration has been passed on 29.09.2025, therefore, the same is clearly barred by limitation.

44. Without prejudice to the above, he submitted that the Assessing Officer had also submitted a proposal for cancelling the registration on 26.08.2024 which was duly endorsed by Ld. Addl. CIT(E) on 28.08.2024. He submitted that no action was taken by the Ld. CIT(E) and on 31.12.2024 the case was transferred to the office of Ld. Pr. CIT(C). He submitted that the proposal for cancellation was given on 26.08.2024 and the first show cause notice was issued to the assessee by the Ld. Pr. CIT(C) on 10.02.2025 which is after a period of 5 months. No reason has been given for the delay in the proceedings for cancellation of the registration when the AO had written a letter on 26.08.2024 proposing for cancelling the registration. He accordingly submitted that once the proposal was already sent for cancelling the registration on 26.08.2024, the period of 6 months ought to have been calculated from 30.09.2024 which works out to 31.03.2025. Since the order cancelling the registration has been passed on 29.09.2025, therefore, the order passed by the Ld. Pr. CIT(C) is barred by limitation.

45. The Ld. CIT-DR on the other hand referring to the provisions of section 12AB(5) submitted that a perusal of the same makes it crystal clear that a very specific limitation has been provided in the Act itself for passing of the cancellation order u/s 12AB(4). He submitted that the sub-section states that the order of cancellation should be passed before the expiry of a period of six months calculated from the end of the quarter in which the first notice u/s 12AB(4)(i) is issued. Referring to the chronology of dates he submitted that the time barring date for passing the order was 30.09.2025 and the order u/s 12AB(4) cancelling the registration was passed on 29.09.2025. The assessee has not disputed the dates or service of notice. Thus, the order passed by the Ld. Pr.CIT(C), Pune was well within the time allowed by the section 12AB(5).

46. So far as the argument of the Ld. Counsel for the assessee that the action of survey u/s 133A or the date of proposal sent by the CIT (Exemption), Pune for cancellation (i.e. 28.08.2024) should be considered as the date for the notice u/s 12AB(4)(i) is concerned, he drew the attention of the Bench to the provisions of section 12AB(5) and submitted that there is no ambiguity regarding trigger for the limitation period given in section 12AB(5). It is the first notice sent by the PCIT/CIT under 12AB(4)(i). He submitted that the date of survey u/s 133A cannot be substituted in place for notice u/s 12AB(4)(i) for deciding the limitation period prescribed in section 12AB(5). He submitted that survey u/s 133A is placed in chapter XIII related to Income tax Authorities whereas section 11, 12 and 13 of the Act for trusts etc is a self-contained separate code in itself. He submitted that the main intention behind survey u/s 133A is information gathering and operates in entirely different domain as investigative tool. It is not an adjudicatory proceeding in itself. He submitted that the provisions u/s 12AB relating to powers of PCIT/CIT to grant or cancel registration are quasi-judicial proceedings. Thus, a survey under Section 133A is conducted by an Income-tax Authority (often an ITO or ACIT) to verify books of accounts whereas a cancellation proceeding under Section 12AB (4) is conducted by a Principal Commissioner or Commissioner specifically to adjudicate the trust’s registration status. The two authorities are different and their mandates are governed by different chapters of the Act. He accordingly submitted that since the order u/s 12AB(4) dated 29.09.2025 is within the limitation period as prescribed u/s 12AB(5), therefore, the grounds raised by the assessee be dismissed.

47. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. It is an admitted fact that the Ld. Pr.CIT(C) issued the first show cause notice dated 10.02.2025 and thereafter another notice on 13.08.2025 asking the assessee to submit its explanation as to why the registration granted u/s 12AB dated 21.06.2016 (applicable up to assessment year 2021-22) should not be cancelled and also the registration granted u/s 12AB(4)(i) r.w.s. 12AB applicable for assessment years 2022-23 to 2026-27 should not be cancelled. A perusal of provisions of section 12AB(5) clearly provides the limitation period for passing of an order u/s 12AB(4) according to which the order of cancellation should be passed before the expiry of a period of six months calculated from the end of the relevant quarter in which the first notice u/s 12AB(4)(i) is issued. Since the order in the instant case cancelling the registration has been passed by the Ld. Pr.CIT(C) on 29.09.2025 which is prior to the limitation period of 30.09.2025 therefore, such order is within the time prescribed u/s 12AB(5). We find merit in the argument of the Ld. CIT- DR that the date of survey u/s 133A cannot be substituted in place for notice u/s 12AB(4)(i) for deciding the limitation period prescribed in section 12AB(5). The other argument of the Ld. Counsel for the assessee that since the CIT(E) has given the approval to conduct survey which means the conducting of an enquiry about the cases or otherwise of any specific violation committed by the assessee company and therefore, the period of six months should be calculated from the quarter ending March, 2024 and the order should have been passed within a period of six months from the quarter ending March, 2024 is incorrect. Since in the instant case the Ld. Pr.CIT(C) has issued the first show cause notice on 10.02.2025, therefore the six months period shall be calculated from the end of the quarter ending March, 2025. Since the order cancelling registration has been passed on 29.09.2025, therefore, the same is not barred by limitation. Accordingly, the ground of appeal No.1 by the assessee is dismissed.

48. Grounds of appeal No.2 and 3 by the assessee relate to the order passed by the Ld. PCIT as without jurisdiction.

49. The Ld. Counsel for the assessee submitted that the proposal for cancellation was submitted by the ITO(E), Ward 2, Pune to the CIT(E) vide letter dated 26.08.2024. Thereafter, the CIT(E) transferred the proposal for cancellation to the Ld. Pr. CIT(C) vide letter 31.03.2024. Referring to the CBDT notification dated 22.10.2014 he submitted that the competent authority for granting and cancelling registration was the CIT(E), Pune. Referring to the provisions of section 127(2) he submitted that the assessment jurisdiction was transferred from Exemption to Central Circle. However, the same did not confer or transfer registration / approval functions as well as cancellation of registration. He submitted that as per the transfer order passed u/s 127, the case has been transferred from the ITO(E), Ward 2, Pune to the DCIT, Central Circle 2(2), Pune. He submitted that the jurisdiction over the assessee for granting registration u/s 12AB or cancellation of the same cannot be transferred by the CIT(E), Pune u/s 127(2) of the Act. The power to transfer jurisdiction from CIT(E) to the Ld. Pr.CIT(C), Pune is only with CBDT. Therefore, the Ld. Pr. CIT(C) cannot assume charge to decide the cancellation of registration without an order being passed by the CBDT transferring the case.

50. Referring to page 41 of the Paper Book, he drew the attention of the Bench to the letter for transfer of proposal for cancellation wherein there is no reference of any order passed by the CBDT. He accordingly submitted that the order passed by the Ld. Pr.CIT(C) cancelling the registration is invalid in law since he had no jurisdiction to cancel the registration granted to the assessee company. For the above proposition, he relied on the decision of the Delhi Bench of the Tribunal in the case of Aggarwal Vidya Pracharni Sabha v/s. Principal Commissioner of Income Tax reported in 228 TTJ 137 (Del) and the decision of Dehradun Circuit Bench of the Tribunal in the case of Sushila Devi Centre for Professional Studies Research vs. PCIT reported in 179 taxmann.com 610 (Dehradun). He also relied on the following decisions:

a) Arya Samaj Model Town vs. PCIT vide ITA No.4805/DEL/2024 order dated 04.06.2025

b) Meenakshi Foundation vs. PCIT vide ITA No.3952/DEL/2024 order dated 23.05.2025

c) Lakshmi Chand Charitable Society vs. PCIT vide ITA No.1803/Del/2024 order dated 22.08.2024

d) Richmond Educational Society vs. DCIT vide ITA No.4779/Del/2025 order dated 11.03.2026

e) Sushila Devi Centre for Professional Studies 7 Research vs PCIT (Central) reported in 179 com610

51. The Ld. DR on the other hand submitted that the contention of the assessee that the Ld. Pr.CIT(C) has no jurisdiction to cancel the registration granted to the assessee company u/s 12AA and u/s 12AB, which is vested with the Principal Commissioner/Commissioner of Income Tax (Exemption) vide CBDT Notification, is incorrect and based on partial reading of and exclusive reliance on only one notification of CBDT i.e. CBDT notification No.52/2014 dated 22.10.2014. He submitted that in order to get the complete picture we need to have conjointly read three CBDT Notifications issued under section 120 of the Act in respect of the jurisdiction of the income tax authorities and relevant provisions of the Act, particularly sections 120 and 127 of the Income Tax Act should be read conjointly. He drew the attention of the Bench to the following CBDT Notifications:

	Notifications	Subject	Date
1	CBDT No.52/2014*	Jurisdiction of CIT (Exemptions)	22.10.2014
2	CBDT No.50/2014	Jurisdiction of PCIT	22.10.2014
3	CBDT No.70/2014	Jurisdiction of PCIT (Central)

Note * – (along with Corrigendum Notifiation No.65/2014 dated 13.11.2014)

52. He submitted that the CBDT notification explains the jurisdiction of CIT(Exemptions) all over India. As per the CBDT Notification No.52/2014 (Annexure-1), Commissioner of Income-tax (Exemption), Pune exercises jurisdiction over all cases of persons in the territorial area of state of Maharashtra excluding Mumbai & Navi Mumbai claiming exemption under section 10,11, 12 13A & 13B of the Income-tax Act, 1961 and assessed or assessable by an Income-tax authority at serial numbers 225 to 227 and 236 to 241 (to be read as 236 to 250 as per Corrigendum Notification No.65/2014 dated 13.11.2014) specified in the CBDT No.50/2014 (Annexure-2) dated the 22nd October, 2014. The Income-tax authorities at serial numbers 225 to 227 and 236 to 250 are as under:

225	PCIT/CIT, Nagpur-1	239	PCIT/CIT, Pune-4	245	PCIT/CIT, Thane-2
226	PCIT/CIT, Nagpur-2	240	PCIT/CIT, Pune-5	246	PCIT/CIT, Thane-3
227	PCIT/CIT, Nagpur-3	241	PCIT/CIT, Pune-6	247	PCIT/CIT, Nashik- 1
236	PCIT/CIT, Pune-1	242	PCIT/CIT, Kolhapur-1	248	PCIT/CIT, Nashik- 2
237	PCIT/CIT, Pune-2	243	PCIT/CIT, Kolhapur-2	249	PCIT/CIT, Aurangabad-1
238	PCIT/CIT, Pune-3	244	PCIT/CIT, Thane-1	250	PCIT/CIT, Aurangabad-1

53. Thus, after conjoint reading of CBDT Notification No.52/2014 and Notification No.50/2014, the jurisdiction of CIT(Exemption), Pune can be read in three steps-

a. Jurisdiction over all cases of persons in the territorial area of state of Maharashtra excluding Mumbai & Navi Mumbai

b. Who are claiming exemption under section 10,11, 12 13A & 13B of the Income-tax Act, 1961.

c. Who are assessed or assessable by specified PCsIT notified as S.No.225 to 227 and S.No.236 to 250 in CBDT No.50/2014.

54. Thus, the three aspects of CIT(Exemptions) jurisdiction are- territory wise, claim of exemption-wise and specified PCIT-wise. A person who fulfils all these conditions will only fall under the jurisdiction of CIT(Exemptions).

55. He submitted that the jurisdiction of Principal Commissioners of Income-tax (Central) have been notified by CBDT Notification No. 70/2014 dated 13.11.2014 (Annexure-3). As per clause (b) of the notification, the Principal Commissioners/ Commissioners of Income-tax (Central) or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the Income-tax Act, 1961 in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of the notification. Therefore, once a case has been transferred by order u/s 127 (in common parlance “Centralized”) with the AO of the Central Circle subordinate to the PCIT(Central), then the PCIT(Central) shall have jurisdiction over that case.

56. The Ld. CIT-DR submitted that once a case is transferred u/s 127 to the AO subordinate to PCIT(C), then he shall exercise powers and perform the functions as stipulated in the Income-tax Act, 1961 in respect of such cases. Since the case of the assessee was transferred from ITO (Exemptions), Ward-2, Pune to DCIT, Central Circle-2(2), Pune vide order u/s 127 dated 19.1.2024 who is subordinate to PCIT, (Central), Pune, therefore, in view of CBDT notification the PCIT(C) shall exercise powers and perform the functions as stipulated in the Income-tax Act, 1961 in respect of such cases which will include power to cancel registration under section 12AB. Hence, the contention of the assessee that the Ld. Pr.CIT(C), Pune does not have power to cancel registration is without appreciating the correct legal position on this issue.

57. He submitted that the CIT(Exemptions), Pune have jurisdiction only in cases in the territorial area of Maharashtra excluding Mumbai & Navi Mumbai claiming exemption under section 10,11, 12 13A & 13B of the Income-tax Act, 1961 and assessed or assessable by PCsIT specified in CBDT Notification No.52/2014. The Pr.CIT (Central), Pune is not listed in in CBDT Notification No.52/2014. Hence, those cases, wherein PCIT, (Central), Pune has jurisdiction, are outside the jurisdiction of CIT(Exemption), Pune. Therefore, in the case of the assessee, which is under the jurisdiction of PCIT(Central), Pune, the CIT(Exemption), Pune has no powers of cancellation of registration and that power vests with PCIT(C), Pune.

58. So far as the various decisions relied on by the Ld. Counsel for the assessee are concerned, he submitted that in all these cases relied on by the Ld. Counsel for the assessee only one CBDT Notification No.52/2014 has been relied upon. Since the Revenue failed to bring to notice the subsequent notifications, therefore, by considering only one Notification the order could not have been held to be without jurisdiction.

59. Referring to the decision of the Delhi Bench of the Tribunal in the case of Legal Initiative for Forest and Environment (LIFE Trust) vs. PCIT vide SA No.129/DEL/2024 dated 09.08.2024, he submitted that the Tribunal has considered the CBDT Notification No.70/2014 and thereafter various other notifications and decided the issue in favour of the Revenue. Similar view has been taken by the Delhi Bench of the Tribunal in the case of Advantage India vs. PCIT reported in (2025) 178 com605 (Delhi-Trib.). He accordingly submitted that the grounds raised by the assessee challenging the jurisdiction of the Ld. Pr.CIT(C) be dismissed.

60. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is the contention of the Ld. Counsel for the assessee that the powers of granting and cancellation of registration under section 12AB(4) of the Act is exclusively vested with CIT(Exemption) as per CBDT Notification and therefore, the order passed u/s 12AA(3) and 12AA(4) and u/s 12AB(4) by the Ld. Pr.CIT(C) is null and void. We do not find any merit in the above argument of the Ld. Counsel for the assessee. We find merit in the argument of the Ld. CIT-DR that the contention of the assessee is based on partial reading of and exclusive reliance on only one notification of CBDT i.e. CBDT notification No.52/2014 dated 22.10.2014. However, the CBDT subsequently has issued two other notifications i.e. CBDT Notification No.50/2014 dated 22.10.2014 giving jurisdiction to the Pr.CIT(C) and the CBDT Notification No.70/2014 which gives jurisdiction to the Ld. Pr.CIT(C) all over India. As per the CBDT Notification No.52/2014, the Commissioner of Income-tax (Exemption), Pune exercises jurisdiction over all cases of persons in the territorial area of state of Maharashtra excluding Mumbai & Navi Mumbai claiming exemption under section 10, 11, 12, 13A & 13B of the Income-tax Act, 1961 and assessed or assessable by an Income-tax authority at serial numbers 225 to 227 and 236 to 241 (to be read as 236 to 250 as per Corrigendum Notification No.65/2014 dated 13.11.2014) specified in the CBDT No.50/2014 (Annexure-2) dated the 22.10.2014. Subsequently the CBDT has also issued another notification No.70/2014. A conjoint reading of these three notifications of CBDT make it abundantly clear that the CIT(Exemption), Pune does not exercise any jurisdiction in respect of the persons claiming exemption under section 10, 11, 12 13A & 13B of the Act which have been assigned to the Assessing Officers subordinate to Principal Commissioner of Income-tax (Central), Pune under section 127 of the said Act. Further, Notification No. 52 issued by the CBDT u/s 120(1) and 120(2) of the Act only authorizes the Commissioners of Income Tax (Exemption) to exercise and perform all the functions in respect of cases or classes of cases specified therein. But this notification nowhere provides that power to grant/refuse the registration or cancel the registration u/s 12AA shall also be exclusively vested in the Commissioners of Income Tax (Exemption) only and no other Commissioner or Pr. Commissioner can exercise such power. Power to grant/refuse the registration or cancel the registration u/s 12AB shall be governed by the provisions of the Income Tax Act which specifically gives this power to Pr. Commissioner or Commissioner. Once a case is transferred u/s 127 of the Act to the Assessing Officer of the Central Circle, the Pr. CIT (Central), shall exercise all the powers and perform the functions as stipulated in the IT Act in respect of the case so assigned to Assessing Officers subordinate to him.

61. We find an identical issue had come up before the Delhi Bench of the Tribunal in the case of Advantage India vs. PCIT (supra). In that case the Tribunal has elaborately discussed various circulars / Notifications issued by CBDT and has observed as under:

“31. It is also true that vide Notification no 53/2014 dated 22.10.2014, the Chief Commissioner of Delhi Income Tax (Exemptions) was entrusted to exercise powers and perform the functions in respect to territorial areas or cases of classes of cases in respect of which the Commissioner of Income Tax (Exemptions), Delhi is having jurisdiction. The effect of the Notification no. 52 and 53(supra) is that the under normal circumstances, the cases of assessee residing in the territorial area of Delhi, claiming exemption under clauses (21), (22), (22A), (22B), (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Income-tax Act, 1961, shall be under the jurisdiction of CIT(Exemptions), Delhi and CCIT of Delhi, (Exemptions) and AOs subordinate to them.

32. However, once the jurisdiction is assigned to an assessing officer of Central Charge vide order under section 127(2) of the Income Tax Act, the entire jurisdiction over the case is transferred to the assessing officer of the Central Charge and its superior officers like Joint Commissioner, Principal Commissioner and the Chief Commissioner or the Director General of Income Tax. The clause (b) of the Notification no. 70/2014 dated 13.11.2014, reproduced above, with absolute clarity, emphasizes this as under:

“(b) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the said Schedules or the Principal Commissioner/Commissioner of Income tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the said Act in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of this notification;”

33. A reading of clause(b) of the Notification 70/2014(supra) conjointly with the Explanation of section 127 leaves no room for doubt as to the intention of the Legislature as to the jurisdiction to be exercised by the authorities concerned over a class of case once order u/s 127 is issued. In the instant case, once the order u/s 127(2) dated 01.12.2016 was issued by the CIT(Exemptions), Delhi transferring the case of the assessee from ACIT(E), Delhi to Central Cir-16, Delhi under the charge of Pr.CIT(Central), Delhi, by virtue of Explanation to section 127 and Notification no 70/2014, the Pr.CIT(Central), Delhi assumes the jurisdiction over the assessee for all purposes and proceedings whether pending or completed or to be commenced, in respect of any year. In the instant case, the CIT(Exemptions), Delhi has specifically transferred the jurisdiction over the case to the Pr.CIT(Central)-2, Delhi, unlike the jurisdiction order passed u/s 127 in the case of Agarwal Vidya Pracharni Sabha (supra) where the transfer order did not specifically mentioned the transfer of jurisdiction to PCIT, Gurgaon. The explanation to section 127 of the Income Tax Act is reproduced again for abundance clarity:

“Explanation in section 120 and this section, the word “case”, in relation to any person whose name is specified in any order or direction issued there under, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and also includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.”

34. We find that the CBDT had further issued a directive vide letter dated 19.01.2024 on the issue of cancellation of registration u/s 12AA/10(23C) of the Income Tax Act in Trust cases by Pr.CIT other than CIT(Exemptions). The letter, referring to the Notification no 50/2014 and 52/2014 dated 22.10.2014 and 70/2014 dated 13.11.2014, further explains as under:

“2.3 A conjoint reading of the above mentioned Notifications and provisions of the Act makes it clear that the CIT (Exemption) does not exercise any jurisdiction in respect of persons claiming exemption under section 11, section 12 of the Act which have been assigned to the Assessing Officers subordinate to Principal Commissioner of Income-tax (Central), under section 127 of the Act.

3. Therefore, by virtue of provisions of clause (b) of the notification no. 70/2014, S.O. 2915(E) dated 13.11.2014, the PCIT(C) has been empowered to perform/exercise powers and functions stipulated in the Act in respect of such cases or classes of cases or such persons or classes of persons, which were assigned to AO subordinate to him, under section 127 of the Act.”

We are thus of the considered and firm view that a harmonious and constructive interpretation of Notification no. 70/2014 and the CBDT directive dated 19.01.2024 would show that the Pr.CIT(Central) assumes the power and indeed obligated to perform all the functions as stipulated in the Act, over the assessee once an order u/s 127 is issued transferring the jurisdiction to AOs subordinate to him.

35. Now that the issue of assumption of jurisdiction by the Pr.CIT(Central) is out of the way, we dwell on the decision relied upon by the assessee on this issue. The assessee has heavily relied on the decision of coordinate Bench of ITAT in the case of Agarwal Vidya Pracharni Sabha (supra) which in turn relied on the Jaipur bench of ITAT in the case of M/s Wholesale Cloth Merchant Association (supra); Jhodpur ITAT Bench order in the case of Pacific Academy of Higher Education and Research Society (supra) and Gyan Sagar Education & Charitable Trust (supra). We find that the Coordinate Bench of ITAT has arrived at its conclusion, in the case of Agarwal Vidya Pracharni Sabha (supra), on the basis of Notification no 52/2014 and 53/2014 dated 22.10.2014 which provided territorial and subject jurisdiction to CIT(Exemptions) over cases claiming exemption u/s 10, 11, 12, 13A and 13B of the Income Tax Act. In effect the ITAT quashed the Pr.CIT(Central) order in the above case, holding that the PCIT(C), Gurgaon had passed order without jurisdiction in context to the territorial powers and subject matter and that the transfer of jurisdiction u/s 127 is made for granting rights to the AO to assess the income of the Trust and it does not grant power to grant/cancel registration to the PCIT(Central).

36. We find that the Coordinate Bench of ITAT was not informed of the existence of Notification no 70/2014 dated 13.11.2014 which specifically conferred jurisdiction to Pr.CIT(Central) Delhi to exercise powers and perform the functions as stipulated in the said Act in respect of such cases i.e., the assessee, assigned to Assessing Officer (Central Cir-16, Delhi) subordinate to Pr.CIT(Central), Delhi, under section 127 of the said Act, from the date of publication of this notification i.e., 15.11.2014. The Coordinate Bench of ITAT acknowledged the same in para 15 of its order that they have arrived at their decision “in the absence of any specific reference of section 12AB in the Notification dated 22.10.2014 or there being subsequent authorisation by any Circular or Notification of the Board”. We also find that in none of the case laws relied upon in the decision of Agarwal Vidya Pracharni Sabha (supra), there is any consideration of Notification no 70/2014 dated 13.11.2014. The Coordinate Bench of ITAT was also not aware of the subsequent directive of the CBDT dated 19.01.2024 which clarified the issue of assumption of jurisdiction by the PrCIT(Central) for the purposes of grant/cancellation of registration in cases of Trust. We therefore hold that the assumption of jurisdiction by the Pr.CIT(Central) over the case for cancelling the registration granted u/s 12AA was valid and legally permissible. The ground no 1 and 2 are dismissed.

37. We are fortified in our view that the PrCIT(Central)’s assumption of jurisdiction for cancellation of registration is legally valid by the recent decision of ITAT, Delhi Bench in the case of Legal Initiative for Forest and Environment (Life Trust) in S.A.129/Del/2024 arising out of ITA no 3241/Del/2023 dated 09.08.2024. The Coordinate Delhi Bench in the case of Legal Initiative(supra) held as under:

“9.6. On a careful perusal of the three case laws relied by the assessee, it is seen that the above three case laws have not considered the said Board Notification No.70/2014 dated 13.11.2014. In fact, the Delhi Tribunal in the case of Aggarwal Vidya Pracharni Sabha v PCIT (Central) Gurgaon (supra) para no.14.5 of its order had specifically mentioned that when a query was made to the CIT-DR to produce any further notification by virtue of which the power exercised by the PCIT u/s 12AB(4) of the ACT which had come into effect from 01.04.2021 would also be exercised or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this notification was left unsatisfied and no other Notification or Circular was brought to the notice. The relevant observation of the Tribunal in para 14.5 is reproduced as under:-

“14.5 The Rule 17A, as clarified by Circular dated 3rd June 2022 provides that in addition to the ‘specified violations’, the power of cancellation has also been granted under sub-rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income tax Rules, 1962 to the Principal Commissioner or Commissioner authorised by the Board. The authorisation u/s 12AB or Rule 17A if have to be construed, by virtue of Board’s Notification dated 22.10.2014, then we pointed out during the hearing, to ld. DR that this Notification dated 22.10.2014 does not mention specifically that the powers which can be exercised by ld. PCIT u/s 12AB(4) of the Act and which have come into effect from 01.04.2021 would also be exercised by virtue of this Notification dated 22.10.2014 or that further jurisdiction u/s 12AB of the Act could be transferred to other authorities as per this Notification. The query was left unsatisfied and no other Notification or Circular was brought to our notice.”

9.7. In view of the above facts, we are of the view that in absence of consideration of the Board Notification No.70/2014 dated 13.11.2014 in the above three case laws, we cannot hold that the Pr. CIT(Central-2), Delhi lacked jurisdiction to pass the order dated 30.09.2023, cancelling the registration of the assessee trust.”

62. Since the CBDT Notification No.70/2014 dated 13.11.2014 specifically conferred jurisdiction to the Ld. Pr.CIT(C), Pune to exercise powers and perform the functions as stipulated in the Income-tax Act, 1961 in respect of such cases or classes of cases assigned to Assessing Officer, Central Circle, subordinate to the Ld. Pr.CIT(C), Pune under section 127 of the said Act from the date of publication of the notification i.e. 15.11.2014, therefore we hold that the Ld. Pr.CIT(C) has the power to cancel the registration and it cannot be held that he has no jurisdiction to cancel the registration. Accordingly, the grounds of appeal No.2 and 3 raised by the assessee are dismissed.

63. In grounds of appeal No.4 to 6 the assessee has challenged the order of the Pr.CIT(C) as well as show cause notice as invalid and null and void.

64. The Ld. Counsel for the assessee submitted that the Ld. Pr.CIT(C) in the instant case has passed the order cancelling the registration u/s 12AA(3) and 12AA(4) and 12AB(4). In the said order he has stated that the registration granted to the assessee u/s 12AA vide order dated 21.06.2016 which was valid upto assessment year 2021-22 is cancelled u/s 12AA(3) r.w.s 12AA(4). He has further stated that the registration granted u/s 12AB r.w.s. 12A(1)(ac)(i) is cancelled u/s 12AB(4).

65. Referring to the first show cause notice dated 10.02.2025 he drew the attention of the Bench to para 6 of the notice where the Ld. Pr.CIT(C) has asked the assessee to explain as to why the registration granted under 12AA should not be cancelled u/s 12AA(3). Referring to pages 50 to 64 of the Paper Book, he drew the attention of the Bench to the second show cause notice dated 13.08.2025 where in para 4 of the said notice (page 64), the Ld. Pr. CIT(C) has asked the assessee to explain as to why the registration granted u/s 12AA should not be cancelled u/s 12AA(3).

66. Referring to the provisions of section 12AA(5) he submitted that the said section provides that nothing contained u/s 12AA shall be applicable on or after 01.04.2021. He submitted that no order u/s 12AA(3) and 12AA(4) can be passed after 01.04.2021. Similarly, no notice u/s 12AA(3)/12AA(4) could be issued after 01.04.2021. Therefore, both the show cause notices as well as the order passed u/s 12AA(3) and 12AA(4) are invalid in law since no action could be taken u/s 12AA(3) and 12AA(4) after 01.04.2021.

67. Referring to para 13 of the order, he submitted that the Ld. Pr. CIT(C) has held that the registration granted to the assessee u/s. 12AA vide order dated 21.06.2016 which is valid upto assessment year 2021-22 has been cancelled u/s 12AA(3) r.w.s. 12AA(4) with effect from 21.06.2016 till 31.03.2021. He submitted that after the insertion of sub-section (5) of 12AA, the Ld. Pr. CIT(C) has no power to cancel the registration granted to the assessee by resorting to the provisions of section 12AA(3) and 12AA(4). He submitted that once he had no power to issue notice or pass the order under those sections, therefore, the order passed by the Ld. Pr. CIT(C) be held as invalid.

68. Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of M.M. Patel Charitable Trust vs. PCIT reported in 172 com316 he submitted that under identical circumstances the Tribunal has held that the show cause notice u/s 12AA of the Act issued on 20.03.2024 for cancellation of registration u/s 12AA(3) and 12AA(4) of the Act for the period 01.07.2019 to 31.03.2021 is invalid and void ab-initio since the PCIT(Central) issued the show cause notice dt 20.03.2024 resorting to a section which already stood discontinued from 01.04.2021 onwards. He accordingly submitted that the order passed by the Ld. Pr.CIT(C) be held as invalid in law.

69. The Ld. DR on the other hand referring to the order of the Ld. Pr.CIT(C) drew the attention of the Bench to the same and submitted that the Ld. Pr.CIT(C) has stated that the assessee has got registration u/s 12AA valid till 31.03.2021 (assessment year 2021-22) and registration u/s 12AB r.w.s 12A(1)(ac)(i) of the Act (valid for A.Y. 2022-23 to Α.Υ. 2026-27). He has also pointed out that the assessee has been violating the terms and conditions of the registrations since F.Y.2016-17 relevant to A.Y. 2017-18 and therefore, all relevant provisions of the section 12AA of the Act and 12AB of the Act will be enforceable for the violations of the respective years.

70. Referring to the decision of the Hon’ble Supreme Court in the case of Isthmian Steamship Lines reported in 20 ITR 572 (SC), he submitted that the Hon’ble Supreme Court in the said decision has held that it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. He submitted that the above decision is authority for the proposition that the subject of matter is pertaining to the previous years, however, the law to be applied is that in force in the respective assessment years, unless otherwise stated or implied. He submitted that there are number of decisions where it has been held that the law in force in the assessment to be applied accordingly in respect the relevant assessment years unless otherwise provided expressly. He submitted that the Ld. Pr.CIT(C) has also emphasised that the amendment made by replacing the section 12AB in place of 12AA of the Act w.e.f 01.04.2021 does not give wavier to the assessee from violating the provisions applicable for those years. He has also pointed out that the stipulated conditions in the section 12AA(3) & 12AA(4) of the Act have continued u/s 12AB(4) of the Act without altering the core intents of the law.

71. So far as the decision of the Pune Bench of the Tribunal in the case of M.M. Patel Charitable Trust vs PCIT(Central) (supra) relied on by the Ld. Counsel for the assessee is concerned, he submitted that the Tribunal in the said decision has relied upon the decision Hon’ble Madras High Court in the case of Auro Lab v. ITO reported in (2019) 102 taxmann.com 225 dated 23.01.2019 wherein it was held that registration u/s 12A cannot be cancelled retrospectively. He submitted that the assessee-Auro Lab was granted registration u/s 12A(a) of the Act by CIT, Madurai on 09.10.1992. Since then section 12A have noticed many amendments. Further, section 12AA of the Act has been inserted vide Finance Act 1996 providing procedure of registration u/s 12A of the Act w.e.f 01.04.1997. Thereafter, section 12AA(3) of the Act was inserted w.e.f 01.04.2004 empowering the CIT to cancel the registration granted u/s 12AA of the Act. He submitted that the facts of M.M Patel case (supra) are different from that of the assessee’s case. He submitted that the trust in M.M. Patel case was registered under section 12A and not under section 12AA. He drew the attention of the Bench to para 15 of the order where the Tribunal has noted as under:

“Now going through section 12AB(4) of the Act, we observe that section 12AB(4) only refers to the registration or provisional registration granted u/s.12AB(1)(a)(b)(b) and 12AA(1)(b) of the Act but there is no mention of section 12A of the Act. Now in absence of any express powers whether the ld.PCIT was justified to issue show cause notice u/s 12AB(4) of the Act for cancelling the registration u/s 12A of the Act.”

72. He submitted that this is not case with trusts registered under section 12AA. Both section 12AA and 12AB allow cancellation of registration of the trust which has been obtained at any time.

73. Referring to the decision of Hon’ble Jurisdictional High Court in the case of Sinhagad Technical Education Society reported in [2012] 343 ITR 23 (Bombay) he submitted that the Hon’ble High Court has clearly held that the provisions of sub-section (3) of section 12AA as amended by Finance Act of 2010 with effect from 01.06.2010 empowers the Commissioner to cancel registration of a trust which has been obtained at any time under section 12A. It also been held that power under section 12AA(3) can be exercised by Commissioner in respect of a trust registered prior to 01.06.2010 and mere fact that a part of requisites for action under section 12AA(3) is drawn from time prior to 2010 would not make any difference. He submitted that the Tribunal in the case of M.M Patel did not consider this binding decision of the Hon’ble Bombay High Court and therefore, it is not a binding precedent.

74. Referring to the decision of the Hon’ble Madras High Court in the case of Vellore Institute of Technology vs CIT reported in [2021] 436 ITR 483 (Madras) he submitted that the Hon’ble High Court has reiterated this position. In this case also registration granted to the assessee under section 12A was cancelled vide order dated 13.03.2008 made under section 12AA(3). The assessee challenged reasons furnished for cancellation of registration on ground that section 12AA(3) was amended by Finance Act, 2010 with effect from 01.06.2010 and same could not be invoked for purpose of cancellation of registration made prior to 01.06.2010 retrospectively. However, the Hon’ble High Court held that the Principal Commissioner/Commissioner was empowered to exercise power of cancellation by invoking sub-clause (3) to section 12AA even prior to 01.06.2010 and insertion made in Finance Act, 2010 was only to clarify provisions under which registration was made i.e. under section 12A and said insertion would not affect power of Commissioner already existing.

75. So far as the contention of the Ld. Counsel for the assessee that as per section 12AA(5) nothing contained in section 12AA shall apply on or after 01.04.2021 and therefore any action after 01.04.2021 under 12AA(3) was invalid is concerned, he submitted that the new section 12AB had similar provisions in relation to the cancellation of registration. Section 12AA was superseded by section 12AB from 01.04.2021. He drew the attention of the Bench to the following chart and submitted that both sections are similarly worded:

Section 12AA(3)

12AB(4)

Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording reasonable opportunity of being heard.

76. He submitted that a perusal of the above would show that both sections were similarly worded and therefore, the contention of the Ld. Counsel for the assessee that the violations under sections 12AA and 12AB are different is not borne out by facts.

77. Referring to the decision of the Hon’ble Supreme Court in the case of ITO vs. Vikram Sujitkumar Bhatia reported in [2023] 453 ITR 417 (SC), he submitted that the Hon’ble Supreme Court in the said decision has held that amendment by substitution has the effect of wiping the earlier provision from the statute book and replacing it with the amended provision as if the unamended provision never existed. Thus, the new section 12 AB(4) was substituted for older section 12AB(4) and would retrospectively applicable along with the concept of specified violation. The Ld.CIT-DR thereafter drew the attention of the Bench to the following written submissions:

“6.3 It is important to note that section12AA(3), original section 12AB(4) and substituted section 12AB(4) are similarly worded and are triggered when CIT is satisfied that “the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution”. Ld. PCIT has correctly noted that provisions of section 12AA(3) and 12AB(4) rws clauses (a) and (c) of Explanation are similar and the activities of the assessee come within the ambit of these provisions. Hence, there is no infirmity in the action of the Ld.PCIT in cancelling the registration of the assessee trust granted u/s 12AA Act vide order dtd. on 21.06.2016-valid upto to A.Y.2021-22 u/s 12AA(3) rws 12AA(4) with effect from 21.06.2016 to till 31.03.2021 and subsequent to that i.e. from FY 2021-22 onwards, the cancelling the registration granted u/s u/s. 12AB r.w.s. 12A(1)(ac) (i) of the Act dated 28.05.2021 valid for A.Y. 2022-23 to 2026-27 u/s 12AB(4) of the Act.

6.4 Without prejudice to the above and strictly in alternative, it is also prayed that in light of blatant and brazen misuse of trust status by the assessee company to commit financial fraud and siphoning off the public money, the Hon. ITAT can uphold the cancellation of registration u/s 12AB. Even if it is presumed that section 12AA will be not applicable after 01.0.2021, nothing prevent the final fact finding authority to uphold the cancellation under section 12AB. It is not the case that the Ld.PCIT had no power to cancel the registration. When the Ld.PCIT had the power to cancel the registration merely quoting of wrong section in the order would in no way vitiate the proceedings. It is pertinent to mention here that the both notices dated 13.08.2025 and 10.02.2025 mentions both sections 12AA and 12AB. So the assessee was well informed of the fact that action under both sections has been initiated against it. In this regard, reliance is placed on the decision of Madras High Court in CIT vs Indian Express (Madurai) (P) Ltd. [1983] 140 ITR 705 (Madras) (Annexure-11) it was held that the appellate authorities perform precisely the same functions as the assessing authority. It reproduced the following passage from the judgment of the Full Bench in State of Tamil Nadu v. Arulmurugan & Co. [1982] 51 STC 381 to emphasis it’s point:

“An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the Legislature. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer’s case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer’s opponent, in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority’s order of assessment is not strictly an arbitral Tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer’s appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself.” (p. 392)

Therefore, in alternative, the use of section 12AA(3) & 12AA(4) in the notices and order may be ignored and the action of the Ld.PCIT in cancelling the registration u/s 12AB(4) be considered w.e.f 21.06.2016 to till 31.03.2021 in addition to cancellation of registration from AY 2022-23.

6.5 Thus, in view of the above discussion, it is prayed that cancellation of registration may be upheld.”

78. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Ld. Pr.CIT(C) in the instant case has passed the order cancelling the registration on 29.09.2025 u/s 12AA(3) & 12AA(4) and 12AB(4) of the Act. In the said order he has mentioned that the registration granted to the assessee u/s 12AA vide order dated 21.06.2016 which was valid upto assessment year 2021-22 is cancelled u/s 12AA(3) r.w.s 12AA(4). Similarly, he has stated that the registration granted u/s 12AB r.w.s. 12A(1)(ac)(i) is cancelled u/s 12AB(4). From the various details furnished by the assessee, we find the Ld. Pr.CIT(C) in the first notice issued on 10.02.2025 asked the assessee to explain as to why the registration u/s 12AA should not be cancelled u/s 12AA(3). Similarly, in the 2^nd show cause notice dated 13.08.2025, copy of which is placed at pages 50 to 64 of the paper book, he has asked the assessee to explain as to why the registration granted u/s 12AA should not be cancelled u/s 12AA(3). It is the submission of the Ld. Counsel for the assessee that no order u/s 12AA(3) and 12AA(4) can be passed after 01.04.2021 in view of the provisions of section 12AA(5). Similarly, no notice u/s 12AA(3)/12AA(4) could be issued after 01.04.2021 and therefore, both the show cause notices as well as the order passed u/s 12AA(3) and 12AA(4) are invalid in law.

79. We find some force in the above arguments of the Ld. Counsel for the assessee. The provisions of section 12AA(5) read as under:

“Procedure for registration.

12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall—

….

(2)….

(3)….

(4)…

(5) Nothing contained in this section shall apply on or after the 1st day of April, 2021.”

80. We find merit in the argument of the Ld. Counsel for the assessee that after insertion of sub-section (5) of section 12AA the Ld. Pr.CIT(C) has no power to cancel the registration to the assessee by resorting to the provisions of section 12AA(3) and 12AA(4) of the Act. Therefore, once he has no power to pass an order under these sections, the order passed by him is bad in law.

81. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of M.M. Patel Charitable Trust vs. PCIT reported in 172 com316. We find the Tribunal after considering the arguments advanced by both the sides at para 18 of the order has observed as under:

“18. The second limb of contention raised by the assessee challenging the powers available in section 12AB of the Act is that the show cause notice issued u/s.12AA of the Act on 20.03.2024 is also invalid. Ld. Counsel for the assessee stated that section 12AA(5) of the Act provides that nothing contained in section 12AA of the Act shall apply on or after 01.04.2021. From 01.04.2021 section 12AB of the Act has been inserted and the proceedings with regard to cancellation of registration u/s.12AA could be taken up only u/s.12AB of the Act. But in the instant case the proceedings for cancellation of registration have been initiated on 21.07.2023 and therefore even the registration u/s.12A cannot be cancelled u/s.12AA of the Act in the instant case because the proceedings have been initiated u/s.12AB which have been brought into Act w.e.f. 01.04.2021. Therefore, the show cause notice u/s.12AA of the Act issued on 20.03.2024 for cancelling the registration u/s.12AA(3) and 12AA(4) of the Act for the period 01.04.2019 to 31.03.2021 is invalid and ab-initio as the ld.PCIT (Central) has issued the show cause notice dated 20.03.2024 in a section already stood discontinued from 01.04.2021 onwards. Thus, the assessee succeeds on this second limb of its legal ground challenging the powers available in section 12AB of the Act for cancellation of registration.”

82. The various decisions relied on by the Ld. CIT-DR in our opinion are distinguishable and not applicable to the facts of the present case. So far as the decision relied on by the Ld. CIT-DR in the case of Isthmian Steamship Lines reported in 20 ITR 572 (SC) is concerned, the same in fact supports the case of the assessee where the Hon’ble Supreme Court has held that it is a cardinal principle of the tax law that law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. As mentioned earlier, the provisions of section 12AA(5) clearly and categorically mentions that nothing contained in this section shall apply on or after 01.04.2021. Therefore, the Ld. Pr.CIT(C) has no power to cancel the registration granted to the assessee by resorting to provisions of section 12AA(3) and 12AA(4) of the Act after insertion of sub-section (5) to section 12AA. Therefore, the notices as well as the consequential order passed by the Ld. Pr.CIT(C) is not valid in law. The various other decisions relied on by the Ld. CIT-DR are not applicable in view of the clear, categorical and unambiguous wording of the provisions of section 12AA(5) of the Act that “nothing contained in this section shall apply on or after 01.04.2021”. We, therefore, hold that the show cause notice issued u/s 12AA(3) and 12AA(4) of the Act and the consequential order passed cancelling the registration u/s 12AA(3) and 12AA(4) are not in accordance with law and are liable to be quashed. The grounds raised by the assessee on this issue are accordingly allowed.

83. Grounds of appeal No.13 to 17 relate to the transactions with HUF India Pvt. Ltd.

84. The Ld. Counsel for the assessee referring to the order of the Ld. Pr.CIT(C) submitted that according to the Ld. Pr.CIT(C), the assessee had received substantial amount from M/s. HUF India Pvt. Ltd. (HUF), an Indian subsidiary of the German company HUF HULSBECK & FURST GMBH & CO. KG from the financial year 2016-17 till December, 2020. The assessee had received funds through sham invoices raised on HUF and the funds so received were subsequently paid as professional fees / consultancy charges /rent, etc. to the entities provides by Shri Sunil Garg, M.D. of HUF. The Ld. Pr.CIT(C) has held that the assessee was engaged in carrying out non-genuine and illegal transactions with HUF which is not in accordance with the aims and objects of the assessee trust. He has further held that the assessee was engaged in illegal and non-genuine activities which come within the purview of money laundering for which the activities carried out by the assessee are not genuine and therefore, there is violation of the provisions of section 12AA(3).

85. The Ld. Counsel for the assessee submitted that the assessee has entered into agreements with HUF for providing on-the-job training to the NEEM trainees as per the relevant schemes. During the course of carrying out these activities, Shri Sunil Garg instructed the assessee to raise additional invoices for out-of-pocket expenses. He had also threatened the assessee that if such additional invoices are not raised, he would terminate the NEEM contract which would have harmed the trainees undergoing the training. Therefore, the assessee received funds on account of additional invoices raised which were paid as consultancy fees/rent, etc. to the persons / entities provides by Shri Sunil Garg. He submitted that there was no diversion of funds to the related parties since Shri Sunil Garg was not related with the assessee company and the amounts received were subsequently paid. He submitted that the assessee was misled to enter into such an arrangement by Shri Sunil Garg and the matter is pending in the court and is sub judice. He submitted that no FIR has been filed against the assessee by HUF. The amounts received from HUF have been subsequently paid to the concerns provided by Shri Sunil Garg. Thus, there is no benefit in any form to the related persons of the assessee. He submitted that after the assessee came to know of the misrepresentation he stopped the transactions with HUF from December, 2020.

86. So far as the allegation of the Ld. Pr. CIT(C) that there is money laundering is concerned, he submitted that the same is not correct since the matter is pending in the court. The Ld. Counsel for the assessee submitted that the activities carried out by the assessee are genuine. He submitted that the Ld. Pr. CIT(C) could not have cancelled the registration u/s 12AA(3) after 01.04.2021 for violation of provisions of section 12AA(3). For the above proposition, he relied on the decision of the Pune Bench of the Tribunal in the case of M.M. Patel Charitable Trust vs. PCIT reported in 172 com316 (Pune – Trib.).

87. The Ld. Counsel for the assessee submitted that the alleged transaction with HUF were upto December, 2020. The amendment in section 12AB(4) providing for specified violation has been introduced with effect from 01.04.2022 and therefore, any alleged violation before that date cannot be the basis for cancellation of registration u/s 12AB(4). He reiterated that since “specified violations” were introduced in section 12AB(4) only with effect from 1-4-2022 and prior to that date there existed no statutory framework defining, recognising or classifying any act or omission as a specified violation, therefore, the Ld. PCIT was not justified in cancelling the registration on account of alleged violation of provisions of section 12AA(3). For the above proposition, he relied on the following decisions:

i) M. M. Patel Charitable Trust vs. PCIT reported in 172 taxmann.com316 (Pune – Trib.)

ii) Ram Saran Das Kishori Lal Charitable Trust vs. CIT reported in 180 com546 (Delhi – Trib.)

ii) Richmond Educational Society vs. DCIT vide ITA No.4779/Del/2025

88. So far as the decision of the Hon’ble Karnataka High Court in the case of J. K. Panthaki and Co. reported in 343 ITR 329 (Kar) relied on by the Ld. Pr.CIT(C) is concerned, he submitted that the same is distinguishable and not applicable to the facts of the present case. In that case, the assessee had paid commission to the Managing Director of Karnataka Ball Bearings Ltd. for awarding contract to it. The said commission paid was claimed as an expenditure by the assessee. The Hon’ble High Court held that the commission paid was in the nature of bribe and could not be allowed as a deduction u/s 37(1). He submitted that in the instant case there is no allegation that the assessee has paid any bribe. Whatever amount was received from HUF was remitted to the concerns as per the instructions of Mr. Sunil Garg. It is not a case that the assessee has paid any bribe. Therefore, the said decision is not applicable to the facts of the present case. He accordingly submitted that the Ld. Pr.CIT(C) has erred in cancelling the registration of the assessee on the basis of alleged violation with respect to the transactions entered into with HUF India Pvt. Ltd.

89. The Ld. CIT-DR on the other hand submitted that during the course of survey action conducted on 06.03.2024 at the premises of the assessee various incriminating evidences regarding sham/non-genuine transactions carried out by the assessee-trust were found according to which bogus bills were raised by the assessee trust on the Indian subsidiary of German company, HUF India Pvt. Ltd. He submitted that the whole scam of bogus billing and siphoning off of the money was revealed when one of the employees of the assessee company was apprehended by the staff of HUF India Pvt. Ltd with bogus invoices in the year 2020. This led to exposure of bogus billing scam involving the assessee company and one Shri Sunil Kumar Garg, the then MD of the HUF India Pvt. Ltd. He submitted that the HUF India Pvt. Ltd lodged a criminal complaint against Shri Sunil Kumar Garg, the then MD of the HUF India Pvt. Ltd. and other key employees like Shri Nikhil Agarwal with the police. The FIR dated 14.03.2021 clearly states that Shri Sunil Kumar Garg, the then MD of the HUF India Pvt. Ltd. and other key employees in connivance with the assesse company had defrauded HUF India Pvt. Ltd. and enriched themselves. He submitted that during post survey verification it was found that the assessee had made payments to Mr. Sunil Garg, Mr. Nikhil Agarwal and their family members & business concerns on account of professional fee/consultancy charges/rent etc. As per the submission of the assessee it had made payment of Rs.15,65,65,766/- to Shri Sunil Garg and his related entities between F.Y.2016-17 and 2019-20 on account of professional fees/consultancy charges/rents, etc. These payments recorded in the books of the assessee were not made for any service rendered to the assessee company but were part of scam/conspiracy in which the assessee company was a willing accomplice. He submitted that the assessee company raised fake bills for supplying the NEEM trainees to the HUF India Limited and received the payments from HUF India Ltd. The assessee company also booked bogus expenses on account of professional fee/consultancy charges/rent etc. Thus, the assessee company cooked its books of accounts and application of income and the expenditure claimed by the assessee on the charitable activities was in fact fake.

90. He submitted that the Income Tax Act empowers the Commissioner to withdraw the registration granted w/s 12AA/12AB if he is satisfied that (a) the activities of the trust or institution are not genuine, and/or (b) are not being carried out in accordance with the objects of the trust or Institution. In the instant case the activities of the trust are not genuine as well as not being carried out in accordance with its declared objects. It manipulated its books of accounts and claimed application of income for bogus expenses like professional fee/consultancy charges/rent etc. Further, the assessee company allowed its exempt status to carry out the financial fraud which is not in accordance with its declared objects. Therefore, the Ld. Pr.CIT(C) was right in withdrawing the registration granted u/s 12AA/12AB.

91. So far as the argument of the Ld. Counsel for the assessee that the assessee company raised fake bills and paid bogus expenses to Shri Sunil Garg & others under duress as Shri Sunil Garg coerced it to do so threatening to terminate the NEEM contract, FIR has not been filed against it but against Shri Sunil Garg & others, there was no money laundering and Shri Sunil Garg has misled the assessee to enter in this fraud arrangement is concerned, he submitted that the assessee company has not denied that it has raised fake bills and booked bogus expenses in name of professional consultancy etc. It had only justified its illegal actions. He submitted that the contentions raised by the assessee in its favour are not tenable in view of the facts and circumstances of the case. He submitted that the Promoter-Director of the assessee-company Shri Vishwesh Kulkarni has been operating in the field of manpower supply and human resource consultancy for more than 3 decades. He is operating dozens of companies / entities in this field and therefore, it is not logical that such an accomplished and experienced businessman could be coerced into an illegal conspiracy of money laundering and financial fraud by an employee of a Private limited company. It is not the case of the assessee that HUF India was its only client and source of income. The assessee-company cannot hide behind the excuse of duress to justify its involvement in blatant fraud and money laundering activity.

92. Referring to para 7.1 (viii) of the order of the Ld. Pr.CIT(C) he submitted that Shri Vishwesh Kulkarni not only arranged fake invoices of YAS but also arranged fake bills of his proprietary concern namely Maharashtra Industrial Services. Thus, it is clear that the assessee-company and its promoter director were hand-in-glove with Shri Sunil Garg & others in carrying out a financial fraud and money laundering activity.

93. So far as the argument of the Ld. Counsel for the assessee that the activities of the assessee-company does not fall under the umbrella of money laundering activities and the FIR does not name the assessee company is concerned, he submitted that these contentions are not acceptable. He submitted that section 3 of the Prevention of Money Laundering Act (PMLA), 2002 defines the offence of money laundering. It states that anyone who directly or indirectly attempts to indulge, knowingly assists, knowingly is a party, or is actually involved in any process or activity connected to the proceeds of crime and projects or claims it as untainted property is guilty of money laundering. Hence, it cannot be said that the assessee-company was not engaged in the financial fraud.

94. So far as the argument of the Ld. Counsel for the assessee that there is absence of name of the assessee company in FIR is concerned, he submitted that the FIR does not name the company as accused but it does point to the involvement of the assessee-company in financial fraud. Further, the FIR at four different places prominently names the assessee-company in connection with the financial fraud which itself was discovered when the employee was caught red handed while submitting fake bills. Although the FIR does not name assessee-company as accused but FIR is the initial document registered by the police to start an investigation into a cognizable offense and not the conclusion. Various investigations and enquiries would be carried out and actual nature of financial fraud would be uncovered.

95. So far as the argument of the Ld. Counsel for the assessee that there was no diversion of funds is concerned, he submitted that the amounts received by raising fake bills on HUF India Ltd were diverted to Shri Sunil Garg and his entities as bogus payments. So far as the argument of the Ld. Counsel for the assessee that the effect of amounts received as fake bills was neutralized and there was no wrongdoing on the part of the assessee-company is concerned, he submitted that the assessee is a section 8 company which has special character as per The Companies Act, 2013. He submitted that section 8(1) of the Companies Act, 2013 allows the registration of associations or individuals as Non-Profit Organizations (NPOs) with limited liability. Instead of standard business growth, these entities exist strictly to promote charitable objectives, commerce, art, science, sports, education, or social welfare. Section 448 of the Companies Act, 2013 deals with the punishment for false statements in company documents. It makes intentionally providing false information or omitting material facts in any returns, reports, or financial statements a serious criminal offense, rendering the offender liable for fraud under Section 447. Thus, the assess-company is claiming itself as innocent after violating clear and unambiguous provisions of Companies Act. He submitted that despite the assessee claiming exemption u/s 11 and 12 of the Income Tax Act as charitable institution still the assess-company has indulged in financial fraud by misrepresentation of its books of accounts leading siphoning off the money of another company.

96. Referring to the order of the Ld. Pr.CIT(C) in para 7.1(viii) he submitted that the order has clearly demonstrated non-genuine and illegal activities carried out by the assessee comes under the preview of money laundering, which do not fall within the conceptual framework of charity as envisaged under the Income Tax Act and also within the objects of the assessee as described in its Memorandum of Association (MOA).

97. Referring to the decision of the Hon’ble Supreme Court in the case of CIT vs Batanagar Education reported in (2021) 436 ITR 501 (SC) he submitted that the Hon’ble Supreme Court in the said decision has clearly stated that cancellation of registration is justified if there is misuse of the status of the trust for financial fraud or illegal activities.

98. So far as the argument of the Ld. Counsel for the assessee that no action u/s 12AA(3) or 12AB(4) can be taken in respect of AY 17-18 to AY 2021-22 is concerned, he submitted that the action of the Ld. Pr.CIT(C) in cancelling the registration u/s 12AA(3) r.w.s. 12AA(4) is as per law and in the line of decision of the Hon’ble Supreme Court in the case of Isthmian Steamship Lines (supra). He submitted that the provisions of section 12AA(3), original section 12AB(4) and substituted section 12AB(4) are similar and applicable to the egregious violations and sham transactions carried out with HUF India Ltd. Therefore, the cancellation of registration u/s 12AA(3) and 12AB(4) for the bogus transactions with HUF India Limited is as per law.

99. So far as the argument of the Ld. Counsel for the assessee that the specified violations mentioned in section 12AB(4) were applicable only from 01.04.2021 and the alleged violation has taken place prior to March, 2020 is concerned, he submitted that if specified violations are noted in years prior to AY 2022-23, then also action can be taken by the PCIT substituted u/s 12AB(4).

100. Referring to the decision of the Hon’ble Supreme Court in the case of ITO vs. Vikram Sujitkumar Bhatia (supra), he submitted that the amendment by substitution has the effect of wiping the earlier provision from the statute book and replacing it with the amended provision as if the un-amended provision never existed. Thus, the new section 12AB(4) was substituted for older section 12AB(4) and would retrospectively applicable along with the concept of specified violation. He accordingly submitted that the grounds raised by the assessee on this issue be dismissed.

101. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Ld. Pr.CIT(C) cancelled the registration on account of alleged violation u/s 12AA(3). According to the Ld. Pr.CIT(C) the assessee has received substantial amounts from HUF during the period from financial year 2016-17 till December, 2020 by raising additional invoices in addition to regular invoices. A part of the amount has been diverted to the entities controlled or managed by Shri Sunil Garg, erstwhile MD of HUF at his instructions. While doing so, he had further mentioned that the contract with the assessee was terminated subsequently and even an FIR has been filed against HUF by Shri Sunil Garg. He, therefore, held that out of the funds received by the assessee a part of which were subsequently transferred / paid to the entities as instructed by Shri Sunil Garg, therefore, the assessee has violated the provisions of section 12AA(3).

