IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Reserved on : 29.11.2025 Pronounced on : 27.02.2026 Whether full judgment is pronounced or operative part thereof : Full The Commissioner of Income Tax, Patiala ...Appellant Versus Baba Gandha Singh Education Trust, Barnala ...Respondent CORAM: HON’BLE MRS. JUSTICE LISA GILL HON’BLE MR. JUSTICE PARMOD GOYAL Present: Ms. Pridhi J. Sandhu, Advocate for appellant.

Ms. Radhika Suri, Senior Advocate with Ms. Pranika Singla, Advocate for respondent.

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PARMOD GOYAL, J.

Present appeal has been filed against the order dated 29.09.2010 (Annexure A-3) passed by Income Tax Appellate Tribunal, whereby appeal against order dated 16.03.2010 (Annexure A-2) passed by Commissioner of Income Tax cancelling registration under Section 12AA of Income Tax Act, 1961 in favour of respondent-Trust, was allowed.

2. Factual matrix required to appreciate and decide controversy arising in present case is being noticed herein. Respondent–Baba Gandha Singh Educational Trust on application dated 11.04.2007 was granted registration under section 12AA of the Income Tax Act, 1961 (hereinafter referred to as ‘1961 Act’) vide order dated 29.08.2007 (Annexure A-1) w.e.f. 01.04.2007 for pursuing educational activities. On 05.11.2009, the Commissioner of Income Tax, Patiala issued a notice under Section 12AA(3) of 1961 Act proposing to cancel the registration of the respondent-Trust on the ground that it was generating surplus for assessment year 2002-03 to assessment year 2007-08 and therefore went beyond the purpose for which registration was accorded to it.

3. Respondent in its reply to the show cause notice pleaded that it was imparting education and the surplus generated was ploughed back by way of investment in capital assets. In furtherance of its stated object generation of surplus by running educational institution and its utilization for education purpose would not disentitle it from exemption/cancellation of registration u/s 12AA(3) of 1961 Act.

4. The Commissioner of Income Tax vide order dated 16.03.2010 (Annexure A-2) after review of copies of accounts filed by ITO, Barnala for assessment years 2002-2003 to 2007-2008 held that respondent-Trust was generating huge surplus year after year, which shows that the Trust was not carrying on activity as per Section 2(15) of 1961 Act wherein charitable activity has been defined. While cancelling the registration under Section 12AA(3) of 1961 Act, reliance was placed upon judgment of Supreme Court in Municipal Corporation of Delhi Vs. Children Book Trust, (1992) 3 SCC 390 and the judgment of the Hon’ble Uttarakhand High Court in Commissioner of Income Tax Vs. Queens’ Educational Society and Anr.

2009 (319) ITR 160.

5. On appeal filed by respondent–Trust before the Income Tax Appellate Tribunal, Chandigarh (hereinafter referred to as ‘Tribunal’), learned Tribunal noticed that pertinently the Commissioner does not dispute that the assessee/Trust was carrying on educational activities which is admittedly the dominant objective of the assessee/Trust. Notably the assessee/Trust is engaged in running schools and the Commissioner of Income Tax has not pointed out any other activity being carried out by the assessee/Trust. The learned Tribunal thereafter allowed the appeal and set aside the cancellation of registration under Section 12AA of 1961 Act in favour of respondent-Trust.

6. While setting aside order of Commissioner of Income Tax, learned Tribunal vide interim order dated 29.09.2010 placed reliance upon judgment of this Court in Pinegrove International Charitable Trust Vs. Union of India and Ors., 2010 (327) ITR 73. Aggrieved therefrom present appeal was filed by the Department.

7. Learned counsel for appellant has defended order of cancellation passed by Commissioner of Income Tax on the ground that respondent-Trust was found involved in activities other than charitable activities as defined in Section 2 (15) of 1961 Act and was generating huge surplus since assessm