Selective Funding of Political Content Justifies Cancellation of Section 12AB Registration: ITAT:

Selective Funding of Political Content Justifies Cancellation of Section 12AB Registration: ITAT The Independent and Public Spirited Media Foundation, a trust registered under Section 12A/12AB of the Income Tax Act to support independent public-interest journalism, was subjected to a survey under Section 133A on 7 September 2022. During the survey, the Department examined digital data from laptops, Tally servers and mobile devices. The material indicated that the Foundation paid up to Rs.1 lakh per story, compared to Rs. 50,000 for other subjects. WhatsApp communications between the Foundation’s CEO and media entities such as The Caravan, The Print and Dool 360 showed suggestions and preferences for specific stories and themes. The Principal Commissioner of Income Tax (Central) cancelled the Foundation’s registration under Section 12AB(4), with retrospective effect from AY 2017–18 (FY 2016–17). Main Issue: Whether the PCIT (Central) had valid jurisdiction to cancel the trust’s registration, and whether selective promotion and funding of political content amounted to a “specified violation” of charitable objects under the Income Tax Act. Tribunal Decided: The ITAT dismissed the foundation’s appeal and upheld the cancellation of registration. The Tribunal held that the PCIT (Central) had proper jurisdiction, as the case had been validly transferred under Section 127. The ITAT found that paying significantly higher rates for political and governance-related articles, coupled with communications influencing story selection, amounted to promotion of a political agenda. Such activities went beyond the stated charitable objects of supporting independent journalism. The Tribunal concluded that these actions constituted “specified violations” under Section 12AB, justifying withdrawal of tax-exempt status. To Read Full Judgment, Download PDF Given Below