102. It is the submission of the Ld. Counsel for the assessee that such cancellation of registration u/s 12AA(3) is not in accordance with law since the Ld. Pr.CIT(C) has no power u/s 12AA(5) to issue any such show cause notices on or after 01.04.2021. It is also his submission that the amendment in section 12AB(4) which provides for specified violation has been introduced w.e.f. 01.04.2022 and since the transactions with HUF were entered into upto December, 2020, therefore, any alleged violation before that date cannot be the basis for cancellation of registration u/s 12AB(4).

103. We find some force in the above arguments of the Ld. Counsel for the assessee. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of M.M. Patel Charitable Trust vs. PCIT (supra) wherein the Tribunal at para 19 of the order has observed as under:

“19. Now we take up the third limb where it has been contended by the ld. Counsel for the assessee that in the show cause notice dated 21.07.2023 the ld. PCIT has referred to ‘specified violation’ committed by the assessee by virtue of which the assessee trust has not applied its income wholly and exclusively for the purpose for which it is established but using it directly or indirectly for the benefits of its trustees and other members of the trust. From perusal of section 12AB(4) of the Act extracted (supra) and specifically to section 12AB(4)(a)(ii) it has been provided that PCIT or CIT shall pass an order in writing cancelling the registration of such trust or institution after affording reasonable opportunity of bearing heard for such previous year and of subsequent previous years if he is satisfied that one or more specified violation have taken place. Now the word ‘specified violation’ was not appearing in the original section 12AB(4) w.e.f. 01.04.2021 but there was an amendment brought into by the Finance Act, 2022 w.e.f. 01.04.2022 inserting the word ‘specified violation’ and its definition. Now prior to 01.04.2022, there is no mention of the word ‘specified violation’ with regard to cancellation of registration granted u/s.12A, 12AA and 12AB of the Act. In the instant case, the allegation made by the Revenue authorities is with regard to cash received against staff salary, doctors salary, PG stipend through bearer cheque and also receiving capitation fee in cash during the period F.Yrs. 2019-20 to F.Y. 2021-22. The ‘specified violation’ as referred by ld. PCIT in the impugned order relates to three financial years. However, as observed above, the word ‘specified violation’ has been brought into Statute from 01.04.2022. Therefore, the same could not have been applied in the case of assessee as there is no ‘specified violation’ word in section 12AB(4) of the Act prior to 01.04.2022.”

104. We find the Delhi Bench of the Tribunal in the case of Ram Saran Das Kishori Lal Charitable Trust vs. CIT (supra) has held that where the assessee-trust was granted registration under section 12A(1)(ac)(i) on 29-3-2022 and subsequently, Commissioner (Exemption) cancelled registration granted to assessee by invoking powers under section 12AA(3)/12AB(4), since ‘specified violations’ alleged by revenue pertained to a period prior to 1-4-2022, provisions of section 12AB(4) could not have been invoked so as to enable the Commissioner (Exemption) to cancel registration. The relevant observations of the Tribunal read as under:

“19. Now, when the aforesaid aspects are taken into consideration, it leaves no doubt in the mind of this Bench that cancellation of registration by the impugned order was on the basis of certain alleged acts which occurred prior to 01.04.2022. The Revenue cannot dispute that the provisions for ‘specified violations’ are inserted in sub-section (4) of section 12AB w.e.f. 01.04.2022. Now, the ‘specified violations’ enumerated in section 12AB(4) recognise the specific nature and scope of violation giving rise to penal consequences of cancellation of registration. The first and foremost we would like to observe is that when the consequences are of the nature of withdrawing a recognition or cancellation of registration, the same can have a catastrophic effect on the existence of an institution and its activities. Thus, the provisions of the law have to be strictly interpreted and complied with.

19.1 As we take into consideration provisions and scope of 12AB(4) of the Act, we find that it refers to the powers granted for an action subsequent to grant of registration or provisional registration of a trust under section 12AA of the Act, and if, ‘subsequently’, specified violations are discovered, then, the competent authority is entitled to initiate an action by following a procedure enshrined in clauses (i) to (iv) of sub-section (4) of section 12AB of the Act.

19.2 It comes up that, clause (i) of sub-section (4) of section 12AB of the Act requires that the competent authority shall call for such documents or information from the trust or institution for making such inquiry as he think necessary in order to specify himself about the occurrence or otherwise of any ‘specified violation’. This clause (i) when read with clause (ii) of sub-section (4) of section 12AB of the Act indicates that the competent authority shall, before cancelling the registration, call for documents or information or make an inquiry as is necessary and, thereupon, after affording a reasonable opportunity of hearing to the assessee, cancel the registration. Thus, of subsection (4) of section 12AB of the Act mandates that when the assessee is called upon to explain and justify the conclusions drawn for cancellation of the registration, the competent authority should have drawn a satisfaction as to what was the ‘specified violation’ which has taken place. Pertinent to mention again is that as observed while referring to sub-section (4) of section 12AB of the Act, the law vests jurisdiction in regard to only ‘specified violations’ found subsequently to the enactment of sub-section (4) of section 12AB of the Act. So it is also necessary that if competent authority intends to invoke cancellation powers with retrospective effects the same should be mentioned in the notice issued to show cause as per mandate of clause (i) when read with clause (ii) of sub-section (4) of section 12AB of the Act.

20. In case of the assessee, if we examine the show cause notice for cancellation of registration u/s 12AA(3)/12AB(4) of the Act issued on 14.03.2024, copy of which is placed at pages 548 to 549 of the paper book, we find that there is no reference to Explanation to sub-section (4) of section 12AB of the Act indicating as to for violation of which of the various ‘specified violations’ defined in clause (a) to (g) of the Explanation, the action of cancellation of registration is called for explanation from the assesse. At the same time there is no mention that competent authority intends to invoke cancellation powers with retrospective effects.

21. To be very specific, this notice dated 14.03.2024 referred to four ‘anomalies’ in which 1 to 3 are with regard to certain acts which have occurred in the past, i.e., before 01.04.2021 and the fourth allegation is of fraudulent means wherein it is alleged that despite the registration of the trust was cancelled in 2008 and which was upheld by the ITAT, the assessee continued to file ITR-7 claiming exemption by quoting old registration number. Now, this fourth ‘anomaly’ cannot be considered to be falling into any of the clauses defining specified violations in the Explanation attached to sub-section (4) of section 12AB of the Act.

22. However, as the impugned order of cancellation of registration is considered, we find that in para 3.7 the competent authority makes specific reference to the class of ‘specified violation’ attracted and for which the assessee is being penalised by cancellation of registration and for convenience, we reproduce para 3.7 and 3.7.1, below:-

“3.7 Specified Violation:

3.7.1 Next it is argued that no specified violation as per section 12AB has occurred. This plea is not accepted, for the following reasons:

(i) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the property of trust has been applied, other than for the objects of the trust. Thus assessee has made violation as per Explanation (a) to 12AB(4)

(ii) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the trust has income from profits and gains of business which is not incidental to the attainment of its objective. Thus assesse has made violation as per Explanation (b) to 12AB(4).

(iii) It is amply clear from discussion in Para-3.3 to 3.4.1 supra the activity carried out by the trust is not genuine and not being carried out in accordance with all or any of the conditions subject to which it was registered. Thus assessee has made violation as per Explanation (e) to 12AB(4).

(iv) It is amply clear from discussion in Para-3.4.1 supra the trust has not complied with TOHO (Transplantation of Human Organs and Tissues) Act, 1994, because of which its license for kidney transplantation was cancelled and never renewed. Thus assessee has made violation as per Explanation (f) to 12AB(4).

(v) It is amply clear from discussion in Para-3.5.1 & 3.5.2 supra the application made by trust u/s 12A(1)(ac) contains false and incorrect information. Thus assessee has made violation as per Explanation (g) to 12AB(4).”

23. The aforesaid observations of the competent authority in paras 3.7 and 3.7.1 leaves no doubt in the mind of this bench that at the time of issuance of notice on 14.03.2024 calling upon the assessee to show cause for the purpose of clause (ii) of sub-section (4) of section 12AB of the Act the competent authority has not reached any conclusion on the basis of information called from the assessee or any independent inquiry as to which of the class of ‘specified violations’ defined in Explanation to sub-section (4) of section 12AB of the Act are being invoked. Neither there is proposal to cancel the registration retrospectively.

24. A co-ordinate bench on which one of us, the judicial member, was also in quorum, in ITA No. 1308 /DEL/2023 Aggarwal Vidya Pracharni Sabha versus Principal Commissioner of Income Tax, Central Gurgaon vide order dated 08.01.2024 was considering similar issue of challenge of cancellation of registration by invoking powers of section 12AB(4) of the Act and with regard to the requirement to disclose in show cause notice as to which class of ‘specified violation’ is invoked, has in para 17.1 concluded as follows;

“17.1 Furthermore, here in this case, the exercise of power u/s 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a ‘specified violation’. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022.”

24.1 This decision in Aggarwal Vidya Pracharni Sabha (supra), has been challenged by the department before Hon’ble Punjab and Haryana High Court vide ITA-122-2024(O&M) and we find that the appeal is admitted vide order dated 12.12.2024, to examine three questions which are other than, aforesaid conclusion drawn by the co-ordinate bench. As for convenience the order dated 12.12.2024 of Hon’ble Punjab and Haryana High Court is reproduced below:-

“ Having heard learned counsel for the parties and considering the provisions of Section 127 of the Income Tax Act, 1961 and explanation appended thereto, the present appeal is admitted on following questions of law:-

(i) Whether on facts and circumstances of the case and in law, Hon’ble HAT is right in quashing the order passed u/s 12AB cancelling the registration of assessee trust by holding that the PCIT (Central), Gurugram does not have jurisdiction to pass the aforesaid order ?

(ii) Whether on facts and circumstances of the case and in law, Hon’ble ITAT is right in only considering the CBDT Notification No.52/2014, S.O.2754(E) dated 22.10.2014 to hold that PCIT (Central), Gurugram does not have jurisdiction to pass order u/s 12AB(4) of the Act and not considering the CBDT Notification No.70/2014, S.O. 2915(E) dated 13.122014 according to which PCIT (Central), has very much jurisdiction to pass the aforesaid order ?

(iii) As to whether PCIT would have the powers to pass an order u/s 12AB, after the jurisdiction of the case of assessee has been transferred under Section 127, which would also include all proceedings including registration ?”

25. Lastly we take note of the decision of Hon’ble Mudurai Bench of Madras High Court in M/s.S.R.Trust, Represented by its Trustee, B.Kannan versus PCIT, Chennai in W.P.(MD)No.14791 of 2021 and W.M.P.(MD)Nos.11697 and 11698 of 2021order dated 18.08.2021 is also relevant where Hon’ble High Court has examined the scope of word ‘subsequently’ used in Section 12AB of the Act and has held that the words ‘subsequently’ occurred in Sub-Section 4 of Section 12AB shall be construed as ‘subsequent to the registration under new regime. Para 33 is thus reproduced below;

“33. In this context, even though an attempt has been made by the learned counsel appearing for the respondent revenue that the word ‘subsequently’ occurred in Sub-Section 4 of Section 12AB shall be construed as ‘subsequent to the registration’, even under the old regime, that is 12A and 12AA of the Act, this Court is not impressed with said interpretation sought to be given by the revenue side, as projected by the learned Standing Counsel, because, the entire procedure as has been contemplated under 12AB is the new procedure introduced, where the word ‘subsequently’, since has been intentionally made in the Sub Section, it means, after the registration is undertaken within the meaning of Section 12AB, then only, if any punitive action by way of cancellation of registration is to be undertaken by the revenue.”

25.1 Thus it is only after the registration is undertaken within the meaning of Section 12AB, then only, if any punitive action by way of cancellation of registration is to be undertaken by the revenue same can be u/s 12AB of the Act, meaning there by that the ‘specified violations’ should be subsequent to the new regime coming into effect.

26. That being the case, we are of the considered view that the notice dated 14.03.2024 itself was defective and did not vest powers to cancel the registration for any alleged ‘specified violation’ and that too retrospectively. The aforesaid discussion also establishes that the ‘specified violations’ allegedly pertained to a period prior to 01.04.2022 thereby provisions of section 12AB(4) of the Act could not have been invoked. Thus, we are inclined to hold that assumption of jurisdiction u/s 12AB(4) of the Act is vitiated and, thus, allow ground No. 5 to 10. The remaining grounds, thus, become superfluous and academic in nature and require no separate adjudication. Consequently, the appeal of the assessee is allowed. The impugned order is quashed.”

105. We find an identical issue had come up before the Delhi Bench of the Tribunal in the case of Richmond Educational Society vs. DCIT vide ITA No.4779/Del/2025 order dated 11.03.2026. In that case the Ld. PCIT cancelled the registration of the Assessee Society for assessment years 2019-20 to 2023-24 and for all subsequent assessment years on the basis of the following allegations relating to the transactions of the Assessee Society:-

a) Alleged bogus salary to Mrs. Jasmine Gandhi

b) Cash receipts in lieu of alleged bogus expenditure / bogus billing

c) Advance of Rs.20 crores paid to Shri Paramjit Gandhi for purchase of school building and

d) Off the books cash transaction.

105.1 We find the Tribunal, following the decision of Hon’ble Karnataka High Court in the case of CIT vs. A S Kupparaju Brothers Charitable Foundation Trust reported in 205 taxman 9 (Kar), quashed the order of the Ld. Pr.CIT(C) cancelling the registration granted by observing as under:

“9.8. Similar view was expressed by the Hon’ble Karnataka High Court in yet another case of CIT vs Islamic Academy of Education reported in 229 Taxman 274 (Kar), wherein it was held that once the object of the trust is imparting education which is a charitable purpose and carrying out of such activity in accordance with objects is not disputed by the revenue, the registration of the trust cannot be cancelled merely on the ground that trustees are misappropriating the funds of the trust. In such a scenario, it would be open to the tax authorities to deny the benefit under section 11 of the Act but that cannot be a ground for cancellation of registration itself.

9.9. The aforesaid decisions are directly applicable to the facts of the instant case and hence we are convinced that the first limb of Clause (e) of Explanation to Section 12AB(4) of the Act cannot be invoked in the present case as predominant and substantive activities of the Assessee Society namely, imparting education through duly recognised and continuously functioning educational institutions are real, ongoing and bonafide. Hence we hold that the invocation of first limb of Clause (e) of Explanation to Section 12AB(4) of the Act on the ground that activities of the Assessee Society are not genuine is wholly misconceived.

9.10. Now coming to the second limb of Clause (e ) of Explanation to Section 12AB(4) of the Act namely that the activities are not being carried out in accordance with the conditions subject to which registration was granted, we find that the predominant object of the Assessee Society is imparting education and the said activity is continued to be carried on by the Society. There is not even an allegation or whisper or finding in the order of the Learned PCIT that the Assessee Society has deviated from its stated objects. Hence the essential statutory requirement of noncompliance with registration conditions is wholly absent in the facts of the instant case. The various conditions stipulated on the Assessee Society while granting registration are listed in Form No. 10AC and we find that none of the conditions stipulated therein have been alleged, much less established , to have been violated in the impugned proceedings. The said conditions only impose a restriction on the Assessee Society not to make any distribution of surplus or assets to the specified persons under section 13(3) of the Act in the event of dissolution of the Assessee Society and not otherwise, meaning thereby – during the continuation of the activities of the Assessee Society, if there is any payment made to specified persons under section 13(3) of the Act which amounts to diversion of income of the Assessee Society, still the registration of the Assessee Society under section 12AB of the Act would not get disturbed as that was not the condition imposed for withdrawal of registration by the competent authority granting registration. On perusal of the order of the Learned PCIT, we find that the Assessee Society is not doubted about the activities carried on by it, rather the order is confined to certain alleged irregularities in specific financial transactions. Hence these alleged financial irregularities would not contribute to the conclusion that activities of the Assessee Society are not genuine or are not being carried out in accordance with its objects.

9.11. Hence we hold that invocation of Clause (e ) of Explanation to Section 12AB(4) of the Act without any adverse finding on the genuineness or nature of the Assessee Society’s activities is wholly misconceived and action of the Learned PCIT in this regard is rejected.

10. The Learned PCIT had invoked Clause (a) of Explanation to Section 12AB(4) of the Act by stating that the Assessee had committed specified violation thereon. The provisions of Section 12AB(4) of the Act together with its Explanation are already reproduced hereinabove. On a plain and harmonious reading of Clause (a) of Explanation to Section 12AB(4) of the Act, it is very clear that the said provision could be invoked only where the income of the Assessee society is applied for purposes other than its stated charitable objects. The statutory trigger herein is thus restricted to diversion of income away from the objects for which registration was granted. For the purpose of grant, continuation or cancellation of registration, the determinative and decisive test is the predominant or principal activity of the Assessee Society. Registration can be denied or withdrawn only where such predominant activity itself is found to be doubtful, sham or ingenuine. The Learned AR argued that the drastic power of cancellation of registration could be attracted only when the very substratum of the Assessee Society’s functioning is shown to be unreal or a mere façade. He even quoted certain illustrations in this regard, namely, where the principal object of a society is imparting education, but it is established as a matter of fact that the society is not engaged in educational activities at all and is, in substance, applying its income predominantly for medical activities, cancellation of registration may justifiably follow as the activities of the society therein were not carried out in consonance with the conditions with which registration was originally granted to it. Similarly, if a trust registered with the stated object of imparting education is, in reality, carrying on activities primarily in the nature of relief to the poor or other charitable purposes unrelated to education, the registration may be liable to be withdrawn. In the instant case before us, the activities carried out by the Assessee Society of imparting education is not even doubted by the revenue at any point in time. The conditions with which registration under section 12AB of the Act was originally granted were fully complied with by the Assessee Society in the instant case. Accordingly, we hold that the provisions of Clause (a) of Explanation to Section 12AB(4) of the Act must have to be interpreted in a purposive and restrictive manner, so as to cover only such violations which strike at the very root of the objects for which the Assessee Society was constituted and registration was granted. In fact even after the extraordinary measure of a search conducted on the Assessee Society under section 132 of the Act, there is not a single finding or material to suggest that the Assessee Society has abandoned, diluted or diverted from its principal and predominant object of imparting education, or that its funds were applied towards any object other than education. Hence in the absence of any such allegation or evidence demonstrating the deviation from the predominant charitable object, the very jurisdictional foundation for invoking Clause (a) of Explanation to Section 12AB(4) of the Act fails. The only allegation stated by the Learned PCIT in his order is that the Assessee Society had carried out certain financial transactions which would fall in the category of an ‘irregularity’ as it extends benefit to certain related parties referred to Section 13(3) of the Act.

11. Let us now examine what according to the Learned PCIT is the benefit extended to the related parties referred to in section 13(3) of the Act, which according to Learned PCIT is a financial irregularity. The various financial irregularities classified by the Learned PCIT are as under:-

A. Salary paid to Ms Jasmine Gandhi – Rs 16 lakhs per month from October 2020 to September 2023 for 36 months falling in the Assessments Years 2021-22 to 2024-25. The allegation levelled on the Assessee Society is that these payments were made without obtaining any real services from Ms Jasmine Gandhi and that she had not even visited the schools for rendition of services. The Learned AR submitted that Ms. Jasmine Gandhi has got over 20 years of experience in the field of education and was named in top 25 women leaders in Indian Education Sector Award for 2018-19 and also received a BlackSwam Award for Women Empowerment by Asia One 4th Edition and many others. He drew our attention to pages 112 and 122 of the paper book containing the media / press coverage in this regard. The Learned AR submitted that Ms. Jasmine Gandhi was appointed as the Director of Academics and drew our attention to the appointment letter dated 2-9-2020 which is enclosed in pages 207-212 of the paper book. He submitted that Ms. Jasmine Gandhi had undertaken a systemic academic review of Noida campuses of the Assessee Society’s schools resulting in structured improvement plans covering curriculum, mentoring and quality systems and had even given a report in this regard which is enclosed in pages 186-189 of the paper book. With regard to Meerut school assessment and closure, she had conducted a feasibility study of the Meerut school and recommended closure for non-viability. The report given by her in this regard is enclosed in pages 175-178 of the paper book. The allegation levelled on her that she had not visited the school is factually incorrect as entries in the registers maintained at the gate of the school premises of the Assessee Society show repeated in-person visits by Ms. Gandhi to both the campuses during the relevant period. The evidences in this regard are enclosed in pages 193-203 of the paper book. The allegation that Ms. Jasmine Gandhi had not visited the school premises at all was made by Mrs. Uttara Singh, Principal of one of the school, in her statement recorded during the course of search. The Learned AR submitted that Mrs. Uttara Singh was only a Principal of one of the school, whereas Ms. Jasmine Gandhi was appointed to overlook the operations of the Society which encompassed all schools which did not necessarily involved interaction with Mrs. Uttara Singh. In fact, in the relied upon statement, Mrs. Uttara Singh confirmed meeting with Ms. Jasmine Gandhi on two to three occasions. The Learned AR submitted that later on a clarification / affidavit was also filed which is enclosed in pages 190 to 192 of the paper book in this regard. Hence, the revenue’s reliance on the statement of Mrs. Uttara Singh gets vitiated based on the clarification / affidavit given at later stage. Mr S.K. Gupta, President had also filed the affidavit wherein he confirmed that no financial benefits were granted to Ms. Jasmine Gandhi unwarrantedly. This affidavit is enclosed in pages 204 to 206 of the paper book. The Learned AR submitted that all these facts clearly go to prove that Ms. Jasmine Gandhi was paid remuneration only for the actual services rendered by her and the Assessee Society had been immensely benefited out of her rendition of services. He submitted that there is no diversion of funds as alleged by the Learned PCIT. The Learned AR submitted that Ms. Jasmine Gandhi was not even a related party or a person referred to in section 13(3) of the Act. Hence, there cannot be any allegation that could be leveled on the Assessee society with regard to payment of salary to Ms. Jasmine Gandhi without obtaining any services from her.

B. Cash receipts in lieu of Bogus expenditure / Bogus billing – During the course of search on the Trustee of the Assessee society, empty / blank / unsigned vendor invoices were found. Further, WhatsApp chats were required between Mr. Paramjit Gandhi and Mr. Samit Bajaj in the search of Mr. Paramjit Gandhi, which referred to two invoices relating to Noida Sector-41 (Rs.51,15,000) and Noida Sector-135 (Rs. 74,25,000) related to floor tiles, which the department linked to the Assessee Society. The Learned AR submitted in this regard that disallowance was made by the Learned AO in the assessment order for assessment year 2020-21 under section 37(1) of the Act in respect of this issue. For this purpose, he submitted that the Learned PCIT need not resort to cancel the registration of the Assessee retrospectively. Further, he submitted that the screenshots of WhatsApp chats merely depict a rough estimate / calculation relating to the tiles and labour charges and they do not constitute any evidence of procurement, billing or payment made by the Assessee Society. There is absolutely no relationship nexus brought on record by the revenue in this regard and during the period to which the chats allegedly relate, neither Mr. Paramjit Gandhi nor Mr. Samit Bajaj had any role, engagement, authority or association with the Assessee Society. The Learned AR submitted that this seized document was seized from the premises of the Trustee of the Assessee Society during his search in his individual capacity. Absolutely there was no cash trail found either in the search or brought on record with evidence by the revenue in this regard.

C. Advance of Rs 20 crores to Mr Paramjit Gandhi – The Assessee paid Rs. 20 crores advance to Mr. Paramjit Gandhi for purchase of school infrastructure located at Noida Sector-41 and Noida Sector-135. The Learned AR submitted that there was a land and building owned by one company. The said land and building was taken on lease by the Assessee Society for use of school buildings and infrastructure at Noida Sector-41 and Noida Sector -135. The said company went into Corporate Insolvency Resolution Process (CIRP) and on 14-12-2020, Mr Paramjit Gandhi was approved by the order of the Hon’ble National Company Law Tribunal as the Successful Resolution Applicant for Educomp Infrastructure & Schools Management Ltd (later renamed as Jasrati Education Solutions Ltd). On 15-1-2023, the Assessee Society entered into a Memorandum of Understanding (MOU) with Mr Paramjit Gandhi for purchase of ownership, use and occupation rights in the building of school located at Noida Sector -41 and Noida Sector-135. The total agreed consideration for transfer of the buildings was fixed at Rs 60 crores and Society had to pay earnest money / advance of Rs 20 crores. MOU also stipulates that upon completion of conveyance and receipt of requisite statutory and regulatory approvals, the earnest money of Rs 20 crores would either be adjusted against the final consideration payable to the asset owning entity or in the alternative, be refunded. Later the Assessee Society received back Rs 10 crores from Mr Paramjit Gandhi, being part of the earnest money earlier advanced and balance Rs 10 crores was adjusted against the purchase consideration. The sale consideration for building of Noida Sector-135 was fixed at Rs 38,63,50,000 and for Noida Sector-41 was fixed at Rs 21,36,50,000 totalling to Rs 60 crores for which payments were made by the Assessee Society to Jasrati Education Solutions Ltd. The Learned AR submitted that the Building Purchase Agreement is enclosed in Pages 434 to 442 of the Paper Book. Further the Assessee Society had taken loan from IDFC First Bank for purchase of the said buildings for which hypothecation deed dated 26-7-2024 was executed (enclosed in Pages 309 to 315 of the Paper Book) and loan sanction letter dated 23-7-2023 is enclosed in Pages 316 to 318 of the Paper Book. The Learned AR submitted that no addition was made by the Learned AO in the assessment order on this issue since the Assessee had not claimed the same as application of income. Mr. Paramjit Gandhi was not even a related party in terms of section 13(3) of the Act at the relevant period.

D. Off the books cash transactions – The revenue contended that the Assessee Society made certain payments / receipts in cash outside the books of accounts not recorded in the financial statements. This was alleged on the basis of diaries marked BK-6 and BK-7 found and seized during the search from the custody of Shri Puneet Kumar who is an employee of the Assessee Society. The Learned AR submitted that the Learned AO had made addition under section 69C and section 69A of the Act for assessment years 2022-23 and 2023-24 in this regard. He submitted that the entries in diary pertain to the employee’s father’s transport business and the same has got absolutely no link with the transactions of Assessee Society at all. The affidavit of employee was also filed on record owning up the entire seized document confirming the entire transactions that it pertains to his father’s transport business and not linked with the Assessee Society. However, the same was not accepted by the Learned AO and additions made in the hands of the Assessee Society for the same. Further, the Learned AR submitted that the aforesaid transactions were not recorded in the books of accounts of the Assessee Society and accordingly not claimed as an application of income. It was also clarified that the said diary belonged to Shri Ashok Kumar Sharma, a private transporter and father of Shri Puneet Kumar Sharma, employee of the Assessee Society.

11.1. The Learned AR pointed out that none of the aforesaid alleged financial irregularities would hamper the predominant and core activity of imparting education by the Assessee Society. Hence the alleged financial irregularities would not stand in way of continuation of the registration granted to the Assessee Society.

12. We find a lot of force in the alternative arguments advanced by the Learned AR on without prejudice basis that any benefit, even if assumed to be extended to related parties, such an alleged violation does not fall within the scope of Clause (a) of Explanation to Section 12AB(4) of the Act. In this regard, the Learned AR rightly placed reliance on the provisions of section 13(1)(c ) of the Act, which is a self-contained code by itself to deal with situations involving alleged benefit to specified persons. He submitted that the provisions of section 13(1)(c ) of the Act prior to amendment by the Finance Act 2014 was confined only to denial of exemption to the extent prescribed for the relevant assessment year and does not extend to cancellation of registration. He referred to the provisions of section 13(1)(c) of the Act as it stood prior to amendment by the Finance Act 2014 and impressed upon us to drive home the point that the legislature has consciously provided a distinct mechanism and consequence under section 13 for alleged benefits to related parties, which is limited to taxability of the diverted income alone and not the withdrawal or cancellation of registration. The Learned AR also placed reliance in support of the aforesaid proposition on the decision of Hon’ble Bombay High Court in the case of CIT (Exemptions) vs Audyogik Shikshan Mandal reported in 101 taxmann.com247 (Bom HC), wherein it was held that where funds of assessee trust were utilized for purchase of car in name of its trustee, there was violation of section 13(2)(b) read with section 13(3); however, denial of exemption under section 11 should be limited only to amount which was diverted in violation of section 13(2)(b). The Learned AR also placed reliance on the Co-ordinate Bench of Mumbai Tribunal in the case of Lilavati Kirtilal Mehta vs CIT reported in 178 ITD 338 (Mum Trib). The relevant operative portion of the said order of the Tribunal is reproduced below:-

“11. In the present case, the case sought to be made out by the Commissioner is that the violation carried out by the assessee would lead to denial of exemption u/s. 11 & 13 of the Act and, therefore, the pre-requisite of section 12AA(3) of the Act is satisfied. In para 9 of the impugned order, the Commissioner records that the violation of section 11 & 13 of the Act would result in forfeiture of exemption not only for the year in which such transactions occur but also for the years when such arrangement continues to be in force. In our considered opinion, such an approach of the Commissioner is quiet misdirected and is inconsistent with the legal position on the subject contemplated u/s. 12AA(3) of the Act so as to cancel registration already granted. We may add here that we are not shutting out the case of the Revenue to examine whether or not there has been a violation of section 13 of the Act, but we are only trying to say that the same is not relevant for the purpose of cancellation of registration u/s. 12AA(3) of the Act. Of course, such matters can be dealt with in the course of assessment proceedings and, in our view, the same ought to be dealt with, if the situation so warrants. Presently, we are confining ourselves with examining the efficacy or otherwise of the action of the Commissioner in invoking section 12AA(3) of the Act and we find that the reasons advanced by the Commissioner are not germane. On this point, the learned representative for the assessee has relied on the following decisions to say that section 12AA(3) cannot be invoked by Commissioner for cancellation of registration merely for violation of provisions of section 11 and 13 of the Act by the assessee :—

CIT v. Apeejay Education Society [2015] 59 taxmann.com 102 (Punj. & Har.)

