Tuesday, 13 February 2018

HC : Upholds retrospective withdrawal of Sec 10(23C) exemption citing educational Trust’s illegal activities

Karnataka HC dismisses assessee’s (a Trust running 13 Educational Institutions) writ, upholds withdrawal of Sec. 10(23C) exemption with retrospective effect from April 1, 2009 (i.e. the date on which approval was granted) onwards; Revenue had withdrawn exemption based on a search and seizure operation conducted in December, 2015 on assessee’s various premises which revealed cash donations (capitation fees) collected from students for admission to medical courses and utilized for personal gains of trustees; Observes that approval u/s. 10(23C) was thoroughly misused by the trustees, notes that a staggering sum of Rs. 52 cr. of capitation fees was booked under the innocuous name of ‘Anonymous Donations’ which was clearly against public policy and specifically prohibited by SC in various cases; Holds that “Trust had indulged in illegal activities … and rather various other business activities of the family of Trustees and their money was passing through the cover and shields of the Books of Accounts of the petitioner - Trust rendering it as merely a skeleton for the purpose of exemption..”, remarks that “the petitioner - Trust cannot be allowed to cry wolf on the anvil of breach of principles of natural justice.”; Upholding exemption withdrawal from April 2009 onwards, HC states that “illegalities and transactions offending the said provisions cannot be split or bifurcated for the period in question only after the search and seizure operations were carried out on 16/12/2015 and the illegality cannot be allowed to be perpetuated for the preceding periods for which such evidence pointing out the illegalities exist on record.”, distinguishes assessee’s reliance on SC rulings in Queen’s Educational Society and American Hotel and Lodging Association Educational Institute, Rajasthan HC ruling in Geetanjali University Trust:HC 

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