GATTI VALLEY EDUCATIONAL FOUNDATION,BENGALURU vs. COMMISSIONER OF INCOME (EXEMPTIONS), BENGALURU

(ii) There was some mismatch in the value of the shares claimed by the assessee vis-z-vis the investment shown by the companies and the share capital of another company.

(iii) According to the ld. CIT(E), the shares of private limited companies would not serve any charitable objects of the assessee.

(iv) There was no charitable activity carried out by the assessee so as to achieve its objects except claiming the expenditure under the head ‘legal expenses’ amounting to Rs. 12,09,735/- only.

10.1 However, the learned CIT (Exemptions), while considering the assessee’s application for the late filing of Form 10B for the assessment year 2020–21, observed certain facts as detailed below: i. The assessee had acquired shares of companies namely, Sparkle Commotrade Pvt. Ltd. and Combined Tracom Private Limited as donations. Both of these companies were holding shares in another company namely M/s Gladiator Commodities Private Limited, which owned a piece of land. In other words, by accepting the donation of these companies in the form of . shares, the assessee became the owner of the impugned piece of land. ii. The learned CIT (Exemptions) observed a mismatch in the number of shares held by these two companies in GCPL vis-à- vis the investments shown in their respective books of accounts.

10.2 Besides the above, the learned CIT (Exemptions) during the proceedings also found that: a. The land acquired by the assessee during the assessment year 2020–21 had not been used for any charitable activity up to the date of the order. b. It was unclear how the acquisition of the shares would serve the assessee's stated educational purpose. c. The assessee claimed having carried out charitable activities in the field of education by establishing a PU College and Best Innovation University, as reflected in the main object clause of the assessee company. However, no approval was furnished by the assessee from any concerned authority for the establishment of the university. d. The assessee did not carry out any activity toward achieving its objects since the assessment year 2020-21, except for claiming a major expense of ₹12,69,735 under the head "Legal Expenses."

10.3 In view of the above, the learned CIT (Exemptions) concluded that the assessee had not furnished any evidence suggesting the genuineness of its activities for achieving its charitable objects. Hence, the learned CIT (Exemptions) canceled the registration certificate granted under section 12AA of the Act.

10.4 Now, the issue before us is whether the act of receiving the donation in the form of shares amounts to a non-charitable activity on the part of the assessee. The shares were received by the assessee through a Memorandum of Understanding (MoU) between the assessee and the parties holding the shares of the aforementioned companies. This understanding, dated 29 June 2019, is placed on record. It is also an admitted fact that the land was held by the aforementioned company and eventually came into the possession of the assessee by virtue of its shareholding.

10.5 Thus, what transpires is that it was not the shares per se that were acquired by the assessee, but a piece of land intended to be used for educational activities. This fact can be verified from the MoU available on record. Accordingly, it is inappropriate to state that the shares of companies would not serve the purpose of achieving the assessee's objects. In addition, we also note that the assessee is in the process of achieving its objectives, as detailed below: • Best Innovation University has been duly recognized by the office of the Andhra Pradesh government, as placed in the appeal file as Annexure C.

• A letter of intent was issued by the Higher Education (EC) Department of the Government of Andhra Pradesh, for establishing Best Innovation University (placed as an annexure F to the appeal).

• A letter was also issued by the University Grants Commission recognizing Best Innovation University as a private university for imparting education.

10.6 A conjoint reading of all the above documents reveals that the assessee has commenced its activities by obtaining approval from government agencies. There is no allegation by the ld. CIT (Exemptions) that these approvals were subsequently withdrawn. Therefore, no adverse inference can be drawn against the assessee holding that the assessee has not commenced any charitable activities.

10.7 It is also worth mentioning that establishing a university is not a trivial task. It is a time-consuming process. Furthermore, it was submitted by the learned AR during the hearing that the assessee is in the process of raising funds to construct buildings on the acquired land. Based on the above, we conclude that it cannot be alleged that the assessee has not carried out any activity of a charitable nature, as claimed by the learned CIT (Exemptions).

10.8 We also note that although there was some mismatch recorded by the CIT (Exemptions) regarding the shares held by the companies vis-à-vis the investments shown in their respective books of accounts, this cannot be a basis for drawing adverse conclusions against the assessee. In this appeal, we are dealing with the issue of cancellation of a registration certificate that was granted subject to certain conditions and such mismatch as discussed above cannot be ground for canceling the registration. Thus, we set aside the findings of the learned CIT (Exemptions) and direct that the registration certificate be granted to the . assessee in accordance with the law, based on the discussion above. Accordingly, the appeal of the assessee is hereby allowed.

Order pronounced in court on 20th day of May, 2025