Cancer Aid & Research Foundation v. DIT (Exemption) [2014] 66 SOT 86/49 taxmann.com 537 (Mum. – Trib.)

CIT (Exemptions) v. Cancer Aid & Research Foundation Income Tax Appeal No.505 of 2015

Prabodhan Shikshan Prasarak Sanstha v. Dy. CIT [2014] 44 taxmann.com 33/[2015] 152 ITD 473 (Pune – Trib.)

Tamil Nadu Cricket Association v. DIT (Exemption) [2014] 360 ITR 633/221 Taxman 275/[2013] 40 taxmann.com 250 (Mad.)

12. Therefore, in view of our aforesaid discussion, on the preliminary point itself, we find that the impugned order of the Commissioner cancelling the registration u/s. 12AA(3) of the Act is bereft of a valid jurisdiction.

13. Now, we may come to the argument set up by the learned CIT-DR. According to him, the activities, which has resulted in violation of section 13 of the Act can be construed as activities carried out by the Trust, which are not in accordance with the objects of the Trust. In our considered opinion the argument set up by the CIT-DR is quite misconceived in as much as the activities that are required to be considered for the present purpose are the activities which are being carried out towards objects of the Trust. In the present case, as we have seen initially, the objects of the Trust are formation of hospital and Institutions for medical relief, etc. In fact, there is no finding by the Commissioner much less any material on record, which would show that the activities of the Trust are dehors its stated objects. The transactions, which are being understood by the CIT-DR as activities, cannot be considered to be the activities that are contemplated for the purposes of section 12AA(3) of the Act. At this stage, we may observe that the insertion of section 12AA(4) of the Act by the Finance Act, 2014 w.e.f. 01.10.2014 also cannot be lost sight of as our subsequent discussion would show. As noted earlier, sub-section (4) of section 12AA has expanded the situation for cancellation of registration by the Commissioner. In fact, the situation sought to be covered by section 12AA(4) of the Act revolves around the manner in which activities are carried out, including a case where the income or property of the trust is applied for specific persons like author of trust, trustees, etc; or investment of funds in prohibited modes, etc. The aforesaid are areas, which are contained in section 13 of the Act, which disentitles an assessee from the exemptions contained in section 11 and 12 of the Act. In other words, violation of section 13 of the Act is also sought to be covered by the Legislature by insertion of sub-section (4) to section 12AA of the Act as a ground for cancellation of registration. So however, the said provision is effective from 01.10.2014. Pertinently, we are dealing with the impugned order of the Commissioner dated 28th March 2014 and, therefore, the provisions of section 12AA(4) of the Act inserted w.e.f. 01.10.2014 would have no application. In fact, the insertion of section 12AA(4) of the Act on a subsequent date reinforces the legal position noted by us in earlier paras that in the impugned case what the Commissioner was required to satisfy the then existing conditions contained in section 12AA(3) of the Act in order to cancel the registration. Thus, the impugned reasons advanced by the Commissioner do not give him jurisdiction to invoke section 12AA(3) of the Act at the relevant point of time.

14. Therefore, we conclude by holding that having regard to the facts and circumstances of the case the Commissioner has wrongly invoked section 12AA(3) of the Act in as much as the requisite conditions contained therein are not fulfilled. Before parting, we may clarify that we have not examined the merits of the reasoning advanced by the Commissioner, which in any case, in our considered opinion, the Revenue is free to examine in the course of the relevant assessment proceedings carried out by the Assessing Officer, as advised in law.

15. In conclusion, we set-aside the order of the Commissioner and restore the registration originally granted to the assessee u/s. 12AA of the Act on 22.01.1979 (supra).

16. In the result, the appeal is allowed, as above.

12.1. Similar views were expressed by the Hon’ble Jurisdictional Delhi High Court in the case of DIT(E ) vs Agrim Charam Foundation reported in 253 ITR 593 (Del) , Hon’ble Karnataka High Court in the case of CIT vs Fr. Mullers Charitable Institutions reported in 363 ITR 230 (Kar) , Hon’ble Bombay High Court in the case of DIT (E ) vs Sheth Mafatlal Gagalbhai Foundation reported in 249 ITR 533 (Bom) , Hon’ble Allahabad High Court in the case of CIT vs Red Rose School reported in 163 Taxman 19 (All). Even as per the provisions of section 164(2) of the Act read with its proviso, only such part of the income so diverted within the meaning of section 13(1)(c ) or 13(1)(d) of the Act would be taxable in the hands of the trust / society. Even the CBDT had come out with a Circular No. 387 dated 6-7-1984 wherein they had stated that the legal precedents that were rendered in the context of violation of provisions of section 13(1)(d) of the Act shall apply mutatis mutandis to violation of provisions of section 13(1)(c ) of the Act also. This was rendered to clarify the tax position as the legislature was very clear with regard to grant of exemption under section 11 of the Act in the event of violation of provisions of section 13(1)(d) of the Act, wherein only such part of the violation would be denied exemption under section 11 of the Act and not the complete denial of exemption under section 11 of the Act. There were some confusion that was created with regard to denial of exemption under section 11 of the Act in the event of violation of provisions of section 13(1)(c ) of the Act. Hence the CBDT came out with the aforesaid Circular No. 387 dated 6-7-1984 clarifying the tax position by treating violations of section 13(1)(c ) at par with section 13(1)(d) of the Act while determining the claim of exemption under section 11 of the Act. For the sake of convenience, the relevant portion of the CBDT Circular No. 387 dated 6-7-1984 is reproduced below:-

“28.6 It may be noted that new sub-section (1A) inserted in section 161 of the Income-tax Act, which provides for taxation of the entire income received by trusts at the maximum marginal rate is applicable only in the case of private trusts having profits and gains of business. So far as the public charitable and religious trusts are concerned, their business profits are not exempt from tax, except in the cases falling under clause (a) or clause (b) of section 11(4A) of the Income-tax Act. As the maximum marginal rate of tax under the new proviso to section 164(2) applies to the whole or a part of the relevant income of a charitable or religious trust which forfeits exemption by virtue of the provisions of the Income-tax Act in regard to investment pattern or use of the trust property for the benefit of the settlor, etc., contained in section 13(1)(c) and (d) of that Act, the said rate will not apply to the business profits of such trusts which are otherwise chargeable to tax. In other words, where such a trust contravenes the provisions of section 13(1)(c) or (d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provisions.

(Emphasis supplied by us)

12.2. In view of the plain statutory scheme of provisions of Section 13(1)(c) of the Act as it stood prior to the amendment by the Finance Act 2014, read with the consistent and binding judicial interpretations thereof mentioned herein above, we hold that the legislature never intended violation of Section 13 to operate as a ground for cancellation or withdrawal of registration. The consequence contemplated under Section 13 of the Act is consciously limited to denial of exemption only to the extent of income alleged to have been diverted for the benefit of the specified persons leaving the registration of the trust intact. This distinction between assessment stage consequences and registration stage consequences has been uniformly recognized by the Hon’ble High Courts and Tribunals. Hence, we are in complete agreement with the arguments advanced by the Learned AR that any attempt to stretch an alleged violation of Section 13(1)(c ) of the Act into a ground for cancellation of registration, would indeed amount to rewriting the statute and the same would obliterate the legislative demarcation between exemption and registration and result in manifestly disproportionate and unjust consequences. We find that this amendment by Finance Act 2022 provided a clear legislative shift aimed at rationalizing the law by aligning the consequence of such violations with their true nature and gravity, ensuring that cancellation of registration is not resorted to mechanically and is replaced by proportionate tax consequences wherever appropriate. This paved way for introduction of provisions of section 115BBI of the Act in the statute and section 12AB(4) of the Act together with its Explanation.

12.3. We find that the earlier framework under section 12AA(4) of the Act stood modified pursuant to the amendments brought in section 13(1)(c ) of the Act by the Finance Act 2022, whereby a violation of section 13(1) of the Act, no longer results in cancellation or withdrawal of registration and the statutory framework consequence is confined to denial of exemption only to the extent of the income so diverted. Prior to the amendments introduced by the Finance Act 2022, the Act contemplated cancellation or withdrawal of registration of a trust in cases where violations of section 13(1) of the Act were alleged. However, the legislature has consciously altered this position by introducing a clear statutory distinction between violations warranting denial of exemption and violations warranting cancellation of registration. Post-amendment, a violation of section 13(1) of the Act, does not per se result in cancellation of registration. Instead, the statutory consequence is restricted to denial of exemption only to the extent of the income so applied for the benefit of specified persons, while the registration of the trust continues to remain intact. This intent is manifest from the amended scheme of sections 11, 12, 13 and section 12AB of the Act, wherein violations of section 13(1) of the Act are consciously excluded from the list of specified violations under the Explanation to Section 12AB(4) of the Act. We find that post Finance Act, 2022, the provisions of section 13(1)(c) of the Act very clearly mention that if there is a benefit extended to specified persons referred to section 13(3) of the Act either directly or indirectly, then only such part of the income so diverted would be subjected to tax in the hands of the trust and to that extent, the exemption under section 11 of the Act would be denied, while the charitable character and registration of the trust would remain intact. For this, a specific section 115BBI of the Act has been introduced by the statute that the diverted amounts in terms of section 13(1)(c) of the Act shall get taxed at a maximum marginal rate of 30% on gross basis. Accordingly, once the statute itself limits the consequence of Section 13(1) of the Act violation, to taxation of the income so diverted, any attempt to invoke cancellation of registration on the same set of allegations amounts to imposing a consequence which the legislature has consciously chosen to exclude under the Post Finance Act 2022 regime. In fact, had it been the intention of the legislature to continue cancellation or withdrawal of registration as a consequence of violation of Section 13(1) of the Act, then there was absolutely no necessity to introduce a specific statutory mechanism providing for denial of exemption only to the extent of income so diverted. Once the registration is cancelled or withdrawn, the trust ceases to be eligible for exemption altogether and the question of proportionate disallowance of income would not arise. In other words, once the registration is withdrawn, then the expression provided in Section 13(1)(c ) of the Act that such part of the diverted income shall get taxed becomes otiose. That situation would never arise since the entire exemption would be denied once the registration is cancelled. Hence we are convinced that violations of section 13(1) of the Act are to be dealt with at the assessment stage only by denial of exemption to the extent of income so applied / diverted while the registration and charitable character of the trust are intended to remain undisturbed. This understanding of ours is even made very clear from the Memorandum Explaining the Provisions in the Finance Bill 2022 which clearly evidences the legislative intent to rationalise the law by restricting the consequence of such violations to taxation of the specified income at a special rate, and not by withdrawing registration. For the sake of convenience, the relevant portion of the Memorandum to Finance Bill 2022 is reproduced below:-

“Rationalisation of the provision of Charitable Trust and Institutions

Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or ub-clause (vi) or sub-clause (via) of clause (23C) of section 10 or any trust or institution registered u/s 12AA or 12AB of the Act is exempt subject to the fulfilment of the conditions provided under various sections. The exemption to these trusts or institutions is available under the two regimes

i. Regime for any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 (hereinafter referred to as trust or institution under first regime); and

ii. Regime for the trusts registered under section 12AA/12AB (hereinafter referred to as trust or institution under the second regime).

In the Finance Bill, it is proposed to rationalise the provisions of both the exemption regimes by

I. ensuring their effective monitoring and implementation;

II. bringing consistency in the provisions of the two exemption regimes; and

III. providing clarity on taxation in certain circumstances.

2. Some consequential amendments are also proposed following the amendments of past few years. All the proposals are discussed below:-

3. Ensuring effective monitoring and Implementation of two exemption regimes

3.1. Books of account to be maintained by the trusts or institutions under both the regimes

a) Where the total income of any trust or institution under the second regime, as computed under this Act without giving effect to the provisions of section 11 and section 12 of the Act, exceeds the maximum amount which is not chargeable to income-tax in any previous year, it is required to get its accounts audited. Similar provision exists for the trusts or institutions under the first regime in the tenth proviso to clause (23C) of section 10 of the Act.

b) However, there is no specific provision under the Act providing for the books of accounts to be maintained by such trusts or institutions. In order to ensure proper implementation of both the exemption regimes, it is proposed to amend clause (b) of sub-section (1) of section 12A of the Act and tenth proviso to clause (23C) of section of the Act to provide that where the total income of the trust or institution under both regimes, without giving effect to the provisions of clause (23C) of section 10 or section and 12, exceeds the maximum amount which is not chargeable to tax, such trust or institution shall keep and maintain books of account and other documents in such form and manner and at such place, as may be prescribed.

c) These amendments will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.

[Clauses 4 and 6 ]

3.2 Penalty for passing on unreasonable benefits to trustee or specified persons

a) Under section 13 of the Act, trusts or institution under the second regime are required not to pass on any unreasonable benefit to the trustee or any other specified person. In order to discourage such misuse of the funds of the trust or institution by specified persons, it is proposed to insert a new section 271AAE in the Act to provide for penalty on trusts or institution under both the regimes which is equal to amount of income applied by such trust or institution for the benefit of specified person where the violation is noticed for the first time during any previous year and twice the amount of such income where the violation is notice again in any subsequent year. The proposed section seeks to operate without prejudice to any other provision of chapter XXI. Thus, if any penalty is leviable under any of the other provisions of this chapter, in addition to the proposed penalty, that penalty would also be applicable.

b) The proposed new section seeks to provide that, if during any proceeding under the Act, it is found that a person, being any trust or institution under the first or the second regime, has violated the provisions of twenty-first proviso to clause (23C) of section 10 (proposed to be inserted by the Finance Bill and discussed in subsequent paragraphs) or clause (c) of sub-section (1) of section 13, as the case may be, the Assessing Officer may direct that such person shall pay by way of penalty,

(i) a sum equal to the aggregate amount of income applied, directly or indirectly, by such person, for the benefit of any person referred to in sub-section (3) of section 13 where the violation is noticed for the first time during any previous year; and

(ii) a sum equal to two hundred percent of the aggregate amount of income of such person applied, directly or indirectly, by such person, for the benefit of any person referred to in sub-section (3) of section 13, where violation is noticed again in any subsequent previous year.

c) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

[Clause 76]

3.3 Reference to the Principal Commissioner or Commissioner (PCIT/CIT) for the cancellation of registration/approval

a) The following issues related to the process of approval or registration, or cancellation or withdrawal thereof, have been noticed, namely:-

(i) Registration or approval of non-genuine trusts or institution under automated approval system:

First and second provisos to clause (23C) of section 10 of the Act were substituted by new provisos by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 w.e.f. 01.04.2021. These provisos provided that the application for the approval of any trust or institution under the first regime, shall be made to the jurisdictional Principal Commissioner or Commissioner and such Principal Commissioner or Commissioner shall grant approval after examination of the application. Earlier such applications were required to be filed before the prescribed authority. Similarly, provisions of clause (ac) of sub-section (1) of section 12A provide that application for the trusts or institution under the second regime shall be made to the principal Commissioner or Commissioner. The provisional registrations or provisional approval or re-registrations or approvals in certain cases, under these clauses, are granted in an automated manner and the respective rules have been amended accordingly. It is essential to ensure that non-genuine trusts or institutions do not get exemption provided by these provisions.

ii) Differences in the provisions related to reference for the cancellation of trusts under the both the regimes:

Provisions of sub-section (3) of section 143 provide that no order under this subsection shall be made, denying the benefits of clause (23C) of section 10, unless the Assessing Officer has intimated the Central Government or prescribed authority the contravention of the provisions of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 and approval granted to such trust or institution has been rescinded. There is no such provision in cases of trusts or institutions under second regime.

(iii) No time limit prescribed for the PCIT/CIT to decide on references for the withdrawal of approval:

For the trusts or institutions under the first regime, the provisions for making reference by the Assessing Officer to the Principal Commissioner or Commissioner are contained in the first proviso to sub-section (3) of section 143 and the time limitation for the completion of assessment is extended as per the provisions of clause (iii) of Explanation 1 to section 153. Presently, there is no time limit for such Principal Commissioner or Commissioner to decide on such reference.

b) In order to address the above issues, it is proposed to amend the provisions of section 12AB and fifteenth proviso to clause (23C) of section 10 of the Act as follows:

(i) Sub-section (4) of section 12AB of the Act is proposed to be substituted with a new sub-section (4) to provide that where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause of sub-section (1) of section 12AB or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently.

(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year;

(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year, or

(c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall—

(i) call for such documents or information from the trust or institution or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation;

(ii) pass an order in writing cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violation have taken place;

(iii) pass an order in writing refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violation;

(iv) forward a copy of the order under clause (ii) or (iii), as the case may be, to the Assessing Officer and such trust or institution

(II) The term “specified violation” is proposed to be defined by inserting an Explanation to sub-section (4) of section 12AB of the Act to mean the following violation :-

a) where any income of the trust or institution under the second regime has been applied other than for the objects for which it is established; or

b) the trust of institution under the second regime has income from profits and gains of business whichis not incidental to the attainment of its objectives or separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives; or

c) the trust or the institution under the second regime has applied any part of its income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; or

d) the trust or institution under the second regime established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste;

e) any activity being carried outby the trust or the institution under the second regime,

I. is not genuine; or

II. is not being carried out in accordance with all or any of the conditions subject to which it was registered; or

(f) the trust or the institution under the second regime has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1) of section 12AB, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.

III) Sub-section (5) of section 12AB of the Act is proposed to be substituted with a new sub-section (5) to provide that that the order under clause (ii) or (iii) of subsection (4) shall be passed before expiry of the period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of subsection (4);

IV) Similarly, the fifteenth proviso to clause (23C) of section 10 of the Act is proposed to be substituted to provide that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) of clause (23C) of the said section 10 is approved under said clause and subsequently—

a. the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year;

b. the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or

c. such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year,

the Principal Commissioner or Commissioner shall—

i. call for such documents or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation;

ii. pass an order in writing cancelling the approval of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, on or before the specified date, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years if he is satisfied that one or more specified violation has taken place;

iii. pass an order in writing refusing to cancel the approval of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, on or before the specified date, if he is not satisfied about the occurrence of one or more specified violations;

iv. forward a copy of the order under clause (ii) or (iii), as the case may be, to the Assessing Officer and such fund or trust or institution or any university or other educational institution or any hospital or other medical institution;

V) It is also proposed to insert an Explanation 1 to the fifteenth proviso to clause (23C) of section 10 of the Act to provide that for the purposes of this proviso, “specified date” shall mean the day on which the period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) expires.

VI) The term “specified violation” is also proposed to be defined by inserting an Explanation (Explanation 2) to the fifteenth proviso to clause (23C) of section 10 of the Act to mean the following: –

a) where any income of trust or institution under the first regime has been applied other than for the objects for which it is established; or

b) the trust or institution under the first regime has income from profits and gains of business is not incidental to the attainment of its objectives or separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives; or

c) any activity being carried out by the trust or institution under the first regime—

A. is not genuine; or

B. is not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or

(d) the trust or institution under the first regime has not complied with the requirement of any other law for the time being in force, and the order, direction or decree, by whatever name called, holding that such noncompliance has occurred, has either not been disputed or has attained finality.

Consequentially sub-section (3) of section 143 of the Act is proposed to be amended by deleting the reference to trusts or institution under the first regime in the first proviso and delete the existing third proviso.

It is also proposed to provide by inserting an Explanation (Explanation 3) to the fifteenth proviso to clause (23C) of section 10 of the Act that where a reference, under the first proviso to sub-section (3) of section 143, has been made on or before the 31st March, 2022 by the Assessing Officer for the contravention of certain provisions of clause (23C) of section 10 of the Act, such references shall be dealt with in the manner provided under the said Explanation.

VII) It is proposed to insert another proviso in sub-section (3) of section 143 of the Act providing that where the Assessing Officer is satisfied that any trust or institution under first or second regime has committed any specified violation, as defined in the Explanation 2 to fifteenth proviso to clause (23C) of section 10 or Explanation to sub-section (4) of section 12AB, as the case may be, he shall,

(a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and

(b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or (iii) of sub-section (4) of section 12AB

Consequentially, it is also proposed to amend the provisions of clause (iii) of Explanation to section 153 by deleting the reference to trusts or institution under the first regime and to insert a new clause (xiii) to provide that the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner under the second proviso to sub-section (3) of section 143 or is deemed to have been made under Explanation 3 to the fifteenth proviso to clause (23C) of section 10, and ending with the date on which the copy of the order under clause (ii) or (iii) of fifteenth proviso to clause (23C) of section 10 or clause (ii) or (iii) of sub-section (4) of section 12AB, as the case may be, is received by the Assessing Officer shall be excluded in computing the period of limitation.

These amendments will take effect from 1st April, 2022

[Clauses 4, 7, 40 and 48]

4. Bringing consistency in the provisions of two exemption the regimes

As mentioned earlier, there is a requirement for alignment of certain provisions of the two regimes as they both intend to grant similar benefit.

4.1 Accumulation provisions

i) Under the existing provisions of the Act, a trust or institution is required to apply 85% of its income during any previous year. However, if it is not able to apply 85% of its income during the previous year, it is allowed to accumulate such income for a period not exceeding 5 years as per the following provisions, namely:

I. sub-section (2) of section 11 of the Act for the trusts or institution under the second regime; and

II. third proviso to clause (23C) of section 10 of the Act for trusts or institution under the first regime.

ii) However, the accumulation of income, as per the provisions of sub-section (2) of section 11 of the Act is allowed subject to the fulfilment of certain conditions while there are no such conditions specifically provided under the third proviso to clause (23C) of section 10 of the Act;

iii) Similarly, sub-section (3) of section 11 of the Act provides for the specific previous year in which the accumulated income will be subjected to tax in case of different types of violations. It, inter alia, provides that if the accumulated income is not applied within 5 years, it shall be taxed in the 6th year. While, on the other hand, there are no such specific provisions under clause (23C) of section 10 of the Act and therefore, if the accumulated income is not applied within 5 years, the same shall be taxed in the 5th year itself

iv) In order to bring consistency in the two regimes, the following are proposed:-

A. It is proposed to amend the provisions of sub-section (3) of section 11 of the Act to provide that any income referred to in sub-section (2) which is not utilised for the purpose for which it is so accumulated or set apart shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart under clause (a) of subsection (2) of section 11, but not utilised for the purpose for which it is so accumulated or set apart.

B. It is proposed to insert Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that for the purposes of determining the amount of application under this proviso, where eighty-five per cent of the income referred to in clause (a) of the third proviso, is not applied, wholly and exclusively to the objects for which the trust or institution under the first regime is established, during the previous year but is accumulated or set apart, either in whole or in part, for application to such objects, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:—

a. such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years;

b. the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11; and

c. the statement referred to in clause (a) of Explanation 3 is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year;

(C) It is proposed to insert a proviso to the proposed Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that in computing the period of five years referred to in sub-clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded

(D) It is also proposed to insert an Explanation (Explanation 4) to third proviso to clause (23C) of section 10 to provide that any income referred to in the proposed Explanation 3 shall be deemed to be the income of the previous year in which the following takes place—

a) the income is applied for purposes other than wholly and exclusively to the objects for which the trust or institution under the first regime is established or ceases to be accumulated or set apart for application thereto, or

b) the income ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5) of section 11, or

c) the income is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of the proposed Explanation 3,

d) the income is credited or paid to any trust or institution under the first or second regime

For the circumstances referred to in clause (c), it is proposed that the income shall be deemed to be the income of previous year which is the last previous year of the period, for which the income is accumulated or set apart under sub-clause (a) of clause (iii) of the proposed Explanation 3, but not utilised for the purpose for which it is so accumulated or set apart.

(E) It is proposed to insert an Explanation (Explanation 5) to third proviso to clause (23C) of section 10 of the Act to enable the Assessing Officer to allow trusts or institutions under the first regime in circumstances beyond their control to apply such accumulated income for such other purpose in India as is specified in the application by such person subsequent to fulfilment of specified conditions. These other purposes are required to be in conformity with the objects for which the trust or institution under the first regime is established. If it is done, the provisions of Explanation 4 to third proviso to clause (23C) of section 10 shall apply as if the purpose specified by such person in the application under this Explanation were a purpose specified in the notice given to the Assessing Officer under clause (a) of the proposed Explanation 3 of the third proviso to clause (23C) of section 10.

(F) It is proposed to insert a proviso to proposed Explanation 5 to third proviso to clause (23C) of section 10 of the Act to provide that the Assessing Officer shall not allow the application of any accumulated income, as referred to in the proposed Explanation 3, to be credited or paid to any trust or institution under the first or second regime, as referred to in clause (d) of proposed Explanation 4 to the third proviso to clause (23C) of section 10.

v) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

[Clauses 4 and 5 ]

4.2 Bringing consistency in the provisions relating to payment to specified person

i) Under section 13 of the Act, trusts or institutions under the second regime are required not to pass on any unreasonable benefit to the trustee or any other specified person. It is proposed to insert twenty first proviso in clause (23C) of section 10 of the Act to provide that where the income or part of income or property of any trust or institution under the first regime, has been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of section 13, such income or part of income or property shall be deemed to be the income of such person of the previous year in which it is so applied. The provisions of sub-section (2), (4) and (6) of section 13 of the Act shall also apply to trust or institution under the first regime.

ii) This amendment will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

[Clause 4]

4.3 The provisions of section 115TD to apply to any trust or institution under the first regime.

i) Chapter XII-EB was introduced by the Finance Act, 2016. It provides for the taxation of accreted income of the trust in certain cases. A society or a company or a trust or an institution carrying on charitable activity may voluntarily wind up its activities and dissolve or may also merge with any other charitable or non-charitable institution, or it may convert into a non-charitable organization. In order to ensure that the intended purpose of exemption availed by trust or institution is achieved, a specific provision in the Act was brought about for imposing a levy in the nature of an exit tax which is attracted when the organisation is converted into a noncharitable organisation or gets merged with a non-charitable organisation or a charitable organisation with dissimilar objects or does not transfer the assets to another charitable organisation. Accordingly, a new Chapter XII-EB consisting of Sections 115TD, 115TE and 115TF was inserted in the Act.

ii) The provisions of the Chapter XII-EB have been made applicable to only the trusts or institutions under the second regime. However, the provisions are not applicable to any trust or institution under the first regime

iii) Hence, it is proposed to amend the provisions of section 115TD, 115TE and 115TF of the Act to make them applicable to any trust or institution under the first regime as well.

iv) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

[Clauses 31, 32 and 33]

4.4 Filing of return by person claiming exemption under clause (23C) of section 10 of the Act

i) According to clause (ba) of sub-section (1) of section 12A of the Act, If a trust or institution under the second regime does not furnish return of income in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section, then provisions of sections 11 and 12 are not applicable. There is no similar provision in the other regime.

ii) Hence, it is proposed to insert twentieth proviso to clause (23C) of section 10 of the Act to provide that for the purpose of exemption under this clause, any trust or institution under the first regime is required to furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under that section.

This amendment will take effect from the 1st April, 2023, and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

[Clause 4]

5. Providing clarity on taxation in certain circumstances

There are various conditions prescribed for availing exemption under the two regimes. There is a need for clear provisions in the Act listing out how income is to be computed in case of non-compliance. Hence, it is proposed to provide for the same so that there is no dispute and the law is applied consistently.

