Cancellation of Registration under Section 12AB on Sale of Donated Books-Held Invalid: ITAT Hyderabad

Citation- John Foundation v. DCIT

ITAT- Hyderabad

ITA No: 643 (Hyd) of 2025

Assessment Year: 2022-23

Date of Order- August 26, 2025

Brief Facts:

• The assessee was a registered charitable and religious trust under section 12A.

• It received religious books from foreign donors free of cost and supplied them to its closely associated company, which sold them to the public at a profit margin of 25-50%.

• The Principal Commissioner of Income Tax (PCIT) cancelled the registration under section 12AB, alleging that income from property held under trust was applied other than for the trust’s objects, and that the activities were not genuine or were carried out contrary to the conditions of registration.

Observations of the Court: The Tribunal held as follows-

• The Tribunal noted that the books were received free of cost and the only expenses

  incurred were import duties and logistics.

• The revenue generated from their sale was applied towards charitable activities such as

  construction of schools, children’s homes, hospital maintenance, and education

  projects.

• The PCIT’s finding that the books were meant for free distribution was not backed by

  evidence.

• There was no proof of bogus expenditure or diversion of income to related parties.

• Distribution and sale of books were consistent with the main objects of the trust as

  permitted in its deed.

• Hence, the cancellation of registration was based on assumptions and lacked

  evidentiary support.
  

The ITAT held that the cancellation of registration under section 12AB was unjustified,

as the trust had applied the revenue from book sales to its charitable objects. Since no

violation of section 13 or misuse of income was established, the order of the PCIT was

set aside and the trust’s registration was restored. The appeal was allowed in favour of

the assessee.