In Brief
Batanagar Education and Research Trust was registered under Section 12AA of the Income Tax Act and given Section 80G approval for charitable donations. During a tax survey, the Trust's managing trustee admitted in writing that donations received by cheque were substantially returned to donors in cash through intermediaries, and were "accommodation entries" used to procure bank loans and finance expansion. The CIT and Tribunal cancelled the registration; the High Court allowed the Trust's appeal. The Supreme Court held that a trust which misuses its tax-exemption status by participating in bogus donation schemes is not entitled to retain registration. The Court reversed the High Court and restored the cancellation, finding the managing trustee's admissions conclusively established misuse of the registered status.
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