5.1 Allowing certain expenditure in case of denial of exemption

i) Different provisions mandate denial of exemption to the trusts or institutions under both the regimes. Some of the provisions under which exemption is not available for its violation are as follows:

a) Having commercial receipts in excess of 20% of the annual receipts in violation of the provisions of proviso to section 2(15);

b) Not getting the books of account audited;

c) Not filing the return of income presently specifically provided under the second regime only;

ii) There is presently lack of clarity on computation of taxable income in case of nonavailability of exemption in these cases. For example, if the exemption is denied to the trust or institution for the late submission of the audit report, its entire receipts may be subjected to taxation and no deduction for any application may be allowed

iii) In order to bring clarity in the computation of the income chargeable to tax in such cases, the following amendments are proposed: –

(a) It is proposed to insert sub-section (10) in section 13 of the Act to provide that where the provisions of sub-section (8) are applicable to any trust or institution under the second regime or such trust or institution violates the conditions prescribed under clause (b) or clause (ba) of sub-section (1) of section 12A, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of the trust or institution, subject to fulfilment of the following conditions, namely :-

a) such expenditure is not from the corpus standing to the credit of such trust or institution as on the last day of the financial year immediately preceding the previous year relevant to the assessment year for which the income is being computed;

b) such expenditure is not from any loan or borrowing;

c) claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income in the same or any other previous year; and

d) such expenditure is not in the form of any contribution or donation to any person.

(b) It is also proposed to insert an Explanation to sub-section (10) to section 13 of the Act to provide that for the purposes of determining the amount of expenditure under this sub-section, the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.

(10) It is also proposed to insert sub-section (11) to section 13 of the Act to provide that for the purposes of computing income chargeable to tax, under subsection , no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any other provision of the Act.

(d) Similarly, it is proposed to insert twenty second proviso to clause (23C) of section 10 of the Act to provide that where any trust or institution under the first regime violates the provisions of the eighteenth proviso or violates the conditions prescribed under tenth or twentieth proviso, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of such trust or institution, subject to fulfilment of the following conditions:

(i) such expenditure is not from the corpus standing to the credit of such trust or institution as on the last day of the financial year immediately preceding the previous year relevant to the assessment year for which the income is being computed ;

(ii) such expenditure is not from any loan or borrowing;

(iii) claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income in the same or any other previous year; and

(iv) such expenditure is not in the form of any contribution or donation to any person.

(e) It is also proposed to insert an Explanation in the twenty second proviso to clause (23C) of section 10 of the Act to provide that for the purposes of determining the amount of expenditure under this proviso, the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.

(f) It is also proposed to insert twenty third proviso in clause (23C) of section 10 of the Act to provide that for the purposes of computing income chargeable to tax under twenty second proviso, no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any other provision of the Act.

These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

[Clauses 4 and 8]

5.2 Taxation of certain income of the trusts or institutions under both the regimes at special rate

Following incomes of the trusts or institutions are chargeable to tax, under different provisions of the Act:-

(a) The trusts or institutions under the first or second regime are required not to pass on any unreasonable benefit to the trustee or any other specified person. For the trusts or institutions under the second regime, clause (c) of sub-section (1) of section 13 of the Act provides that the entire exemption shall be denied to the trust irrespective of the amount of benefit passed on. For trusts or institutions under the first regime similar provisions is proposed by way of insertion of twentieth proviso to clause (23C) of section 10 of the Act

(b) It is mandatory for any trust or institution under the first regime, to keep their funds in the specified modes. Third proviso of clause (23C) of section 10 of the Act specifically provides that the funds of such trusts or institutions shall be maintained in these specified modes. For the trusts or institutions under the second regime, clause of sub-section (1) of section 13 of the Act provides that the exemption shall be denied to the trust irrespective of the amount of investment in nonspecified modes

(c) Further, the trusts or institutions under both the regimes are required to apply at least 85% of their income during the year. Where the trust is not able to apply 85% of the income, it may accumulate such income for maximum 5 years. Subsection (3) of section 11 of the Act specifically provides for the trusts or institutions under the second regime that such accumulated income, which could not be applied within the period of accumulation (maximum 5 years), shall be deemed to be the income of the trust. Similarly, for the trusts or institutions under the second regime, there is a specific provision under clause (2) of Explanation 1 to sub-section (1) of section 11 of the Act providing for the accumulation of income for a period of one year. Subsection (1B) of section 11 of the Act provides that if the income accumulated under clause (2) of Explanation 1 to sub-section (1) of section 11 of the Act could not be applied within the time allowed; it shall be deemed to be the income of the trust.

(d) The trusts or institutions under the first regime are also required to apply at least 85% of their income during the year. Where such trust is not able to apply 85% of its income during the year and does not accumulate such income, entire income of such trust shall be subjected to tax where the trust is approved under the second proviso to clause (23C) of section 10 of the Act since third proviso to clause (23C) of section 10 of the Act mandates minimum 85% application of income unless such income is accumulated.

Denying exemption to the trust, for small amount of income applied in violation to the provisions referred in clause (a) and (b) above creates difficulties to the trusts or institutions under both the regimes as there is ambiguity about the manner of taxation of such income. Further, there is need for special provision to ensure that the income applied in violation is taxed at special rate without deduction. Accordingly, in order to rationalise the provisions, the following amendments are proposed:-

(a) It is proposed to amend clause (c) of sub-section (1) of section 13 of the Act to provide that only that part of income which has been applied in violation to the provisions of the said clause shall be liable to be included in total income.

(b) It is also proposed to insert twenty first proviso in clause (23C) of section 10 to specifically provide that where the income of any trust under the first regime, or any part of the such income or property, has been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of section 13, such income or part of income or property shall be deemed to be income of such person of the previous year in which it is so applied. The provisions of subsection (2), (4) and (6) of section 13 of the Act shall also apply to it.

(c) It is proposed to amend clause (d) of sub-section (1) of section 13 of the Act to provide that only the that part of income which has been invested in violation to the provisions of the said clause shall be liable to be included in total income.

(d) It is proposed to insert Explanation 4 in third proviso to clause (23C) of section 10 of the Act to specifically provide that income accumulated which is not utilised for the purpose for which it is so accumulated or set apart shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart.

(e) All the above income are also required to be taxed at special rate. Hence, it is proposed to insert new section 115BBI in the Act providing that where the total income of any assessee being a trust under the first or second regime, includes any income by way of any specified income, the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated at the rate of thirty per cent on the aggregate of specified income; and

(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of specified income referred to in clause (i).

(f) The sub-section (2) of this new section seeks to provide that no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of the Act in computing specified income.

(g) Explanation to the proposed section defines “specified income” to mean:-

(i) income accumulated or set apart in excess of fifteen percent of the income where such accumulation is not allowed under any specific provisions of the Act; or (ii) deemed income referred to in Explanation 4 to third proviso to clause (23C) of section 10 or sub-section (3) of section 11 or sub-section (1B) of section 11;or

(iii) any income which is not exempt under clause (23C) of section 10 on account of violation of the provisions of clause (b) of third proviso of clause (23C) of section 10 or not to be excluded from total income under the provisions of clause (d) of subsection (1) of section 13;

(iv) any income which is deemed to be income under the twenty first proviso to clause (23C) of section 10 or which is not excluded from total income under clause (c) of sub-section (1) of section 13; or

(v) any income which is not excluded from total income under clause (c) of subsection (1) of section 11.

(vi) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

12.5. We find that Clauses (a) and (b) of Section 13(1) of the Act have been in pari materia to Clauses (c ) and (d) of Explanation to Section 12AB(4) of the Act evidencing a conscious legislative alignment between the two provisions. As stated earlier, the Clauses (c) and (d) of Section 13(1) of the Act have not been brought in Explanation to Section 12AB(4) of the Act which defines ‘specified violation’. Hence the legislative intent is very clear that any violation of provisions of sections 13(1)(c ) or 13(1)(d) of the Act would not fall within the ambit of ‘specified violation’ as defined in Explanation to Section 12AB(4) of the Act.

12.6. Thus we have no hesitation to hold that there was no specified violation committed by the Assessee Society in the instant case and hence the action of the Learned PCIT in cancelling the registration of Assessee Society under section 12AB of the Act is bad in law and legally unsustainable.”

106. The various other decisions relied on by the Ld. Counsel for the assessee, copies of which are placed in the paper book, also support his case to the proposition that since the specified violations were introduced in section 12AB(4) only w.e.f. 01.04.2022, therefore, any alleged violation prior to this date could not confer power to the Ld. Pr.CIT(C) for assumption of jurisdiction u/s 12AB(4) and therefore cancellation of registration in absence of specified violation is not justified and not in accordance with law.

107. So far as the various decisions relied on by the Ld. CIT-DR are concerned, we find these are all distinguishable and are not applicable to the facts of the present case. The grounds raised by the assessee on this issue are accordingly allowed.

108. Grounds of appeal No.18 to 31 relate to the violation of provisions of section 13(1)(c) of the Act.

109. The Ld. Counsel for the assessee submitted that while cancelling the registration u/s 12AA(3) as well as u/s 12AB(4) the Ld. Pr.CIT(C) has alleged that the assessee has violated the provisions of section 13(1)(c) of the Act which resulted into benefit to the directors and related parties on account of the following transactions:

a. Personal expenses of Shri. Abhishek Kulkarni.

b. Salary of employees booked in the hands of the assessee who were also working for group concerns.

c. Loans and advances given to the directors and their concerns.

d. Salaries paid to Smt. Shobha Kulkarni and Ms. Abhilasha Kulkarni.

e. Repair and maintenance of the building owned by the Directors and related concerns.

110. So far as the payments to Shri Abhishek Kulkarni are concerned, he submitted that the assessee company has not conferred any benefit to Shri Abhishek Kulkarni by reimbursing the credit card expenses. He submitted that Shri Abhishek Kulkarni does not take any salary for the services rendered by him. Further, the Ld. Pr.CIT(C) has not quantified such amount. Therefore, there is no violation of the provisions of section 13(1)(c) by reimbursing the credit card expenses of Shri Abhishek Kulkarni.

111. So far as the allegation of the Ld. Pr.CIT(C) that the assessee has booked salary expenses of the employees who were working for other group entities is concerned, he submitted that during the course of survey it was noticed that there were total 102 employees working in the office premises out of which 93 employees were on the pay rolls of the assessee. He submitted that without any evidence and only on the basis of presumption the Ld. Pr. CIT(C) held that all the 93 employees are also working for other group entities. Therefore, in absence of any such evidence the allegation of the Ld. Pr. CIT(C) that it has benefitted to the directors or their concerns by booking salary expenses of employees by the assessee trust who are working in other concerns is not correct.

112. So far as the reference to the statement of Smt. Kamini More, HR is concerned, he submitted that Smt. Kamini More was on the pay roll of M/s. Reliable Industrial Services, which is a partnership firm wherein Shri Vishwesh Kulkarni is a partner. Referring to pages 455 to 469 of the Paper Book, he drew the attention of the Bench to the submissions dated 02.09.2025 and submitted that the salary of Mrs. More was borne by another entity while she was also working for the assessee and there is no reimbursement of her salary cost. Further, all the 93 employees are substantively engaged in the activities of the assessee company who are contributing to the assessee’s charitable objects. Occasional interaction or co-ordination with other entities does not result in any benefit which amount to violation of section 13(1)(c) of the Act. Therefore, the Ld. Pr.CIT(C) is not justified in holding that the assessee has committed any violation of the provisions of section 13(1)(c).

113. So far as the allegation of the Ld. Pr. CIT(C) that the assessee has violated the provisions of section 13(1)(c) on account of giving loans and advances to the related entities and the directors as well as payment of salary to Smt. Shobha Kulkarni and Ms. Abhilasha Kulkarni is concerned, he submitted that there is no such violation committed by the assessee in respect of the above expenses. He submitted that the Ld. Pr. CIT(C) has not quantified the value of the benefit allegedly provided and therefore, there is no reason to cancel the registration on this ground.

114. So far as the allegation of the Ld. Pr.CIT(C) that the assessee has incurred repairs and maintenance expenses in respect of the building owned by the Director and other group concern is concerned, he submitted that the assessee has incurred repairs and maintenance expenses in respect of the office building namely Yashaswi House, Lane No.15, Prabhat Road, Pune and the furniture and fixtures which is debited under the head ‘repairs and maintenance others’. He submitted that the said building is owned by Shri Vishwesh Kulkarni and the assessee has been using the said building since inception as its office. Further, as noticed by the survey team around 93 employees of the assessee were working in that building and the assessee has not paid any rent to Shri Vishwesh Kulkarni for use of the said building which is around 15000 sq. ft. in a busy locality. He submitted that the average rent in that area is approximately Rs.13.50 lakh per month and therefore, when the assessee has not paid any rent for the said building, which is used by the assessee for its office and has borne the expenses on account of repairs and maintenance of the building and the furniture and fixtures, it cannot be held that there is any violation of the provisions of section 13(1)(c).

115. He submitted that the assessee has also incurred repairs and maintenance of the building owned by Yashaswi Educational Society which is a charitable trust registered u/s 12AA of the Act. Therefore, the assessee has not violated the provisions of section 13(1)(c) by incurring expenses on account of repairs and maintenance of another charitable trust.

116. The Ld. Counsel for the assessee submitted that Shri Vishwesh Kulkarni and his son Shri Abhishek Kulkarni, who are full-time engaged in the activities of the assessee, have not charged any salary or remuneration. The turnover of the assessee for the year ended 31.03.2024 was Rs.9,89,03,57,353/-. Referring to the order of the Ld. Pr.CIT(C), he submitted that the Ld. Pr.CIT(C) has mentioned regarding the violation of provisions of section 13(1)(c). However, he has not mentioned a single word regarding no remuneration being charged by Shri Vishwesh Kulkarni and Shri Abhishek Kulkarni for looking after the day-to-day activities of the assessee trust. Similarly, no rent has been charged for the use of office premises which is owned by Shri Vishwesh Kulkarni. Further, no quantification of the alleged benefit has been done, therefore, the Ld. Pr.CIT(C) is not justified in cancelling the registration on account of alleged violation of provisions of section 13(1)(c).

117. Referring to the provisions of section 12AB(4) he submitted that the Ld. Pr.CIT(C) has no jurisdiction to cancel the registration on the basis of alleged violation of section 13(1)(c). He can cancel the registration only if he is satisfied of occurrence of any specified violation. For the above proposition, he referred to the provisions of Explanation to section 12AB(4) which defines specified violations. He submitted that there is no reference that violation of provisions of section 13(1)(c) or 13(1)(d) would result in coming within the purview of specified violation. For the above proposition, he relied on the decision of the Delhi Bench of the Tribunal in the case of Richmond Educational Society vs. DCIT vide ITA No.4779/Del/2025 order dated 11.03.2026 where the Tribunal has held that violation of section 13(1)(c) or 13(1)(d) does not fall within the ambit of specified violation as defined in explanation to section 12AB(4).

118. Referring to the decision of the Bangalore Bench of the Tribunal in the case of M/s. Islamic Academy of Education vs. PCIT(Central), Bengaluru vide ITA No.610/Bang/2023 order dated 28.02.2024, he submitted that the Tribunal in the said decision has held that the amended section 12AB(4) does not consider a violation of section 13(1)(c) and 13(1)(d) as specified violation. Accordingly it held that the registration cannot be cancelled on the ground that the assessee had violated the provisions of section 13(1)(c) or 13(1)(d).

119. Referring to the following decisions of the Hon’ble Bombay High Court he submitted that the Hon’ble High Court in these decisions has held that if there is violation of the provisions of section 13(1)(c), the income to that extent is not entitled for exemption u/s 11 and the charitable trust does not loose the exemption u/s 11 in totality:

a) Commissioner of Income-tax (Exemption) v/s. Maharashtra Academy of Engineering and Educational Research reported in (2024) 161 com290 (Bom)

b) Commissioner of Income Tax (Exemptions) Pune v/s. Audyogik Shikshan Mandal reported in (2019) 101 com247 (Bom)

c) CIT(E) vs. Mukund Bhavan Trust vide ITA No.683 of 2018 order dated 05.08.2022

120. The Ld. Counsel for the assessee submitted that the provisions of section 13(1)(c) and 13(1)(d) have been amended with effect from 01.04.2023 and it has been specifically stated in those sections that only to that extent resulting in violation would not be eligible for exemption u/s 11. He accordingly submitted that in view of the amendment to section 13(1)(c)/13(1)(d) and in view of the decisions of the Hon’ble Bombay High Court cited (supra) where it has been held that the income to the extent of violation would not be entitled for exemption u/s 11, the question of cancelling the registration on the ground of alleged violation of section 13(1)(c)/13(1)(d) does not arise. Therefore, the order of the Ld. Pr.CIT(C) cancelling the registration u/s 12AB(4) is not correct.

121. So far as the argument of the Ld. CIT-DR that if there is a minor violation of the provisions of section 13(1)(c), in that event registration granted u/s 12AA should not be cancelled but when there is major violation of the provisions of section 13(1)(c), the registration granted u/s 12AA should be cancelled is concerned, he submitted that as per section 12AB(4) there is no such provision which provides that registration should not be cancelled for a minor violation of the provisions of section 13(1)(c). Once there is no such provision differentiating between minor/major violations of the provisions of section 13(1)(c), the same cannot be presumed and hence the registration u/s. 12AA/12AB cannot be cancelled on that basis.

122. So far as the decision of the Amritsar Bench of the Tribunal in the case of Sh. Gurdwara Sahib Parbandhak Committee reported in 150 taxman.com181 relied on by the Ld. CIT-DR is concerned, he submitted that in that case the Tribunal in para 7 has noted that the assessee society had not filed the certified copy of the Memorandum of Association and bye laws as submitted by it in the Office of Registrar of Societies. Accordingly, it was held that in the absence of the same the activities of the society cannot be corroborated with the stated aims and objects and the genuineness of the activities thereof. The Tribunal further held that the assessee society had undertaken development and maintenance of the Gurudwara Sahib situated at Balluana and the society will maintain, repair and expand the Gurdwara Sahib for all types of religious/charitable activities. The Tribunal has held that these activities would be restricted to specific group i.e. people of village of Balluana and the same cannot be claimed to be enduring the benefit of the general public. The Tribunal further noted that apart from the expenses, longar charge for specific people restricted to the people of village Balluana only, no other major expenditure would be attributable to the stated objects of the society as claimed by the assessee. Accordingly, it was held that the arrangement of the applicant clearly leads to the conclusion that the assessee is not pursuing the charitable objects for public at large but is restricted to the people of village Balluana only. Accordingly, the order of the PCIT cancelling the registration was upheld. He submitted that the said decision is distinguishable and not applicable to the facts of the present case. Further, there is no such allegation in the case of the assessee which is there in the case of Sh. Gurdwara Sahib Parbandhak Committee relied on by the Ld. CIT-DR. In the instant case the assessee is carrying out its charitable activities for public at large and therefore, the said decision is not applicable.

123. So far as the decision of the Delhi Bench of the Tribunal in the case of Corbett Education Society reported in 82 taxmann.com249 and relied on by the Ld. CIT-DR is concerned, he submitted that in that case the assessee society had made an application for granting registration u/s 12AA of the Act. The Ld. CIT refused the registration on the ground that survey action was conducted on the assessee wherein it was found that 4 ladies, being family members of the management committee, were being paid salary without rendering any services. It was accordingly held by the Tribunal that members of the management committee had siphoned off or misappropriated the income of the society and thus, the activity of the society cannot be termed as genuine and the society in the garb of charitable activity was engaged in enriching its members. He submitted that the above decision is distinguishable and not applicable to its case since firstly, the assessee is genuinely carrying out educational activities. Secondly, none of the directors of the assessee have siphoned off or misappropriated the income of the assessee company. He submitted that in the present case the alleged violation of the provisions of Section 13(1)(c) has not been quantified. Therefore, the decisions relied on by the Ld. CIT-DR in the case of Corbett Education Society (supra) is not applicable.

124. So far as the decision of the Hon’ble Supreme Court in the case of Batanagar Education and Research Trust reported in 436 ITR 501 (SC) relied on by the Ld. CIT-DR is concerned, he submitted that in that case the assessee had received donations by way of cheques out of which substantial money was returned to donors in cash. Accordingly, it was held that the assessee had misused the status of trust. He submitted that in the case of the assessee there is no allegation that it has received donations and the said amount has been returned by it to the donors. He accordingly submitted that the said decision relied on by the Ld. CIT-DR is not applicable to the facts of the present case.

125. So far as the decision of the Hon’ble Supreme Court in the case of Jagannath Gupta Family Trust reported in 102 com34 (SC) relied on by the Ld. CIT-DR is concerned, he submitted that in that case also the assessee had received certain donations. The CIT(E) cancelled the registration on the ground that the assessee had received bogus donations. However, he had not granted any opportunity of cross examination to the assessee of the donor whose statement was relied upon while cancelling the registration. The Hon’ble Supreme Court has set aside the case back to the file of CIT(E) and no decision on merits was rendered. Therefore, the above decision is not applicable to the facts of the present case. He accordingly submitted that the registration cannot be cancelled on the basis of alleged violation of provisions of section 13(1)(c) / 13(1)(d) since the same does not come within the ambit of specified violation as defined u/s 12AB(4).

126. The Ld. CIT-DR on the other hand submitted that the assessee has raised the grounds of appeal in such a manner so as to appear that the Ld. Pr.CIT(C) has cancelled registration for violation of provisions of section 13(1)(c) which is not the case. He submitted that the Ld.PCIT(C) has pointed out that the assessee company has not applied the income of the company wholly and exclusively for the objects for which the company was established. He submitted that there is no mention of section 13(1)(c) violation in the order of the Ld. Pr.CIT(C). The assessee has deliberately framed the grounds so that it can bypass these transgressions claiming that these issues can be covered during assessments and there is no need for cancellation of registration.

127. The Ld. CIT-DR drew the attention of the Bench to the personal expenses of Shri Abhishek Kulkarni and submitted that the assessee company has been making payments for the transactions made by the Director Shri Abhishek Kulkarni. It was noticed that the above transactions are personal and luxurious in nature and have no connection with the activities of the assessee. He drew the attention of the Bench to the year-wise payments made to Shri Abhishesh Kulkarni by the assessee according to which the total amount from financial year 2017-18 to 2022-23 is Rs.12,00,57,628/-.

128. So far as the argument of the Ld. Counsel for the assessee that these are reimbursement for expenses made by Shri Abhishek for activities of company and no salary paid to him is concerned, he submitted that the same is not acceptable in view of the facts and circumstances of the case. He submitted that most of the payments were made for transactions such as hotel bill, purchase of i-phones, expensive leather bags, hair brush, lego, etc are day to day lifestyle expenses made by Shri Abhishek Kulkarni. Therefore, claiming reimbursement of the said personal expenses of its director as its “application of income” is a serious financial and legal transgression.

129. So far as the argument of the Ld. Counsel for the assessee that no salary has been paid to Shri Abhishek Kulkarni is concerned, he submitted that he was not only exclusively involved in assessee-company but he is director/partner in half a dozen companies/firms including AVK law Associates and Yashaswi Skills Limited. Therefore, the Ld. Pr.CIT(C) has rightly held that expenses incurred by Shri Abhishek Kulkarni claimed to be made for the assessee, which were later on reimbursed by it are not aligned with the stated objects of the assessee and therefore, claiming those expenses as the assessee’s application of income are not in accordance with its objects.

130. So far as the booking of salary of other group concerns in hands of the assessee is concerned, he submitted that during the survey action it was found that out of 102 employees working from the corporate office premises of the assessee-company, 93 staff were found on the payroll of YAS and rest 09 was found on the pay roll of other related concerns. From the details obtained from HR personnel it was seen that most of the concerns of Yashaswi Group do not have any branches. However, very minimal employees on their payrolls were found during the survey, which validated the belief that employees kept on the payroll of YAS had been used to cater the regular business activities of other concerns of the group. Thus, it was apparent that the Director promoters of the assessee-company were applying the income not for objects of the company but for benefit of its associate concerns.

131. So far as the argument of the Ld. Counsel for the assessee that no evidence has been brought on record to indicate that all the 93 employees who are on payroll of the assessee company have rendered services to group entities and Smt. Kamini More was on payroll of M/s Reliable Industrial Services, partnership firm of Shri. Vishwesh Kulkarni and therefore her statement cannot be accepted is concerned, he submitted that during the survey proceedings it was found that the employees of the assessee-company were in fact working for other group entities. The statement of Shri Devidas Mali, CFO of Yashaswi Group was also recorded wherein he confirmed that he is the CFO of Yashaswi Group assigned with the responsibilities of over all accounts and finance of the Group. However, he received salary from assessee-company only. Further, from the survey findings and admission of Shri Vishwesh Kulkarni and other key persons it was noticed that liabilities of the employees’ cost of related concerns/concerns of the specified persons have been booked in hands of assessee. Therefore, the Ld. Pr.CIT(C) has rightly held that bearing the cost of those employees working to the extent for the other concerns are not the application of the assessee’s income towards its charitable objects and therefore, there is violation of provisions of 12AA(3) & (4) of the Act as well as 12AB(4) of the Act making the assessee liable for cancellation of its registration granted u/s 12AA and 12A(1)(ac) r.w.s 12AB of the Act.

132. So far as the loans and advances to Directors and their concerns are concerned, he submitted that the Ld. Pr.CIT(C) has noted that the assessee had advanced huge amount of loans to various concerns of Yashashwi Group including proprietary and partnership concerns of Shri Vishvesh Prabhakar Kulkarni and to the Director Shri Abhishek Kulkarni without any interest or any collateral. The total amount of such loans & advances by the end of financial year 2022-23 was about Rs.26.33 Crore.

133. So far as the contention of the Ld. Counsel for the assessee that the Ld. Pr.CIT(C) has not quantified the value of benefit provided by the assessee to its related parties is concerned, he submitted that the assessee has not denied that it has not given any loans and advances. Therefore, once the loans and advances are given without any collateral or adequate interest, the issue is not of quantification but of misapplication of funds/income of the assessee. Therefore, the Ld. Pr.CIT(C) has rightly held that these actions of the assessee company are in contravention of the objects of the company and liable for withdrawal of registration u/s 12AA/12AB.

134. So far as the salary paid to the specified persons/related persons without reasonable cause is concerned, he submitted that Mrs. Shobha Kulkarni wife of Shri Vishwesh Kulkarni and Ms. Abhilasha Kulkarni, daughter of Shri Vishwesh Kulkarni were paid huge salaries without rendering any services. The assessee has also not denied that salaries were paid without rendering any services. Further, Mrs. Shobha Kulkarni had admitted in response to Q.No.8 reproduced on page no.37 of the order that she is not actively engaged in the business activities and they are carried out by her husband and son. He submitted that Mrs. Shobha Kulkarni has received salary of Rs.40 lakhs/annum which was far more than what was paid to Shri Devidas Mali CFO who looked after the finances and accounts of YAS and also worked for other group companies. Further, Mrs. Shobha Kulkarni was found to be running a beauty parlor as an independent entrepreneur under the name and style of “Femina Flaunts Studio Salon”. There is no iota of evidence submitted by the assessee before the Ld. Pr.CIT(C) or the ITAT of any services rendered by Mrs. Shobha Kulkarni. Similar is the case of Ms. Abhilasha Kulkarni. She was paid when she was in United Kingdom for pursuing her studies.

Therefore, the Ld. Pr.CIT(C) has clearly held that providing the benefits to the related persons and further claim of such benefits as application of its income are violation of the provisions of section 12AA(3) & (4) of the Act as well as clause (a) & (c) to Explanation of Section 12AB(4) of the Act which makes the assessee liable for cancellation of its registration u/s 12AA and 12A(1)(ac) r.w.s 12AB of the Act.

135. So far as the repairs and maintenance of buildings not owned by the assessec-company are concerned, he submitted that the assessee has claimed expenses under the head ‘Repair & Maintenance of building’ of Rs.67,94,795/- and Rs.7,37,38,213/- for F.Y.2022-23 and 2023-24, respectively. Similarly, it claimed expenses under the head ‘Repair & Maintenance Others’ of Rs.1,20,07,183/- and Rs. 1,05,73,368/- for F.Y.2022-23 and 2023-24, respectively. He submitted that the assessee does not own any building and it had carried out repair and maintenance of Yashaswi House, Lane No.15, Prabhat Road, Pune-04 which was being used as its corporate office.

