Relief by courts against cancellation of S.12 A and S.80(G)

Cancellation of S.12 A registration

As tax authorities are more and more resorting to cancellation of charitable status of Trusts, a Punjab High Court decision would come as a relief.

As per the decision, Income Tax authorities must record findings in writing that a Charitable Trust is either not undertaking its activities in accordance with its objects or the activities stated are not genuine, before issuing an order for its cancellation of S. 12A registration.

This is a pre-condition before cancellation of the registration, since the Trust originally is registered under S. 12A after due consideration of its activities.

[Case CIT, Ludhiana vs Ved Niketan Dham, Public Chaitable Trust, (2013)]  

Denial of S.80(G) Relief
In another case, Delhi High Court rejected an appeal by tax authorities for denying S.80G relief to a charitable trust.

The tax authorities argued before High Court that the charitable trust did not maintain regular accounts as required under S. 80G (5) (iv). However the Court rejected appeal by the tax authorities on the ground that Director IT (Exemptions) order only talked of minimal level of activities undertaken by the Trust and did not elaborate on non-maintenance of accounts. Hence the Tribunal Order setting the same aside was valid.
[Case Director Income Tax vs Neel Gagan Charitable Trust, (2013)]  

From the above two decisions it is clear that order issued by the Tax authorities must be read very carefully. It is essential that order complies with all requirements of the legislation  to be legally compliant.

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