CIT Vs Ponnaiyah Ramajeyathammal Educational And Charitable Trust (Madras High Court)
The Madras High Court considered Revenue appeals challenging the Income Tax Appellate Tribunal’s order dated 10.12.2009, which had set aside the Commissioner of Income Tax’s order dated 30.03.2009 cancelling the respondent trust’s registration under Section 12AA(3) of the Income-tax Act, 1961. The respondent trust had been granted registration on 02.12.1998 and was engaged primarily in running an educational institution along with charitable activities.
Following a search under Section 132 on 05.10.2006 in the case of a person connected with the trust and a subsequent survey, the Revenue alleged several violations, including investment of trust funds in the managing trustee’s proprietary concerns, rent advances from trust funds, diversion of corpus funds, sale of educational institutions, collection of unaccounted capitation fees, violations of Section 13 of the Income-tax Act, maintenance deficiencies in books relating to supplies and services, acquisition of assets by trustees out of trust funds, transfer of corpus funds into trustees’ bank accounts, and enrichment of trustees through trust funds. A dual system of accounting for student fee receipts was also stated to have been detected. On the basis of these findings, a show cause notice dated 27.02.2009 was issued and the Commissioner cancelled the trust’s registration under Section 12AA(3).