136. So far as the argument of the Ld. Counsel for the assessee that there is nothing wrong in paying for its maintenance since the assessee does not pay any rent to corporate office is concerned, he submitted that the above contention is not acceptable as Yashaswi House is not occupied exclusively by the assessee-company but there are dozen more group companies/ entities operating from Yashaswi House. Therefore, incurring of such huge expenses in the hands of the assessee is not justified. Further, huge expenses pertaining to related concern-Yashaswi Education Society were also booked by the assessee with the intent to divert income of the assessee by providing benefit to the said concern. Therefore, the assessee has diverted its income by showing such expenses as its application towards the objects to provide direct benefits to the specified persons/their concerns. Therefore, the Ld. Pr.CIT(C) is justified in cancelling the registration on the ground that booking of those expenses in the hands of the assessee as its application of income are not in accordance with the objects of the trust and are violations of provisions of section 12AA(3) & (4) of the Act as well as under specified violation of 12AB(4) of the Act which makes the assessee liable for cancellation of its registration granted u/s 12AA and 12AB r.w.s 12A(1)(ac) of the Act.

137. So far as the legal grounds in grounds of appeal No.18 to 31 are concerned, the Ld. CIT-DR submitted that the assessee has framed the grounds of appeal in such a manner so as to appear that the Ld. Pr.CIT(C) cancelled the registration for violation of provisions of section 13(1)(c). However, a perusal of the cancellation order clearly shows that the Ld. Pr.CIT(C) has pointed out that the assessee company has not applied the income of the company wholly and exclusively for the objects for which the company was established. For the above proposition he drew the attention of the Bench to para 7.2 where the Ld. Pr.CIT(C) has written the title as under:

“7.2 Application of income not wholly and exclusively applied for the objects for which it is established but for the benefits of its trustees/related persons.”

138. He submitted that there is no mention of section 13(1)(c) and the assessee has deliberately framed the grounds so that it can bypass these transgressions claiming that these issues can be covered during assessments and there is no need for cancellation of registration.

139. Referring to pages 42 to 59 of the order of the Ld. Pr.CIT(C), he submitted that he has clearly noted the issues like Credit card reimbursement to Shri Abhishek Kulkarni, renovation of buildings and premises, advancing income of YAS to other concerns as loans & advances, Salary paid to Smt. Shobha Kulkarni and Miss. Abhilasha Kulkarni without reasonable cause, etc. which are not limited to any particular year or on any particular issue but the violations have been found throughout the periods since its registration. He submitted that the intent behind the violations is very much evident to use the assessee’s tax exempted status as money minting machine to provide benefits to the related persons & their concerns. He submitted that the assessee has provided benefits to the specified persons & their related concerns and also claimed those expenses in its hands showing as its application of income towards the objects. The said application of funds has not been made towards its day-to-day activities as per the stated objects and therefore, the claims of the said applications are not in accordance with objects of the trust for which it has been granted registration.

140. So far as the amendment made to section 13(1)(c) of the Act by the Finance Act 2022 wherein it has now been mandated that in case of benefit extended to specified persons referred to section 13(3) of the Act either directly or indirectly, then only such part of the income so diverted would be subjected to tax in the hands of the trust and to that extent, the exemption under section 11 of the Act would be denied, while the charitable character and registration of the trust would remain intact is concerned, he submitted that it is necessary to understand the intention behind this amendment. He submitted that before the amendment it was found that often in case of even small and unintended violations of section 13(1)(c) resulted in complete denial of exemption and cancellation of registration. Hence, now it has been specifically mandated that only the diverted income will lose the exemption and will not lead to loss-of exemption to entire exemption u/s 11 in respect of whole income of the trust.

141. Referring to the following decisions, he submitted that in all these cases the entire exemption u/s 11 was denied for just one violation of section 13(1)(c):

i. Audyogik Shikshan Mandal Vs ITO Ward 8(1), Pune (supra)

ii. Hon’ble Bombay High Court in the case of CIT V/s Mukund Bhavan Trust pronounced on 05.08.2022.

iii. Hon’ble Bombay High Court in the case of CIT(E) Vs Maharashtra Academy of Engineering and Educational Research reported in 161 com290.

142. Referring to the decision of the Hon’ble Bombay High Court in the case of Maharasthra Academy of Engineering and Educational Research (supra) he submitted that the Hon’ble High Court has held that if a minor infringement could cause the denial of exemption for the entire income including amounts properly used for charitable purposes, it would be grave injustice. It is with this intention the above amendment was brought in by the Finance Act 2022.

143. The Ld. CIT-DR drew the attention of the Bench to the Notes to Finance Bill which states as under:

“5.2 Taxation of certain income of the trusts or institutions under both the regimes at special rate Following incomes of the trusts or institutions are chargeable to tax, under different provisions of the Act:-

(a) The trusts or institutions under the first or second regime are required not to pass on any unreasonable benefit to the trustee or any other specified person. For the trusts or institutions under the second regime, clause (c) of sub-section (1) of section 13 of the Act provides that the entire exemption shall be denied to the trust irrespective of the amount of benefit passed on. For trusts or institutions under the first regime similar provisions is proposed by way of insertion of twentieth proviso to clause (23C) of section 10 of the Act.

(b) It is mandatory for any trust or institution under the first regime, to keep their funds in the specified modes. Third proviso of clause (23C) of section 10 of the Act specifically provides that the funds of such trusts or institutions shall be maintained in these specified modes. For the trusts or institutions under the second regime, clause (d) of sub-section (1) of section 13 of the Act provides that the exemption shall be denied to the trust irrespective of the amount of investment in nonspecified modes.

(c) Further, the trusts or institutions under both the regimes are required to apply at least 85% of their income during the year. Where the trust is not able to apply 85% of the income, it may accumulate such income for maximum 5 years. Subsection (3) of section 11 of the Act specifically provides for the trusts or institutions under the second regime that such accumulated income, which could not be applied within the period of accumulation (maximum 5 years), shall be deemed to be the income of the trust. Similarly, for the trusts or institutions under the second regime, there is a specific provision under clause (2) of Explanation 1 to sub-section (1) of section 11 of the Act providing for the accumulation of income for a period of one year. Subsection (1B) of section 11 of the Act provides that if the income accumulated under clause (2) of Explanation I to sub-section (1) of section 11 of the Act could not be applied within the time allowed, it shall be deemed to be the income of the trust.

(d) The trusts or institutions under the first regime are also required to apply at least 85% of their income during the year. Where such trust is not able to apply 85% of its income during the year and does not accumulate such income, entire income of such trust shall be subjected to tax where the trust is approved under the second proviso to clause (23C) of section 10 of the Act since third proviso to clause (23C) of section 10 of the Act mandates minimum 85% application of income unless such income is accumulated

Denying exemption to the trust, for small amount of income applied in violation to the provisions referred in clauses (a) and (b) above creates difficulties to the trusts or institutions under both the regimes as there is ambiguity about the manner of taxation of such income. Further, there is need for special provision to ensure that the income applied in violation is taxed at special rate without deduction. Accordingly, in order to rationalise the provisions, the following amendments are proposed:-

(a) It is proposed to amend clause (c) of sub-section (1) of section 13 of the Act to provide that only that part of income which has been applied in violation to the provisions of the said clause shall be liable to be included in total income.

——

vi). These amendments will take effect from 1 April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

(Clauses 4, 8, 28)”

144. He accordingly submitted that the intention of the Legislature was that inadvertent, single or small amount of violations should not cause problems to otherwise genuine charitable trusts. However, in the instant case there are blatant misuse of the status of the trust year by year and in huge amounts. Therefore, the Ld. Pr.CIT(C) was justified in invoking the provisions of section 12AA(3) & (4) of the Act as well as under specified violation of 12AB(4) of the Act for cancellation of registration.

145. Referring to the following decisions which have been relied on by the Ld. Pr.CIT(C) he submitted that the assessee trust has not simply violated the provisions of section 13(1)(c) but, in fact, has misused its tax exempt charitable status for purposes which are alien to its objects:

a. Commissioner of Income-tax (Exemptions), Kolkata v. Batanagar Education And Research Trust [2021] 129 com30 (SC)

b. Dr. Bhim Rao Ambedkar Educational Society vs. Commissioner of Income-tax, (Exemptions) [2017] 88 taxmann.com524 (Allahabad)

c. CIT vs. Jagannath Gupta Family Trust reported in [2019] 411 ITR 235 (SC)

d. Sh. Gurudwara Sahib Parbhandhan Committee vs Commissioner of Income-tax (Exemptions) [2023] 150 taxmann.com181 (Amritsar Trib.)

146. He accordingly submitted that the cancellation of registration by the Ld. Pr.CIT(C) was as per law.

147. The Ld. CIT-DR next argued that during the course of survey it was noticed from the cashbook that there were withdrawals of cash throughout the year and subsequent payments mainly with narration “Being Stipend paid”. The assessee could not produce any evidence to substantiate that these were the actual stipends paid. No other documents to prove the genuineness of the apprentices worked with the respective establishments, copy of agreement with the apprentices and establishments, identity of apprentices, application forms of the apprentices, muster sheet and other documents to verify the terms and conditions of the agreement regarding payment of stipends, identity of the trainees as well as genuineness of the cash payments were produced. Therefore, in absence of any explanation on claim of cash payments which are against guidelines of NAPS Scheme and other similar Schemes which give mandate to pay stipend through electronic mode and not in cash, the Ld. Pr.CIT(C) was justified in holding that the assessee has made specified violation of the law as per section 12AB (4) of the Act and therefore, its registration u/s 12AB r.w.s 12A(1)(ac) is liable for cancellation.

148. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Ld. Pr.CIT(C) while cancelling the registration u/s 12AA(3) and 12AA(4) and 12AB(4) has held that the assessee has violated the provisions of section 13(1)(c) of the Act on account of the following transactions:

a. Personal expenses of Shri. Abhishek Kulkarni.

b. Salary of employees booked in the hands of the assessee who were also working for group concerns.

c. Loans and advances given to the directors and their concerns.

d. Salaries paid to Smt. Shobha Kulkarni and Ms. Abhilasha Kulkarni.

e. Repair and maintenance of the building owned by the Directors and related concerns.

149. According to the Ld. Pr.CIT(C) by incurring the above expenses which has resulted into benefit to the directors and related parties, the assessee has violated the provisions of section 13(1)(c) and therefore, he cancelled the registration granted to the assessee u/s 12AA(3) and 12AA(4). So far as the allegation of the Ld. Pr.CIT(C) that the assessee has reimbursed personal expenses of Shri Abhishek Kulkarni and has paid salary to Mrs. Shobha Kulkarni and Mrs. Abhilasha Kulkarni are concerned, we find the Ld. Pr.CIT(C) has not quantified the amount of such violation. In any case, these are matters for adjudication during the course of assessment proceedings and the registration cannot be cancelled for alleged violation of provisions of section 13(1)(c) in view of our discussion in subsequent paragraphs.

150. So far as the salary of employees booked in the hands of the assessee who were also working for group concerns is concerned, we find the Ld. Pr.CIT(C) presumed that all the 93 employees out of 102 employees are also working for other group entities without any evidence brought on record. Further, the statement of Smt. Kamini More in our opinion cannot be accepted since she was on the pay roll of M/s. Reliable Industrial Services, which is a partnership firm wherein Shri Vishwesh Kulkarni is a partner and she was not in the pay roll of the assessee company.

151. So far as the repairs and maintenance expenses incurred for Yashaswi House which is around 15000 sq. ft. is concerned, we find the assessee without paying any rent has incurred repairs and maintenance expenses to keep the office in good condition and therefore, cannot be held as a violation of provisions of section 13(1)(c). So far as the expenses incurred towards repairs and maintenance of building belonging to Yashaswi Education Society is concerned, we find the same is a charitable institution duly registered and therefore incurring the repairs and maintenance for the building owned by Yashaswi Education Society in our opinion cannot be held as a violation.

152. So far as the loans and advances given to the directors and their concerns are concerned, we find the Ld. Pr.CIT(C) has not quantified the value of any benefit allegedly provided. Further, we find merit in the submission of the Ld. Counsel for the assessee that as per the provisions of section 12AB(4), the Ld. Pr.CIT(C) has no jurisdiction to cancel the registration on the basis of the alleged violation of provisions of section 13(1)(c) of the Act. He can cancel the registration if he is satisfied about occurrence of any specified violation.

153. So far as the submission of the Ld. CIT-DR that the grounds of appeal have been framed in such a manner so as to appear that the Ld. Pr.CIT(C) cancelled the registration for violation of provisions of section 13(1)(c), which is not the case and that there is no mention of section 13(1)(c) in the order and the assessee has deliberately framed the grounds so that it can bypass these transgressions claiming that these issues can be covered during assessments and there is no need for cancellation of registration is concerned, we find the Ld. Pr.CIT(C) vide show cause notice dated 10.02.2025 has held that the assessee was claiming bogus expenses and also that the funds / income of the assessee was used for meeting the expenses of its related concerns and accordingly, the assessee has violated provisions of section 13(1)(c) r.w.s. 13(3) of the Act as well as section 12AA(3) & (4) by claiming non-genuine expenses. The relevant part of the findings of the Ld. Pr.CIT(C) in body of the order at pages 12 and 13 reads as under:

154. Similarly, he has also reproduced the provisions of section 13(1)(c) in para 7.2.9 of his order which read as under:

7.2.9. Further, in its submission, the assessee has also relied upon various judgements in connection of violations u/s 13(1)(c) of the Act for providing benefits to the specified persons and contended that the in case of violation of the said section, assessee does not become liable for cancellation of registration and its exemption u/ s 11 will be denied only to the extent of violative portions.

(i) In this regard, it is to state that the assessee is registered u/s 12AA/12A(1)(ac)(i) of the Act as a charitable trust which allows it to claim exemption u/s 11 and 12 subject to certain restrictions as provided u/s 13 of the Act. Relevant part of the restrictions laid down u/s 13 of the Act is reproduced hereunder.

“Section 11  not to apply in certain cases.

13. (1) Nothing contained in section 11 or section 12 shall operate so as to ex^,lude from the total income of the previous year of the person in receipt thereof—

(a)……….;

(b)……….;

(bb) (***1

(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof—

(i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or

(ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied,

directly or indirectly for the benefit of any person referred to in sub-section (3) :

Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution :

…………………………………

(d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year—

(i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or

(ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or

(iii) any shares in c:. company, other

155. We find the Ld. Pr.CIT(C) in his order has observed as under:

(iv). In view of the aforesaid discussion, the assessee’s contentions on the above said issues are found to be devoid of merit and hence, not acceptable. The expenses incurred by Shri Abhishek Kulkarni claimed to be made for the assessee, which have later on reimbursed by it are not aligned with the stated objects of the assessee and therefore, claiming those expenses as the

156. Therefore, the submission of the Ld. CIT-DR that there is no mention of section 13(1)(c) either in the notice or in the order of the Ld. Pr.CIT(C) and the assessee has deliberately framed the grounds so that it can bypass these transgressions claiming that these issues can be covered during assessments and there is no need for cancellation of registration, is without any merit.

157. So far as the concerns raised by the Ld. Pr.CIT(C) that the assessee has violated the provisions of section 13(1)(c) by incurring various expenses which resulted in benefit to the directors and the related parties and therefore, there is violation of provisions of section 13(1)(c) for which he cancelled the registration granted u/s 12AA(3) and 12AA(4) is concerned, we find it has been held in various decisions that the violation of provisions of section 13(1)(c) or 13(1)(d) does not fall within the ambit of specified violation as defined in Explanation to section 12AB(4) of the Act. We find the Delhi Bench of the Tribunal in the case of Richmond Educational Society vs. DCIT (supra) while deciding an identical issue has held that the violation of section 13(1)(c) or 13(1)(d) does not fall within the ambit of specified violation as defined in Explanation to section 12AB(4). The relevant observations of the Tribunal have already been reproduced in the preceding paragraphs.

158. We find the Bangalore Bench of the Tribunal in the case of M/s. Islamic Academy of Education vs. PCIT(Central), Bengaluru (supra) has held that the amended section 12AB(4) does not consider a violation of section 13(1)(c) and 13(1)(d) as specified violation. Accordingly it was held that the registration cannot be cancelled on the ground that the assessee had violated the provisions of section 13(1)(c) or 13(1)(d).

159. We find the Hon’ble Bombay High Court in the case of Commissioner of Income-tax (Exemption) v/s. Maharashtra Academy of Engineering and Educational Research reported in (2024) 161 taxmann.com 290 (Bom) has held that the denial of benefit u/s 11 of the Act will be restricted only to that income of the trust which was used / applied directly or indirectly for the benefit of prohibited persons.

160. We find the Hon’ble Bombay High Court in the case of Commissioner of Income Tax (Exemptions) Pune v/s. Audyogik Shikshan Mandal reported in 261 com12 (Bom) has held that the denial of exemption u/s 11 should be limited only to the amount which was diverted in violation of section 13(2)(b). The various other decisions relied on by the Ld. Counsel for the assessee also supports his case to the proposition that the denial of benefit u/s 11 will be restricted only to the income of the trust which was used / applied directly or indirectly for the benefit of prohibited persons.

161. We find the provisions of section 13(1)(c) and 13(1)(d) have been amended w.e.f. 01.04.2023 and it has been specifically stated in those sections that only to that extent resulting in violation would not be eligible for exemption u/s 11. Therefore, we find merit in the arguments of the Ld. Counsel for the assessee that the question of cancelling the registration on the ground of alleged violation of section 13(1)(c) and 13(1)(d) does not arise.

162. We further find the Explanation to section 12AB(4) which defines the specified violation as under:

a) where any income of the trust or institution under the second regime has been applied other than for the objects for which it is established; or

b) the trust of institution under the second regime has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives; or

c) the trust or the institution under the second regime has applied any part of its income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; or

d) the trust or institution under the second regime established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste;

e) any activity being carried out by the trust or the institution under the second regime,

(i) is not genuine; or

(ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or

(f) the trust or the institution under the second regime has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1) of section 12AB, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality or

(g) the application referred to in clause (ac) of sub-section (1) of section 12A contains false or incorrect information”

163. Therefore, as per definition of specified violation, violation of provisions of section 13(1)(c) and 13(1)(d) does not come within its ambit and therefore, the cancellation of registration by the Ld. Pr.CIT(C) in our opinion is not justified.

164. So far as the argument of the Ld. CIT-DR that if there is a minor violation of the provisions of section 13(1)(c), in that event registration granted u/s 12AA should not be cancelled but when there is major violation of the provisions of section 13(1)(c), the registration granted u/s 12AA should be cancelled is concerned, we find there is no such provision in the Statute or in provisions of section 12AB(4) which provides that registration should not be cancelled for a minor violation of the provisions of section 13(1)(c) and can only be cancelled when major violation of the provisions of section 13(1)(c). We find the issue has already been adjudicated by the Delhi Bench of the Tribunal in the case of Richmond Educational Society vs. DCIT (supra) where it has been held that the registration granted u/s 12AA / 12AB cannot be cancelled on the alleged violation of provisions of section 13(1)(c). The relevant observations of the Tribunal have already been reproduced in the preceding paragraphs.

165. The various other decisions relied on by the Ld. CIT-DR are distinguishable and are not applicable to the facts of the present case. So far as the decision of the Hon’ble Supreme Court in the case of Batanagar Education and Research Trust reported in 436 ITR 501 (SC) relied on by the Ld. CIT-DR is concerned, we find in that case the assessee had received donations by way of cheques out of which substantial money was returned to donors in cash. Accordingly, it was held that the assessee had misused the status of trust. However, in the instant case there is no allegation that it has received donations and cash amount has been returned by it to the donors. In the case before the Hon’ble Supreme Court the assessee had received donations for which it would have issued 80G donation receipts and the said amount has been refunded by it. Accordingly, it was held that the assessee has misused its status of a trust. Since the assessee in the instant case has neither received donations nor issued 80G receipts, therefore, the decision relied on by the Ld. CIT-DR is not applicable to the facts of the present case.

166. So far as the decision of the Hon’ble Supreme Court in the case of Jagannath Gupta Family Trust reported in 102 taxmann.com34 (SC) relied on by the Ld. CIT-DR is concerned, we find in that case the assessee had received certain donations. The Ld. CIT(E) cancelled the registration on the ground that the assessee had received bogus donations. However, he had not granted any opportunity of cross examination to the assessee of the donor whose statement was relied upon while cancelling the registration. Therefore, the Hon’ble Supreme Court set aside the matter to the file of CIT(E) for fresh adjudication. Therefore, the said decision is also not applicable to the facts of the present case. The various other decisions relied on by the Ld. CIT-DR are also distinguishable and not applicable to the facts of the present case. In view of the above discussion and respectfully following the decisions cited (supra), we hold that the Ld. Pr.CIT(C) is not justified in cancelling the registration on the basis of the alleged violation of provisions of section 13(1)(c) or 13(1)(d) of the Act as the same does not come within the ambit of specified violation as defined u/s 12AB(4) of the Act. The grounds raised by the assessee on this issue vide grounds of appeal No.18 to 31 are accordingly allowed.

167. Grounds of appeal Nos.32 to 34 relate to the allegation of the Ld. Pr.CIT(C) that the assessee is running a hotel / restaurant in the guise of skill development and hence it is a commercial activity which is not in accordance with the objects of the assessee.

168. The Ld. Counsel for the assessee submitted that the Ld. Pr.CIT(C) has not appreciated the facts correctly while holding that the assessee is running a hotel / restaurant on commercial basis. Referring to the copy of the MOU placed at pages 744 to 750 of the Paper Book he submitted that it has been specifically mentioned that Maharashtra State Institute of Hotel Management and Catering Technology (MSIHMCT) is conducting various hotel management courses in bakery, food products, front office, etc. The MOU further states that Maharashtra State Board of Technical Education (MSBTE) is having expertise in the area of skill development. It is also stated that the assessee is engaged in skill training and skill development programs and therefore, has been selected to operate the hospitality training centre at Model Colony, Shivajinagar, Pune. He submitted that the students undergoing hotel management courses are required to provide on-the-job practical training. For that purpose, the MOU was entered into wherein the entire facilities would be provided by MSIHMCT and the job of the assessee was to implement various skill development programs and to arrange for job training to the students. He submitted that for that purpose a hotel along with banquet hall and restaurant has been provided by MSIHMCT. Thus, the whole object of entering into the MOU was not running a commercial hotel but to provide skill training to hotel management students.

169. So far as the allegation of the Ld. Pr.CIT(C) that the main objects of the assessee in running the hotel was to generate revenue and earn surplus is concerned, he submitted that the MOU has been entered into with MSIHMCT and MSBTE which are Government of Maharashtra undertakings and as per the MOU, 75% of the surplus was to be paid to those two entities and balance 25% could be retained by the assessee. The deficit, if any, was entirely to the account of the assessee. He submitted that the assessee has given year-wise position of the surplus/deficit and it would be observed that for F. Y. 2019-20 to 2021-22 there is deficit and for F. Ys. 2022-23 and 2023-24, there is meager surplus out of which, 75% would be paid to those two entities. He accordingly submitted that the Ld. Pr. CIT(C) is not justified in holding that the assessee is running a hotel/restaurant on commercial lines and the entire object of entering into the MOU was to provide skill training to the students undergoing hotel management courses.

170. So far as the order of the Ld. Pr.CIT(C) referring that MSBTE vide letter dated 01.03.2024 has directed the assessee to stop running hotel/restaurant is concerned, he submitted that during the course of hearing no such query was raised by the Ld. Pr. CIT(C) regarding this letter. Referring to page 62 of the order where a copy of the letter is placed, he submitted that the said letter refers to MOU dated 14.03.2023 entered into by the assessee with MSBTE for providing skill training at Government Polytechnic, Pune, Maharashtra. The Ld. Counsel for the assessee filed a copy of the MOU and submitted that this MOU is totally different vis-a-vis the MOU entered into on 14.08.2018 between the MSIHMCT, MSBTE and the assessee. He clarified that as per the MOU dated 14.03.2023, MSBTE has appointed the assessee for operating MSBTE’s skill development center at Government Polytechnic, Pune which is also located in Model Colony, Pune. As per the said MOU, the assessee was to run various skill courses relating to electronic hardware and ITES sector. Further, the assessee was also permitted to conduct additional training program for which necessary capital and recurring expenditure was to be incurred by the assessee. Accordingly, the assessee started a small food tech lab in the said premises. He submitted that the assessee also informed MSBTE vide letter dated 06.02.2024 that it has started a kitchen helper course for providing relevant skill development. Thereafter, on 01.03.2024 MSBTE directed the assessee to stop the said activity. He submitted that the Ld. Pr. CIT(C) has not appreciated that there were two different activities conducted by the assessee. Both these activities were conducted to provide skilled training for hotel management/hospitality sector and therefore, there is no reason to hold that the assessee is running a commercial establishment. He reiterated that the activities of the assessee were in furtherance to its charitable objects and therefore it has not committed any violation because of which the registration can be cancelled. He accordingly submitted that the cancellation of registration on this ground is not justified.

171. The Ld. CIT-DR on the other hand submitted that the assessee was running a hotel on commercial basis which was neither the object of the assessee nor incidental to attaining its objects. Referring to the order of the Ld. Pr.CIT(C) he submitted that the Ld. Pr.CIT(C) at para 7.3 of his order has brought out the facts according to which the assessee is running a restaurant named Amit Garden Restaurant in the premises of MSIHMCT at 412C, Shivaji Nagar. He has also given a finding that the financials of the assessee show that it has focus on commercial activities rather than training / skill development for which infrastructure of MSIHMCT has been given to the assessee. He has given a finding that the assessee runs hotel and similar activities in the guise of skill development and on the job training which is not incidental to attainment of its activities. Even before the Tribunal also the assessee could not bring anything new on record to support its case. Therefore, the Ld. Pr.CIT(C) was justified in cancelling the registration.

172. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Ld. Pr.CIT(C) has cancelled the registration on the ground that the assessee was running a hotel / restaurant in the guise of skill development which is not incidental to attainment of the main objects of the assessee. It is his allegation that the financials of the assessee indicate that the core intention of the assessee was to generate revenue from hotel rooms, banquets and related infrastructure as well as restaurants in the guise of skill development which is not its main objects for which he cancelled the registration. It is the submission of the Ld. Counsel for the assessee that an MOU has been entered into with MSIHMCT and MSBTE which are the Government of Maharashtra undertakings and as per MOU 75% of the surplus was to be paid to those two entities and the balance 25% could be retained by the assessee. Further, deficit, if any, was entirely to the account of the assessee. It is his submission that for assessment years 2019-20 to 2021-22, there is deficit and for financial years 2022-23 and 2023-24, there is meagre surplus out of which 75% would be paid to those two entities. Accordingly it is his submission that the Ld. Pr.CIT(C) is not justified in holding that the assessee is running a hotel / restaurant on commercial lines.

173. We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the details furnished in the paper book shows that the assessee has entered into an MOU with MSIHMCT and MSBTE which are Government of Maharashtra undertakings. As per the MOU, 75% of the surplus was to be paid to those two entities and the balance 25% could be retained by the assessee. Further, a perusal of the details furnished in the paper book shows that for assessment years 2019-20 to 2021-22, there is deficit and for financial years 2022-23 and 2023-24, there is meagre surplus out of which 75% would be paid to those two entities. Therefore, it cannot be said that the assessee was running a hotel / restaurant on commercial basis.

174. So far as the letter dated 01.03.2024 issued by MSBTE directing the assessee to stop running hotel / restaurant is concerned, we find no such query was raised by the Ld. Pr.CIT(C) regarding this letter in his notice. A perusal of the notice, copy of which is placed at page 62 of the paper book, shows that the said letter refers to the MOU dated 14.03.2023 entered into by the assessee with MSBTE for providing skill training at Government Polytechnic, Pune, Maharashtra. This MOU is totally different vis-à-vis the MOU entered into on 14.08.2018 between the MSIHMCT, MSBTE and the assessee. From the MOU dated 14.03.2023, we find MSBTE has appointed the assessee for operating MSBTE’s skill development center at Government Polytechnic, Pune which is also located in Model Colony, Pune. As per the said MOU the assessee was to run various skill courses relating to electronic hardware and ITES sector. Further, the assessee was also permitted to conduct additional training program for which necessary capital and recurring expenditure was to be incurred by the assessee. Accordingly, the assessee started a small food tech lab in the said premises which was informed to MSBTE vide letter dated 06.02.2024 stating that it has started a kitchen helper course for providing relevant skill development. Thereafter, on 01.03.2024 MSBTE directed the assessee to stop the said activity. We, therefore, find force in the argument of the Ld. Counsel for the assessee that the Ld. Pr.CIT(C) has not appreciated the facts properly that there were two different activities conducted by the assessee and both these activities were conducted to provide skilled training for hotel management/hospitality sector. We, therefore, find merit in the argument of the Ld. Counsel for the assessee that the activities of the assessee were in furtherance to its charitable objects and the assessee has not committed any violation so as to give power to the Ld. Pr.CIT(C) to cancel the registration. The grounds of appeal No.32 to 34 raised by the assessee are accordingly allowed.

175. Grounds of appeal No.35 and 36 relate to the allegation regarding payment of stipend in cash.

176. The Ld. Counsel for the assessee referring to para 7.4 of the order of the Ld. Pr.CIT(C) submitted that according to the Ld. Pr.CIT(C) the assessee has paid stipend in cash to certain trainees in violation of the guidelines issued by NAPS and has not submitted any documents to prove the genuineness of the payments made. He accordingly held that the assessee has committed specified violation by making payment of stipend in cash for which he has cancelled the registration on this ground. He submitted that most of these trainees come from rural backgrounds and they require cash for their day-to-day needs for which the assessee has made payments to some of the trainees. The assessee had also submitted sample details of the trainees to whom such stipend was paid in cash. He submitted that all these trainees are undergoing skill development and the relevant agreements entered into are available.

177. So far as the allegation of the Ld. Pr.CIT(C) that by making payment of stipend in cash the assessee has violated the guidelines issued under NAPS is concerned, he submitted that the trainees to whom such stipend is paid are partly covered under NAPS and partly under NEEM. He submitted that there is no prohibition that the stipend cannot be paid in cash under NEEM. Further the stipend paid to the trainees in cash may be a procedural lapse and the concerned department has not taken any action / asked for any explanation from the assessee. Therefore by making payment of stipend in cash, the genuineness of the activities carried out by the assessee cannot be doubted and therefore the cancellation of registration on this ground is not justified.

178. The Ld. CIT-DR on the other hand submitted that during the course of survey it was noticed from the cashbook that there were withdrawals of cash throughout the year and subsequent payments mainly with narration “Being Stipend paid”. The assessee could not produce any evidence to substantiate that these were the actual stipends paid. No other documents to prove the genuineness of the apprentices worked with the respective establishments, copy of agreement with the apprentices and establishments, identity of apprentices, application forms of the apprentices, muster sheet and other documents to verify the terms and conditions of the agreement regarding payment of stipends, identity of the trainees as well as genuineness of the cash payments were produced. Therefore, in absence of any explanation on claim of cash payments which are against guidelines of NAPS Scheme and other similar Schemes which give mandate to pay stipend through electronic mode and not in cash, the Ld. Pr.CIT(C) was justified in holding that the assessee has made specified violation of the law as per section 12AB (4) of the Act and therefore, its registration u/s 12AB r.w.s 12A(1)(ac) is liable for cancellation.

179. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Ld. Pr.CIT(C) while cancelling the registration u/s 12AA(3) & 12AA(4) and 12AB(4) has held that the assessee has paid stipend to certain trainees which is in violation of the guidelines issued by National Apprenticeship Promotion Scheme (NAPS) and the assessee could not substantiate with evidence to his satisfaction towards the genuineness of the payments. It is the submission of the Ld. Counsel for the assessee that the stipend in cash has been paid to some of the trainees who come from rural background and who require cash for their day-to-day needs. It is his submission that the assessee has submitted cash vouchers but the allegation of the Ld. Pr.CIT(C) is that the assessee did not submit copies of agreements, application forms etc of such trainees to prove the genuineness of the cash payments for which the Ld. Pr.CIT(C) has cancelled the registration. It is his submission that the trainees to whom such stipend is paid are partly covered under NAPS and partly under NEEM and for payment of stipend to the students coming under NEEM, there is no prohibition that stipend cannot be paid in cash. It is also his submission that the payment of cash to the trainees may be procedural lapse and the concerned department can take action. However, no action has been taken by the concerned department and therefore, by making payment of stipend in cash the genuineness of the activities carried out by the assessee cannot be doubted.

180. We find some force in the above arguments of the Ld. Counsel for the assessee. No doubt the assessee by making payment of stipend in cash to some of the trainees of NAPS has violated the guidelines issued by NAPS. However, there is no evidence on record that the concerned department has taken any action against the assessee. Further, the payment of stipend in cash instead of through banking channel or digital mode which is in violation of the guidelines issued by NAPS is at best a procedural lapse on the part of the assessee for which the concerned department may take action against the assessee but the registration in our opinion cannot be cancelled u/s 12AA(3) and 12AA(4). The grounds of appeal No.35 and 36 are accordingly allowed.

181. In grounds of appeal Nos.7 to 12 and 37 to 40 the assessee has challenged the order of the Ld. Pr.CIT(C) holding that the assessee is not engaged in carrying out any charitable activities.

182. The Ld. Counsel for the assessee submitted that the assessee was incorporated on 20.03.2014 u/s 8 of the Companies Act, 2013. Referring to pages 5 to 27 of the paper book which is the Memorandum of Association (MOA) of the assessee, he drew the attention of the Bench to the main objects of the MOA which is to promote, initiate, carry out, execute, implement, aid and assist activities towards skill development and meeting the entire value chain’s requirements of appropriately trained manpower. Initially, the assessee had undertaken skill development under NEEM which is promoted by All India Council for Technical Education (AICTE). The assessee has been appointed as a facilitator under the NEEM scheme vide letter dated 12.10.2015 issued by AICTE, copy of which is placed at pages 317 to 318 of the Paper Book. He submitted that as per the guidelines issued by the AICTE, to be eligible for appointment as a facilitator, it is mentioned that the said facilitator should be in the business of training for a period of at least five years. Referring to pages 307 to 316 of the paper book, he drew the attention of the Bench to the relevant guidelines issued by AICTE at para 3.2 which read as under:

“3.2 NEEM Facilitator shall be in the business of training for at least five years or the parent company under which a Section 25 Company / Section 8 of Company Act, 2013 or Relevant Act as amended from time to time, is formed to meet the objective of NEEM shall be in the business of training for at least five years.”

183. He submitted that the Apprenticeship Act, 1961 was in force for last several years. However, the number of apprentices undergoing training under the said Act was very minuscule considering the total work force. Accordingly, NAPS was introduced by the Ministry of Skill Development and Entrepreneurship (MSDE) in order to encourage industry partners to undertake apprenticeship programs. Further, the Apprenticeship Act, 1961 was amended in the year 2014 by inserting sub-section 8(2) which enabled several employers to join together either themselves or through an agency approved by the Apprenticeship Advisor for and provide apprenticeship training to the apprentice under them in accordance with the guidelines issued by the government. Accordingly, the NAPS was launched on 19.08.2016 to provide financial support to establishments undertaking apprentice programs. He submitted that to support MSMEs and other establishments, a facility of third-party aggregators was provided to encourage large number of youths for apprenticeship training. Referring to page 129 of the Paper Book he drew the attention of the Bench to the background of the NAPS as per the guidelines issued for Third Party Aggregators (TPA).

184. Referring to pages 120 to 122 of the Paper Book, he drew the attention of the Bench to the Memorandum of Understanding (MOU) entered into by the assessee with MSDE. He submitted that as per the MOU it is mentioned that Yashaswi Academy for Skills is an organisation with an objective to provide employment to youth of India across the country. It is further mentioned that based on Yashaswi’s extensive interaction with the industry partners, skill development bodies and subject matter exposed, Yashaswi has developed a work integrated certificate program in various occupations including automobile, auto component, engineering, pharmacy, food and food processive, paint, chemical, forging, foundry, logistic and other related industry. It has further been mentioned that Yashaswi aims to enhance employability of youth of India by providing apprenticeship training and to meet the skill demand of Indian industry. Accordingly, as per the MOU, the assessee has been appointed as a third-party agency between the apprentice and employer as per the guidelines issued by government of India. Referring to pages 128 to 132 of the Paper Book, he drew the attention of the Bench to the guidelines issued for Third-Party Aggregator by MSDE. He submitted that the assessee has received approval as a training partner for the following sector skills.

1. Automotive

2. Logistics

3. Electronics

4. BFSI

5. Tourism & Hospitality

6. IT-ITeS

7. Retail

8. Apparel

9. Construction

10. Food Processing

11. Healthcare

12. Life Sciences

13. Management

14. Capital Goods

15. Agriculture

16. Beauty & Wellness

17. Infrastructure Equipment

18. Green Jobs

185. Referring to page 133 of the Paper Book, he drew the attention of the Bench to the relevant certificate issued by National Skill Development Corporation. He submitted that as on date, the operations of the assessee are spread across 14 states and around 50,000 students/trainees are enrolled through the assessee for undertaking training in the NEEM/NAPS schemes.

186. So far as the allegation of the Ld. Pr.CIT(C) that the role of the assessee was only to mobilize the candidates and help in compliances is concerned, he submitted that the said allegation of the Ld. Pr. CIT(C) is not correct. He submitted that initially the assessee has to identify a particular candidate and understand his educational qualifications. Considering the educational qualifications of a particular candidate, the assessee decides under which job role the said candidate can be deployed for on-the-job training. The assessee thereafter enters into a contract with the eligible candidate and the industry partner and the said contract is to be approved by the Apprenticeship Advisor. Referring to pages 140 to 159 of the Paper Book he drew the attention of the Bench to some of the sample copies of the apprenticeship contracts entered into by the assessee.

187. He submitted that as per the NAPS guidelines, basic training is an essential component of apprenticeship training for those candidates who have not undergone any institutional training/skilled training before taking up on-the-job training. He submitted that the basic training is imparted to the fresher candidates for acquiring reasonable ability to handle instruments, equipment, machinery etc. prior to moving to the shop floor. Candidates who are ITI Pass Outs, Graduates / Diploma Holders, Dual-Learning Mode from ITI and Pursuing Graduation / Diplomas are exempted from undergoing the Basic Training. Basic training usually accounts for 20-25% of the overall Apprenticeship Program. As per the guidelines issued by MSDE, the TPA is required to provide basic training to the fresher apprentices.

188. He submitted that the Basic Training can be conducted by 1) Sequential phase- Basic training is conducted before on-the-job training or 2) Simultaneous Basic Training – conducted along with the on-the-job training in the establishment premise. He submitted that YAS is registered as a Training Provider and has various Training Centres located at different locations in the Establishment to enable the apprentices to undergo basic training at the Training Centres. YAS is registered for 2 Basic Training Providers (BTP) with registration numbers TP000295 (which was by default transferred from Skill India portal to the Apprenticeship Portal) and BTP00016 (which YAS had registered on the Apprenticeship Portal). As a BTP, YAS has 80 Training Centres within various establishments with courses mapped to these Centres as per the needs of the Establishment. As per the Basic Training guidelines, the assessee has prepared a time table for the topics to be covered and have conducted basic training to the apprentices under Sequential and Simultaneous modes. Since the outbreak of COVID-19, all the courses had to be conducted through online mode.

189. He submitted that once the candidate is deployed for the on-the-job training, he has to undergo theoretical training as well as on-the-job training. He clarified that the assessee is not at all involved in providing on-the-job training. It is the responsibility of the concerned industrial partner to provide the same. However, the concerned trainee has to undergo theoretical training according to the curriculum approved by the National Skill Development Corporation (NSDC). Referring to some sample copies placed at pages 160 to 214 of the paper book, he submitted that NSDC has approved separate curriculum for different sector skills. He submitted that the minimum number of hours of theoretical training to be undertaken by the trainee is also mentioned in the curriculum. He submitted that as per requirement of the industry partners, the assessee has also developed certain curriculums which are approved by NSDC and which are available on the website of NSDC and they can be used by any other industry partner. Referring to pages 178 to 214 of the paper book, he drew the attention of the Bench to the copies of the curriculum prepared by assessee and duly approved by NSDC.

190. The Ld. Counsel for the assessee submitted that the assessee has entered into agreements with industry partners. Referring to page 231 of the paper book he drew the attention of the Bench to an agreement entered into by the assessee with Hilti Manufacturing India Pvt. Ltd. where it is clearly mentioned in para 1 that Hilti Manufacturing is willing to deploy the services of the assessee for the purposes of implementation of NAPS. In para 4 of the agreement, obligations of TPA i.e., the assessee have been mentioned. Referring to para 4.4 of the said agreement, he submitted that it is clearly stated that the assessee shall impart theoretical training as per the curriculum according to job role in which apprentices have been enrolled through online mode. He drew the attention of the Bench to the relevant para which reads as under –

“4.4 TPA shall impart theoretical training as per the curriculum according to job role in which apprentices have been enrolled through online mode. In case Client wishes to have offline training sessions, it will be provided by TPA only above 100 nos, of Apprentices. In case Client wishes to have offline training below 100 nos., Client will have to pay additional cost of 20,000 per month for the same.”

191. Referring to copy of agreement entered into with Wipro Enterprises Pvt. Ltd., copy of which is available on page 252 of the Paper Book he submitted that even in that agreement, it is clearly mentioned that Wipro is interested in appointing the assessee as a TPA for the effective implementation of NAPS. Referring to para 4 of the said agreement available on page 255 of the paper book he submitted that obligations of TPA are mentioned wherein also it is provided that the assessee is responsible for imparting theoretical training as per the curriculum.

192. He submitted that as per the agreements entered into with the industry partners, the responsibility of providing on-the-job training is that of the assessee. Accordingly, the assessee has 281 full-time faculties as on December, 2024 to impart training for around 83 job roles of various sector skill councils. Most of these faculties are qualified as M.E./ M.Tech/ B.Ε./B.Tech/ D.M.E. Referring to pages 134 to 139 of the paper book he drew the attention of the Bench to the details of the faculty employed by the assessee for imparting training to the trainees under NEEM/NAPS.

193. He submitted that the faculty prepares a monthly training calendar in consultation with the concerned HR official and shares the same with the industrial partner as well as the apprentices. He drew the attention of the Bench to the sample copies of the training schedule for the month of March, 2024 in respect of the trainees undergoing training in Can-Pack India Pvt. Ltd., copies of which are available on pages 215 to 217 of the Paper Book. Similar mails and WhatsApp messages shared for the training to be undertaken are available on pages 218 to 220 of the Paper Book. He submitted that as a part of the training activity, the assessee on its own conducts 3rd party monthly assessment of each apprentice and shares assessment reports with the concerned industry and apprentice to understand their academic performance. He submitted that the assessee has also submitted attendance and training programs of conducting the training which are given on page 229 of the Paper Book and the photographs on pages 386 to 390 of the Paper Book.

194. In respect of agreements entered into, for providing training under NEEM contracts, the Ld. Counsel for the assessee referred to the copies of the agreements placed at pages 322 to 380 of the Paper Book and submitted that the assessee shall impart necessary training to the students. Subsequently once the trainee concerned completes his theoretical as well as on-the-job training, the said candidate has to undergo final assessment conducted by respective sector skill council. Thereafter, the certificate is issued by NSDC certifying him to have cleared the assessment for the respective job role confirming to National Skills Qualification Framework. He drew the attention of the Bench to the sample copies of the certificates placed on pages 381 to 385 of the Paper Book and submitted that in the certificates, the name of the assessee as well as the industrial partner is also mentioned.

195. So far as the allegation of the Ld. Pr. CIT(C) that the assessee is not involved in carrying out education and that the role of the assessee was to mobilise the candidates and to help in compliances only is concerned, he submitted that the Ld. Pr. CIT(C) has totally ignored the various documentary evidences submitted by the assessee. He has not appreciated that if the assessee was not carrying out educational activity in the form of providing training to the trainees/students, there was no reason for the assessee to employ around 281 faculties for imparting training.

196. So far as the allegation of the Ld. Pr. CIT(C) that no physical classroom was found during the survey action is concerned, he submitted that the training is conducted by the assessee either through online mechanism or at the premises of the industrial partners. Accordingly, question of having physical classrooms is not required.

197. He submitted that the assessee has entered into agreements with the industry partners wherein the responsibility of providing theoretical training is that of the assessee. As per the agreement, the assessee has to provide theoretical training. He submitted that the evidences for the same in the form of photographs, monthly schedule and attendance as well as report submitted by faculty of the assessee to the concerned official of the industrial partner of the training conducted have been provided. However, the Ld. Pr. CIT(C) has totally ignored all these evidences while holding that no training has been provided by the assessee. Accordingly, he submitted that the Ld. Pr. CIT(C) is not justified in holding that the assessee has not imparted any training.

198. So far as the order passed by Maharashtra Authority for Advance Ruling referred by the Ld. Pr.CIT(C) is concerned, the Ld. Counsel for the assessee drew the attention of the Bench to the copy of the said order placed at pages 742 to 743 of the Paper Book and submitted that the assessee has approached the said authority for a limited purpose to ascertain whether GST was applicable on the reimbursement of stipend according to the qualification as mentioned in Rule 33 of the GST Act, as a pure agent. He submitted that the assessee receives stipend from the industrial partners on behalf of trainees which is to be distributed to the concerned trainees. For the services rendered by the assessee, it receives separate payment from the industry partners on which GST is charged. Thus, the issue involved before Hon’ble Maharashtra Authority for Advance Ruling was totally different. Accordingly, the reliance placed on the said order by the Ld. Pr. CIT(C) is not correct.

199. So far as the allegation of Ld. Pr. CIT(C) that the assessee has subcontracted certain activities to the Business Associates is concerned, he submitted that the assessee has more than 50000 students/trainees and is operating in more than 14 states wherein it has branches/offices. For effective implementation of the scheme, the assessee has appointed business associates whose main role is to mobilise the students/trainees and oversee the fact that the stipend is paid to them. He submitted that it is not possible for the assessee to mobilise the trainees from all over the country. Accordingly, the assessee has taken the help of these business associates. However, the basic training as well as theoretical training is provided by the assessee only.

200. So far as the allegation of the Ld. Pr.CIT(C) that the assessee by subcontracting part of the activity has violated the terms of the agreement entered into with the government agencies and has also further violated the conditions on which registration u/s 12A/12AA/12AB has been granted is concerned, he referred to the MOU entered into for implementation of NAPS scheme, copy of which is placed on pages 120 to 122 of the Paper Book. Referring to pages 301 to 313 of the paper book, he drew the attention of the Bench to the guidelines issued by All India Council for Technical Education for implementation of NEEM. He submitted that there is no prohibition under the said schemes that some of the activities cannot be subcontracted. The Ld. Pr. CIT(C) has not brought on record the relevant guideline which has been violated by the assessee. So far as the allegation of the Ld. Pr.CIT(C) that the assessee has violated the conditions on which registration u/s 12AA/12AB has been granted is concerned, the Ld. Counsel for the assessee referred to the copy of the registration certificate granted u/s 12AA dated 21.06.2016, copy of which is placed on pages 30 to 31 of the Paper Book and drew the attention of the Bench to the relevant conditions which are as under:

201. Referring to pages 34 to 37 of the paper book, he drew the attention of the Bench to the approval granted u/s 12AB and submitted that there is no restriction placed upon the assessee that it cannot sub-contract any of its activities. He submitted that there is no such condition that the registration granted u/s 12AA would be revoked if any of the activities are subcontracted. He accordingly submitted that the contention of the Ld. Pr. CIT(C) that the assessee has violated the conditions on which it has been granted registration u/s 12AA/12AB is not correct. He reiterated that the assessee has not violated any of the conditions of the agreements entered into with the government departments by appointing the business associates and therefore the Ld. Pr. CIT(C) is not justified in holding that the activities of the assessee cannot be considered charitable in nature.

202. So far as the allegation of the Ld. Pr.CIT(C) that the assessee has supplied contractual labour to the industry partners which is not charitable in nature and that the assessee has carried out salary benchmarking and other services to GKN Sinter Metals Pvt. Ltd., which is not charitable in nature and also not in accordance with the objects of the assessee is concerned, he submitted that providing contractual labour or salary benchmarking services aligns with the objects of the assessee of skill development. He submitted that the practical training provided to the trainees in collaboration with the industrial partners is an essential component of skill development. The placement of skilled candidates in industries is a natural extension of skill development program ensuring trained individuals secure meaningful employment. He accordingly submitted that the above activities are in furtherance of the objects, therefore, the L.d. Pr. CIT(C) is not justified in holding that the same are not charitable in nature.

203. The Ld. Counsel for the assessee submitted that as per provisions of section 11(4A), the business income of a trust is exempt from tax if the business is incidental to the attainment of the objectives of the trust. Referring to the decision of Hon’ble Supreme Court in the case of Thanthi Trust [247 ITR 785] he submitted that the Hon’ble Supreme Court in the said decision has held that a business, whose income is utilised by the trust or the institution for the purposes of achieving of the object of the trust or institution, is a business which is incidental to the attainment of the objectives of the trust or institution. Similar view has been taken by Hon’ble Madaras High Court in the case of CIT vs. Janakiammal Ayyandar Trust reported in (2005) 277 ITR 274 (Mad). He accordingly submitted that even if it is assumed that the assessee has carried out business by providing such services, the same is incidental to the attainment of the objectives of the assessee and accordingly, the Ld. Pr. CIT(C) is not justified in holding that the said activities are not in accordance with the objects of the assessee.

204. So far as the observation of Ld. Pr. CIT(C) that Shri Vishwesh Kulkarni in his statement as well as in the affidavit had admitted that the assessee was not carrying out charitable activities and had proposed to surrender the registration granted u/s 12A/12AA of the Act is concerned, the Ld. Counsel for the assessee referred to the copy of the statement of Shri. Vishwesh Kulkarni placed on pages 488 to 523 of the Paper Book and submitted that Shri Kulkarni in his answer to question no.69 had stated that Learn and Earn Scheme was the flagship scheme of the assessee contributing more than 60% of the total revenue. He had further stated that from the year 2021, the said scheme was discontinued and hence, the activities of the assessee are no longer charitable. In answer to question no. 72, he has stated that considering the change in the activities from 2021 onwards, he proposed to surrender the registration granted to the assessee u/s 12A(1)(ac)(i) of the Act. Subsequently, Shri. Vishwesh Kulkarni filed an affidavit, copy of which is placed at pages 710 to 711 of the paper book wherein he has reiterated the same facts. He has stated that due to discontinuation of the Learn and Earn Scheme, the activities of the assessee are no longer charitable.

205. He submitted that Shri Vishwesh Kulkarni thereafter filed an affidavit of retraction, copy of which is given on pages 714 to 718 of the Paper Book. In the said affidavit, he has stated that the Learn and Earn Scheme was not carried out by the assessee, and thus, stopping of the said scheme had no bearing on the nature of activities of the assessee. He has also stated that the activities conducted by the assessee are purely educational in nature.

206. The Ld. Counsel for the assessee submitted that the basis of alleged surrender of the registration granted was that the Learn and Earn Scheme was discontinued which contributed more than 60% of the revenue. He submitted that the assessee society had never carried out the said scheme. Thus, the basis of surrender was totally incorrect since, the assessee was carrying out activities under NEEM and NAPS scheme and not under Learn and Earn Scheme. Hence, the reason given for alleged surrender of the registration certificate was totally incorrect. In fact, the Ld. Pr. CIT(C) on pages 73 to 76 has accepted this fact. He has accepted that the assessee was not carrying out Learn and Earn Scheme and there was no change in the nature of the activities of the assessee carried out prior to F. Y. 2021-22. He has also stated that the major revenue of the assessee is under NEEM and NAPS scheme and the assessee did not run any training program named Learn and Earn.

207. The Ld. Counsel for the assessee submitted that there is no provision under the law to surrender a registration certificate. The registration granted u/s 12AA/12AB can be cancelled only as per the provisions of section 12AB(4). Simply because under incorrect appreciation of fact and law, the assessee had proposed to surrender the registration certificate the same cannot be the ground for cancelling the registration unless the conditions specified in section 12AB(4) are satisfied.

208. Referring to the following decisions he submitted that it has been held that skill development amounts to a charitable activity falling within the definition of education u/s. 2(15) of the Act:

i) Escorts Skill Development vs. Commissioner of Income-tax (Exemptions), Chandigarh [2019] 178 ITD 32 (Delhi – Trib.)

ii) NSDC Skill Impact Trust VS. Commissioner of Income-tax(Exemptions) [2025] 176 com253 (Delhi – Trib.)

iii) Deshpande Education Trust vs. Assistant Commissioner of Income-tax [2025] 181 com796 (Karnataka)

iv) Commissioner of Income-tax (Exemptions) vs. Unique Educational Society [2024] 168 com448 (Punjab & Haryana)

v) Deputy Commissioner of Income-tax (Exemptions) vs. ICT Academy of Tamil Nadu [2026] 184 com634 (Chennai – Trib.)

209. So far as the decision of the Hon’ble Kerala High Court in the case of Mahatma Gandhi Charitable Society reported in 415 ITR 27 (Kerala) relied on by the Ld. CIT-DR is concerned, he submitted that in that case, the assessee was originally granted registration u/s 12A. Subsequently, the Ld. CIT cancelled the registration on the ground that no charitable activity was being carried out by the assessee. Hon’ble High Court held that the assessee was engaged in executing contracts awarded to it by the Indian railways for cleaning train coaches and railway stations. It has been held that the execution of work awarded by the Indian railways is not a public utility service carried on by the assessee and the mere fact that poor people are employed in such execution of contract awarded, would not make it a charitable purpose. Accordingly, Hon’ble High Court held that the assessee was not carrying out any charitable activity and was purely running a commercial venture. He submitted that the said decision of Hon’ble Kerala High Court is not applicable to the facts of the present case. He submitted that the assessee is engaged in providing education through skill development training which is also a flagship project of Government of India. He submitted that by providing skill development training, the assessee company is creating a pool of skilled workers to further enhance growth and development of the country and therefore, the said activity of the assessee is a charitable activity falling within the definition of education u/s 2(15) of the Act.

210. So far as the decision of the Hon’ble Kerala High Court in the case of Annadan Trust reported in 96 com207 (Kerala) relied on by the Ld. CIT-DR is concerned, he submitted that in that case, the assessee was implementing welfare schemes of various state governments, i.e., supplying food to poor street children on funds earmarked and disbursed by the government. Hon’ble High Court held that the assessee was an implementing agency, and it cannot be said to be carrying out charitable activity. Hon’ble High Court held that a welfare measure of the state implemented with the state funds was claimed as charity by the implementing agency who received consideration for such implementation. Accordingly, it was held that no charitable activity was carried out by the assessee. He submitted that in the instant case, the assessee is not implementing any scheme which is funded either by the State Government or by the Central Government. The assessee is engaged in skill development which ultimately helps nation building by enhancing and developing economic growth. Accordingly, the said decision of Kerala High Court is distinguishable and not applicable to the facts of the present case.

211. He accordingly submitted that the activities of the assessee are genuine, the assessee is engaged in imparting education and therefore the Ld. Pr.CIT(C) is not justified in cancelling the registration granted to it and therefore the registration u/s 12AA and 12AB of the Act be restored.

212. The Ld. CIT-DR on the other hand submitted that the Ld. Pr.CIT(C) has noted that while the assessee has claimed that it is carrying out charitable activity i.e. “Education” but the survey findings revealed that the assessee is mainly working as manpower supplier as well as Facilitator/Third-Party-Aggregator (TPA)/Agent for industry partners to implement government sponsored skill development schemes mainly NEEM, NAPS, etc. He submitted that during the survey no physical infrastructure related to educational activity such as classroom etc were found at any of the premises. Further the assessee itself has admitted before the Maharashtra Authority for Advance Ruling that it was working as agent under NEEM Scheme whereas the industry partners impart actual practical training to the trainees/students. Therefore, once the assessee has taken one stand before one statutory authority it cannot change its stand before another government authority. He submitted that the assessee was not carrying out any educational activity but engaged in purely commercial operation including sub-contracting for carrying out its responsibilities while acting as middlemen or facilitator. He submitted that the Ld. Pr.CIT(C) has given elaborate reasons while holding that the assessee’s role as facilitator/agent/Third party aggregator cannot be construed as ‘education’ under section 2(15) of the Act in order to get claim of exemption u/s 11 of the Act. Therefore, the activities carried out by the assessee-YAS cannot be considered as education and cannot be considered as charitable in nature and is profit motivated. He submitted that even for argument sake if it is considered that skill development through On the Job training is education, then it has been conclusively proved that the assessee is not engaged in any skill development activity but only carrying out work of Facilitator/Aggregator who acts as mobilizer and middlemen between apprentices and the industry partners.

213. Relying on various decisions, he submitted that the Ld. Pr.CIT(C) has correctly held that the assessee was not engaged in charitable activities. Finally, the Ld. CIT-DR while concluding his arguments drew the attention of the Bench to the following written submissions:

“In view of the above discussion, it is seen that the assessee is not engaged into charitable activities. The assessee has misused its charitable status by acting as conduit for HUF to evade the tax on account of fake/bogus training expenses and further siphoning off the fund of HUF to the accounts of its related persons and their concerns. The assessee has also misappropriated its income/fund by giving loan to its directors and their concerns, reimbursing personal expenses of its director, incurring repair & maintenance cost of the building and premises owned by its director & by the other trust, giving unreasonable salary to relatives of its director, paying salary of employees working for other group concerns, etc. As such, the assessee has diverted the income/funds of the company which is public money and also claimed them as application of income, which is found not in accordance with its objects for which it was granted registration. Thus, it is seen that assessee has indulged in repeated occurrences of violation as specified u/s 12AA(3)&(4) of the Act as well as section 12AB(4) of the Act. The activities of the assessee trust cannot be held genuine as there is found to be diversion of income of the assessee trust for purposes other than the Objects of the trust.

All these violations clearly come within the ambit of provisions of section 12AA(3) and 12AA(4) and clauses (a), (b), (e) of Explanation below section 12AB(4) of the Act, as applicable for the respective years. Hence, it is prayed that cancellation of registration may kindly be upheld.”

214. He accordingly submitted that the order of the Ld. Pr.CIT(C) cancelling the registration u/s 12AA(3) & 12AA(4) and 12AB(4) of the IT Act, 1961 be upheld and the appeal filed by the assessee be dismissed.

215. We have heard the rival arguments made by both the sides, perused the order of the Ld. Pr.CIT(C) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find it is the allegation of the Ld. Pr.CIT(C) that the assessee is not engaged in carrying out any charitable activities. According to him, the assessee is mainly working as a manpower supplier as well as facilitator/third-party aggregator/agent for industry partners to implement government sponsored skill development schemes. Further, Shri Vishwesh Kulkarni had agreed to surrender the registration granted u/s 12A/12AA. It is also his allegation that during the survey action no physical infrastructure like classroom, educational equipment etc were found and that no skill development courses were conducted for the students by the assessee for which he cancelled the registration.

216. From the various details furnished by the assessee we find the assessee was incorporated on 20.03.2014 u/s 8 of the Companies Act 2013. The main objects of the assessee as per the MOA have already been reproduced in the preceding paragraphs. A perusal of the same shows that the main object of the assessee is to promote, initiate, carry out, execute, implement, aid and assist activities towards skill development and meeting the entire value chains requirements of appropriately trained manpower. We find the assessee had undertaken skill development under NEEM which is promoted by All India Council for Technical Education (AICTE). The assessee was appointed as a facilitator under the NEEM scheme vide letter dated 12.10.2015 issued by AICTE, copy of which is placed on pages 317 to 318 of the Paper Book. As per the guidelines issued by the AICTE, to be eligible for appointment as a facilitator, it is mentioned that the said facilitator should be in the business of training for a period of at least five years. The said guidelines issued by AICTE are placed at pages 307 to 316 of the Paper Book. We find para 3.2 of the guidelines issued by AICTE read as under:

“3.2 NEEM Facilitator shall be in the business of training for at least five years or the parent company under which a Section 25 Company/Section 8 of Company Act, 2013 or Relevant Act as amended from time to time, is formed to meet the objective of NEEM shall be in the business of training for at least five years.”

217. We find the assessee entered into an MOU with the Ministry of Skill Development and Entrepreneurship (MSDE), copy of which is placed at pages 120 to 122 of the paper book according to which it is mentioned that Yashaswi Academy for Skills is an organisation with an objective to provide employment to youth of India across the country. It has further been mentioned that based on Yashaswi’s extensive interaction with the industry partners, skill development bodies and subject matter exposed, Yashaswi has developed a work integrated certificate program in various occupations including automobile, auto component, engineering, pharmacy, food and food processive, paint, chemical, forging, foundry, logistic and other related industry. It has further been mentioned that Yashaswi aims to enhance employability of youth of India by providing apprenticeship training and to meet the skill demand of Indian industry. Accordingly, as per the MOU, the assessee has been appointed as a third-party agency between the apprentice and employer as per the guidelines issued by government of India. From the various details furnished by the assessee we find the operations of the assessee are spread across 14 states and around 50,000 students/trainees are enrolled through the assessee for undertaking training in the NEEM/NAPS schemes. From the various details furnished by the assessee in the paper book, we find it has entered into agreements with industry partners. For example, a copy of an agreement entered into by the assessee with Hilti Manufacturing India Pvt. Ltd. is placed at page 231 of the paper book. As per the said agreement, it is clearly mentioned that the said company is willing to deploy the services of the assessee for the purposes of implementation of NAPS. Similarly, MOU with Wipro Enterprises Pvt Ltd, copy of which is placed at page 252 of the paper book shows that Wipro is interested in appointing the assessee as a TPA for effective implementation of NAPS. The various other agreements which have been placed in the paper book also mention similar things. Further, from the various details furnished in the paper book, we find the assessee has employed 281 full time faculties as on December, 2024 to impart training for around 83 job roles of various sector skill councils. A perusal of the details furnished at pages 134 to 139 of the paper book shows that most of these faculties are qualified as M.E. / M.Tech / B.E. / B.Tech / D.M.E. etc who are imparting training to the trainees under NEEM / NAPS.

218. From the various details furnished in the paper book, we find that the faculty prepares a monthly training calendar in consultation with the concerned HR official and shares the same with the industrial partner as well as the apprentices. The assessee also maintains attendance of training programs, some of the details are placed at pages 222 to 226 of the Paper Book.

219. So far as the observation of the Ld. Pr.CIT(C) that the assessee is not involved in carrying out education and the role of the assessee was to mobilise the candidates and to help in compliances is concerned, we find the assessee is conducting training either through online mechanism or at the premises of the industrial partners. It has entered into agreements with industrial partners wherein the responsibility of providing theoretical training is that of the assessee.

220. So far as the order passed by Maharashtra Authority for Advance Ruling, copy of which is placed at pages 732 to 743 of the Paper Book which is referred by the Ld. Pr.CIT(C) is concerned, we find the assessee has approached the said authority for the limited purpose to ascertain whether GST was applicable on the reimbursement of stipend according to the qualification as mentioned in Rule 33 of the GST Act, as a pure agent. Since the assessee receives stipend from the industrial partners on behalf of trainees which is to be disbursed to the concerned trainees, therefore, we find merit in the argument of the Ld. Counsel for the assessee that the issue involved before Maharashtra Authority for Advance Ruling was totally different. As mentioned earlier, the assessee has more than 50000 students/trainees and is operating in more than 14 states wherein it has branches/offices. For effective implementation of the scheme, the assessee has appointed business associates. The main role of the business associates is to mobilise the students/trainees and oversee the fact that the stipend is paid to them. Since it is not possible for the assessee to mobilise the trainees from all over the country, therefore, we find force in the argument of the Ld. Counsel for the assessee that the assessee has taken the help of these business associates and the basic training as well as theoretical training is provided by the assessee only.

221. So far as the allegation of the Ld. Pr.CIT(C) that the assessee by subcontracting part of the activity has violated the terms of the agreement entered into with the government agencies and has violated the conditions on which registration u/s 12A/12AA/12AB has been granted is concerned, we find force in the arguments of the Ld. Counsel for the assessee that there is no prohibition under the said schemes that some of the activities cannot be subcontracted. Nothing has been brought on record to show that the assessee has violated the relevant conditions.

222. So far as the allegation of the Ld. Pr.CIT(C) that the assessee has supplied contractual labour to the industry partners which is not charitable in nature and that the assessee has carried out salary benchmarking and other services to GKN Sinter Metals Pvt. Ltd. which is not charitable in nature and also not in accordance with the objects of the assessee is concerned, we find force in the argument of the Ld. Counsel for the assessee that providing contractual labour or salary benchmarking services align with the objects of the assessee of skill development. The practical training provided to the trainees in collaboration with the industrial partners is an essential component of skill development. The placement of skilled candidates in industries is a natural extension of skill development program ensuring trained individuals secure meaningful employment.

223. We find as per provisions of section 11(4A) the business income of a trust is exempt from tax if the business is incidental to the attainment of the objectives of the trust. The Hon’ble Supreme Court in the case of Thanthi Trust reported in 247 ITR 785 (SC) has held that a business whose income is utilised by the trust or the institution for the purposes of achieving of the object of the trust or institution is a business which is incidental to the attainment of the objectives of the trust or institution.

224. We find the Hon’ble Madras High Court in the case of Janakiammal Ayyandar Trust reported in 277 ITR 274 (Mad) has upheld the decision of the Tribunal holding that the income of the assessee has been employed to achieve its charitable objects and therefore the assessee is entitled to exemption u/s 11 of the Act. The Hon’ble High Court while holding so has also relied on the decision of the Hon’ble Supreme Court in the case of Thanthi Trust (supra). We, therefore, find merit in the argument of the Ld. Counsel for the assessee that even if it is assumed that the assessee has carried out business by providing such services, the same is incidental to the attainment of the objectives of the assessee and therefore, the Ld. Pr.CIT(C) is not justified in holding that the said activities are not in accordance with the objects of the assessee.

225. So far as the observations of the Ld. Pr.CIT(C) that Shri Vishwesh Kulkarni in his statement as well as in the affidavit had admitted that the assessee was not carrying out charitable activities and had proposed to surrender the registration granted u/s 12A/12AA of the Act is concerned, we find from the various details furnished by the assessee in the paper book that Shri Vishwesh Kulkarni in his answer to question no.69 had stated that Learn and Earn Scheme was the flagship scheme of the assessee contributing more than 60% of the total revenue. He had further stated that from the year 2021, the said scheme was discontinued and hence, the activities of the assessee are no longer charitable. In his answer to question no.72, he has stated that considering the change in the activities from 2021 onwards, he proposed to surrender the registration granted to the assessee u/s 12A(1)(ac)(i) of the Act. However, subsequently, Shri Vishwesh Kulkarni filed an affidavit wherein he has reiterated the same facts and has stated that due to discontinuation of the Learn and Earn Scheme, the activities of the assessee are no longer charitable. Thereafter, Shri Vishwesh Kulkarni filed another affidavit of retraction, copy of which is placed at pages 714 to 718 of the Paper Book, wherein he has stated that the Learn and Earn Scheme was not carried out by the assessee and thus stopping of the said scheme had no bearing on the nature of activities of the assessee. Therefore, the basis of alleged surrender of the registration granted was that the Learn and Earn Scheme was discontinued which contributed more than 60% of the revenue. Since the assessee society had never carried out the said scheme, therefore, we find merit in the argument of the Ld. Counsel for the assessee that the basis of surrender was totally incorrect. We further find the Ld. Pr.CIT(C) at pages 75 to 76 of his order has mentioned as under:

“Moreover, it was found that vide Govt. of Maharashtra GR 26.07.2010, Yashaswi Institute of Technology (YIT) (Prop. concern of Shri Vishwesh Kulkarni) started ‘Learn & Earn’ in association with Yashwantrao Chavan Open University (YCOU). Similarly, it was found that Yashaswi Institute for Skill Development, Pune which is also another Proprietary concern of Shri Vishwesh Kulkarni, was approved by the Maharashtra Govt.’s GR dtd. 23.04.2013 to run the Scheme “Learn & Earn” in association with The Maharashtra State Board of Technical Education (MSBTE) for the academic year 2013-14. Thus, it was found that the assessee was not running any such training program named as “Learn & Earn” approved by the government authority as claimed by Shri Vishwesh Kulkarni in his statement on oath. It is significant to mention here that the assessee in its many of the agreements executed with industry partners have introduced itself as running “Learn & Earn Scheme”.

226. Therefore, the rationale given for alleged surrender of the registration was totally incorrect since the assessee has never carried out any training program under Learn and Earn Scheme. We, therefore, are of the considered opinion that the registration granted u/s 12AA/12AB cannot be cancelled on account of incorrect appreciation of facts.

227. We find the Delhi Bench of the Tribunal in the case of Escorts Skill Development vs. Commissioner of Income-tax (Exemptions), Chandigarh reported in [2019] 178 ITD 32 (Delhi – Trib,) has held that imparting “Skill Development Training” is a charitable activity. The relevant observation of the Tribunal reads as under:

“16. Ld. CIT (E) was only required to firstly satisfied himself if the trust has been established for charitable activities and its activities are genuine for the purpose of grant of registration w/s 12AA of the Act, rest of the suspicion and apprehensions raised by the Ld. CIT (E) can be taken care of by the Revenue at the time of framing assessment. Moreover, the Ld. CIT (E) declined the registration merely on the basis of assumptions and presumptions. 1. Following the decision rendered by the coordinate Bench of the Tribunal in case cited as Nanak Chand Jain Charitable Trust (supra) and case decided by Hon’ble High Court of Punjab & Haryana in IILM Foundation Academy (supra), we are of the considered view that imparting “skill development training”, by the applicant company which is also a flagship project of the Government of India for sustaining its growth rate and to create the pool of skill worker to further enhance its growth and development is a charitable activity following within the definition education u/s 2(15) of the Act entitling the applicant company for registration u/s 12AA of the Act and consequent approval u/s 80G of the Act, hence both the appeals filed by the applicant company are allowed directing the Id. CIT (E) to provide registration u/s 12AA to the assessee and grant consequent approval u/s 80G of the Act.”

228. We find the Delhi Bench of the Tribunal in the case of NSDC Skill Impact Trust vs. Commissioner of Income-tax (Exemptions) reported in [2025] 176 taxmann.com253 (Delhi – Trib.) while taking similar view has held as under:

“4. We have heard the rival submissions and perused the materials available on record. The assessee trust was started on 31.05.2022. The assessee obtained registration u/s 12A(1)(ac)(vi) of the Act on 12.08.2022. The assessee filed an application on 20.09.2024 in Form 10AB for regular registration u/s 12A(1)(ac)(iii) of the Act. The main objects of the assessee as per the Form 10AB of the Act as noted by the ld CIT(E) are for imparting education and advancement of any other object of general public utility. The assessee explained that it is a registered trust of the National Skill Development Corporation (NSDC) acting as an approved training partner under the National Skill Development Programme of Ministry of Skill Development and Entrepreneurship, Govt. of India, in order to encourage, promote and facilitate skill development, impactful employability, entrepreneurship skill and competency and create mechanism/ structure for information “outreach”, for generating awareness about the prospects which would open up on acquiring specific skills. The assessee submitted the copy of agreement dated 24.09.2024 with NSDC. The ld CIT(E) noted that as per the said agreement with the NSDC agreement, the assessee is a mere service provider for providing training services to NSDC for consideration of payment of 10% on actual expenses as compensation. The assessee submitted before the ld CIT(E) that 10% management fee collected is only to recover the operation cost incurred by the assessee trust. It is not profit driven fee charges but only reimbursement to sustain the trust’s activities, ensuring efficient execution of its objects. Further, the ld CIT(E) noted that the assessee had entered into an agreement with M/s. Edujobs Academy Pvt. Ltd on 11.09.2024 wherein M/s Edujobs Academy Pvt. Ltd was appointed as its coimplementation partner to oversee full implementation of the skilling programme in Odisha. The assessee was asked to explain how the agreement has been entered into with M/s. Edujobs Academy Pvt. Ltd even before the parent agreement with NSDC. The assessee submitted that though the formal agreement had been executed on 24.09.2024, the agreement with NSDC is applicable from 01.04.2024 to 31.03.2009. The work had already started and discussion had already been taking place with NSDC to start the services on ground. The agreement with M/s. Edujobs Academy Pvt. Ltd executed on 11.09.2024 was in anticipation of the formalization of the NSDC agreement as it was already in pipeline and discussions were going on. This was necessary to ensure operational readiness and alignment with the broader objectives of the scheme.

5. The ld CIT(E) however did not agree with the contentions of the assessee and concluded that the assessee has not engaged in the charitable activities but only engaged in rendering services of collection of management fees of 10%. Hence, he concluded that the activities carried out by the assessee are business/ target oriented and commercial in nature rather than charity-focused. Accordingly, he held that the assessee had failed to satisfy the genuineness of the charitable activities carried out by it and hence, the application seeking for registration u/s 12(1)(ac)(iii) of the Act was rejected. Consequentially, the claim of exemption u/s 80G of the Act was also rejected by the ld CIT(E).

6. The copy of the trust deed is enclosed in pages 5 to 22 of the Paper Book. The objects of the trust are reflected in pages 8 to 11 of the Paper Book in the trust deed which are not reiterated herein for the sake of brevity. On perusal of the trust deed, we find that the Settlor of the Trust is National Skill Development Corporation (NSDC), a Government body, through its initial trustees. A sum of Rs. 1 lakh stood deposited into the bank account of the trust as initial contribution. The list of students who are enrolled for the training programmes are provided from pages 77 to 94 of the Paper Book containing the full name, gender, date of birth, email id, marital status, father’s name, mother’s name, domicile state, mobile number and permanent address. No expenditures were incurred by the assessee for the year ended 31.03.2023 and 31.03.2024 by the trust. The provisional balance sheet of the assessee trust as on 31.12.2024 was placed on record which are enclosed in pages 101 to 103 of the Paper Book, wherein it can be seen that a sum of Rs.56,73,335/- has been spent on activities carried out by it. The assessee submitted the complete details together with the bills, vouchers and photographs in respect of activities carried out by it. The details of training sessions conducted at the Skill India Training Centre at various locations together with the respective candidates undergoing training of the assessee trust were filed. The bills and vouchers raised by M/s. Edujobs Academy Pvt. Ltd in relation to the training activity carried out were enclosed on sample basis before the ld CIT(E). The assessee gave the details of its operating skill training at 5 centers in Odisha wherein, training is being provided to candidates in the below mentioned job roles:-

i. IT Help desk .

ii. F&B steward

iii. Graphic designing

iv. Story Board Artist

v. Stitcher Goods and Garments

vi. Cutter Goods & Garments

vii. Part Making Helper

viii. Barista Executive

ix. Footwear and fashion accessory in retail

7. The assessee submitted that 608 candidates had been enrolled in the above mentioned job roles out of which 212 candidates were trained and the balance were undergoing training. We find all these aforesaid details were not doubted/ disputed by the ld CIT(E). The main grievance of the ld CIT(E) is that assessee is a service provider charging 10% management fee; and assessee had entered into agreement with M/s. Edujobs Academy Pvt. Ltd on 11.09.2024 as co-implementing partner, whereas the parent agreement with NSDC was entered only on 24.09.2024. In this regard, the assessee had explained in detail that the discussions with NSDC were in the pipeline and the formal agreement was executed on 24.09.2024. What is to be seen at the time of grant of registration by the ld CIT(E) is that whether the activity carried out which are mentioned in the trust deed or the activity proposed to be carried out are indeed charitable in nature. There is absolutely no doubt on perusal of the objects of the trust deed that the activities mentioned thereon are indeed charitable in nature. Hence, we direct the ld CIT(E) to grant registration u/s 12A of the Act to the assessee trust holding that it is engaged in charitable activity and consequentially grant claim of exemption u/s 80G of the Act.

8. In the result, both the appeals of the assessee are allowed.”

229. We find the Hon’ble Karnataka High Court in the case of Deshpande Education Trust vs. Assistant Commissioner of Income-tax reported in [2025] 181 taxmann.com796 (Karnataka) has held as under (Headnotes):

“Section 2(15), read with section 11 of the Income-tax Act, 1961 – Charitable purpose (Education) – Assessment years 2011-12 and 2012-13-Assessee-trust was registered under section 12AA and engaged in running coaching classes and conducting skill-development and vocational training programmes for students/rural youth by charging fees – It filed returns declaring nil income Assessing Officer denied exemption under section 11 to assessee on ground that hefty fees was charged by assessee for providing its services and that there was major surplus that had been generated Tribunal upheld order of Assessing Officer on ground that activity of assessee was in nature of ‘advancement of any other object of general public utility’ and proviso to section 2(15) got attracted. It was noted that assessee trust was formed for purpose of undertaking charitable activities through education for empowerment of underprivileged, poor and women, viz., vocational training and skill development and surplus that had been generated had been deposited back into account of trust and had not been utilised for non-educational purposes Whether since activity that assessee was indulged in included systematic instructions or training which involved process of teaching and learning, it could not be stated that activities offered by assessee were not ‘education’ under section 2(15)-Held, yes – Whether, further, mere generation of surplus would not be a ground to deny exemption to assessee when surplus so generated was used solely for educational purposes only Held, yes – Whether, therefore, activity of assessee was ‘education’ under section 2(15) and, accordingly, assessee was entitled for exemption under section 11 – Held, yes [Paras 14, 15, 18 and 19] [In favour of assessee.]”

230. We find the Hon’ble Punjab & Haryana High Court in the case of Commissioner of Income-tax (Exemptions) vs. Unique Educational Society reported in [2024] 168 taxmann.com448 (Punjab & Haryana) has held as under:

231. We find the Chennai Bench of the Tribunal in the case of Deputy Commissioner of Income-tax (Exemptions) vs. ICT Academy of Tamil Nadu reported in [2026] 184 taxmann.com634 (Chennai – Trib.) has held as under:

“12. We have heard the rival submissions, perused the orders of the lower authorities and the material placed on record, including the paper book filed by the assessee. The short issue that arises for our consideration is whether the activities carried on by the assessee fall within the ambit of “education” as defined u/s.2(15) of the Act, thereby entitling it to exemption u/s.11 and 12 of the Act, or whether the same fall under the residuary limb of “advancement of any other object of general public utility” and are hit by the proviso to section 2(15) of the Act.

13. It is an admitted fact that the assessee is a society registered under section 12A of the Act and is engaged in activities relating to skill development, training, certification, and employability enhancement of students and faculty in coordination with Government bodies and educational institutions. The nature of activities, as borne out from the record, indicates that the assessee conducts structured training programmes, faculty development initiatives and vocational courses aligned with national skill development policies.

14. The AO has treated the said activities as falling under the limb of “general public utility” and invoked the proviso to section 2(15) on the ground that the assessee is generating receipts from certification fees, membership fees, and other related activities, which according to the AO are in the nature of trade, commerce or business. The ld.CIT(A), however, has held that the activities of the assessee constitute “education” and accordingly allowed exemption u/s.11 of the Act.

15. In order to adjudicate the issue, it is necessary to consider the ratio laid down by the Hon’ble Supreme Court in the case of Assistant Commissioner of Income Tax (Exemptions) vs. Ahmedabad Urban Development Authority (2022) 449 ITR 1 (SC). The Hon’ble Apex Court has comprehensively interpreted the scope of section 2(15) and the applicability of its proviso. It has been held that the proviso to section 2(15) is attracted primarily in cases falling under the residuary limb of “general public utility” where the activities are carried out in the nature of trade, commerce or business. At the same time, the Hon’ble Court has clarified that the determination is fact-specific and has to be undertaken on a year-to-year basis, having regard to the nature of receipts and whether the charges are on cost basis or involve significant mark-up.

16. The Hon’ble Supreme Court has further emphasized that where the receipts are merely incidental and aimed at cost recovery or are intrinsically linked to the main charitable object, the same would not ipso facto render the activity as commercial. It is only where the activities are undertaken with a profit motive and involve substantial mark-up that the proviso would be attracted. Applying the aforesaid principles to the facts of the present case, we find that the dominant object of the assessee is to impart skill-based education and training with the objective of enhancing employability. Such activities, in the present socio-economic context, form an integral part of the educational framework. The programmes conducted by the assessee are structured, curriculum-based and aimed at systematic development of skills and knowledge. Therefore, the same cannot be equated with mere commercial or business activities.

17. We further find that the receipts earned by the assessee from certification fees, membership fees and training programmes are incidental to its main object of imparting education and skill development. There is nothing on record to indicate that the assessee is engaged in profit maximization or that the fees charged are disproportionately high so as to characterize the activities as trade, commerce or business. The finding of the ld. CIT(A) that the assessee does not charge fees at market-driven commercial rates and that the surplus, if any, is ploughed back into its charitable activities, remains uncontroverted by the Revenue.

18. The reliance placed by the ld. DR on the judgment of the Hon’ble Supreme Court in Ahmedabad Urban Development Authority (supra) is, in our view, misplaced. The said decision does not lay down an absolute proposition that any receipt exceeding a particular threshold would automatically disentitle an assessee from exemption. On the contrary, the Hon’ble Supreme Court has clearly held that the true test is the nature, object and manner of carrying out the activity, and whether the receipts are incidental or indicative of a profit-oriented commercial activity.

19. In the present case, the Revenue has failed to demonstrate, on the basis of cogent material, that the assessee’s activities are driven by a profit motive or that they constitute business activities in substance. The mere presence of receipts from training or certification programmes cannot, in isolation, lead to the conclusion that the proviso to section 2(15) is attracted. Further, we find merit in the submissions of the ld.AR with regard to the applicability of the judgment of the Hon’ble Supreme Court in the case of ACIT (Exemption) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC). In this regard, para 172 of the said judgment states as under:

“172. Yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profits, the prohibition against carrying on business or service related to business is not attracted – if quantum of such profits do not exceed 20% of its overall receipts.”

20. Applying the above ratio to the facts of the present case, we note from the material placed on record, including the financial statements for the impugned year that the assessee had incurred deficits in several years. This clearly indicates that the activities were not driven by a profit motive.

21. We also find that the ld. CIT(A), after appreciating the nature of activities and the material on record, has rightly concluded that the assessee is engaged in educational activities and is therefore entitled to exemption under section 11. The findings of the ld. CIT(A) are based on proper appreciation of facts and do not call for any interference. In view of the foregoing discussion, and respectfully following the ratio laid down by the Hon’ble Supreme Court in Ahmedabad Urban Development Authority (supra), we hold that the activities of the assessee fall within the ambit of “education” u/s.2(15) of the Act and are not hit by the proviso thereto. Consequently, the assessee is entitled to exemption u/s.11 and 12 of the Act. Accordingly, we find no merit in the grounds raised by the Revenue. The order of the ld. CIT(A) is upheld and the appeal filed by the Revenue is dismissed.

22. In the result the appeal of the revenue is dismissed.”

232. So far as the decision of the Hon’ble Kerala High Court in the case of Mahatma Gandhi Charitable Society reported in 415 ITR 27 (Kerala) relied on by the Ld. CIT-DR is concerned, we find in that case the assessee was originally granted registration u/s 12A. Subsequently, the Ld. CIT cancelled the registration on the ground that no charitable activity was being carried out by the assessee. The Hon’ble High Court held that the assessee was engaged in executing contracts awarded to it by the Indian railways for cleaning train coaches and railway stations. It was held that the execution of work awarded by the Indian railways is not a public utility service carried out by the assessee and the mere fact that poor people are employed in such execution of contract awarded, would not make it a charitable purpose. Accordingly, the Hon’ble High Court held that the assessee was not carrying out any charitable activity and was purely running a commercial venture. However, the facts of the present case are completely different since it is engaged in providing education through skill development training which is also a flagship project of the Government of India.

233. So far as the decision of the Hon’ble Kerala High Court in the case of Annadan Trust reported in 96 com207 (Kerala) relied on by the Ld. CIT-DR is concerned, we find in that case the assessee was implementing welfare schemes of various state governments, i.e., supplying food to poor street children on funds earmarked and disbursed by the government. The Hon’ble High Court held that the assessee was an implementing agency, and it cannot be said to be carrying out charitable activity. The Hon’ble High Court held that a welfare measure of the state implemented with the state funds was claimed as charity by the implementing agency who received consideration for such implementation. Accordingly, it was held that no charitable activity was carried out by the assessee. However, in the present case the assessee is not implementing any scheme which is funded either by the State Government or by the Central Government. Therefore, the said decision is not applicable to the facts of the present case. The grounds raised by the assessee on this issue are accordingly allowed.

234. In view of the above discussion, we hold that the Ld. Pr.CIT(C) is not justified in cancelling the registration u/s 12AA(3) & 12AA(4) and 12AB(4) of the Act. We, therefore, direct him to restore the registration granted earlier. The grounds raised by the assessee are accordingly partly allowed.

235. In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open Court on 3^rd July, 2026.