Late Shri Mohanlal Kanjibhai Pansara Education & Charitable Trust, JAMNAGAR V. The Commissioner of Income Tax, JAMNAGAR

ITA 172/RJT/2013

• Counselvise Citation: 17224914 RSA 2013
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 30-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: HARISHKUMAR SHAH
• Keywords: Charitable institution
• Section: 12A; 12AA; 10; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL , SMC BENCH, RAJKOT BEFORE SHRI D K SRIVASTAVA, AM ITA NO. 172 /RJT/2013 LATE SHRI MOHANLAL KANJIBHAI PANSARA V. CIT, JAMNAGAR EDUCATION & CHARITABLE TRUST, VIBHAPAR, HAPA RAJKOT ROAD JAMNAGAR 361120 PAN: A AATL 9805 E DATE OF HEARING : 22 . 0 5 . 201 3 DATE OF PRONOUNCEMENT : 20 .06. 201 3 ASSESSEE BY : SHRI HARISHKUMAR SHAH, CA REVENUE BY : SHRI K. C. MATHEWS, DR ORDER D. K. SRIVASTAVA : THE AP PEAL FILED BY THE ASSESSEE - TRUST IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME - TAX, JAMNAGAR ON 26 .0 2 .2013 U/S 12AA OF THE INCOME - TAX ACT , ON THE FOLLOWING GROUND: - 1. THE LEARNED COMMISSIONER OF INCOME - TAX JAMNAGAR ERRED IN LA W AND ON FACT ON REJECTING APPLICATION FOR REGISTRATION U/S 12(A)(A) OF THE INCOME - TAX ACT, 1961 ON THE GROUND THAT THE TRUST DEED DOES NOT CONTAINS THE PROVISION IN THE EVENT OF ITS DISSOLUTION TO THE EFFECT THAT UPON THE DISSOLUTION, IF ANY PROPERTY REMA INS AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES, THE SAME SHALL BE TRANSFERRED TO TRUST HAVING SIMILAR OBJECTS. 2. THE LEARNED COMMISSIONER OUGHT TO HAVE CONSIDER THE SUBMISSION DATED 18 TH FEB. 2013. 2. THE ASSESSEE - TRUST HAS FILED ENGLISH VERSION O F TRUST DEED ORIGINALLY WRITTEN IN GUJARATI. PERUSAL OF THE AFORESAID TRUST DEED SHOWS THAT IT WAS EXECUTED BY FIVE PERSONS ON 03.02.2012. THE ASSESSEE - TRUST SUBSEQUENTLY APPLIED FOR REGISTRATION UNDER THE BOMBAY PUBLIC TRUST ACT 1950 WHICH WAS GRANTED BY THE ASSISTANT CHARITY COMMISSIONER, JAMNAGAR ON 22.03.2012. THE ASSESSEE - TRUST ALSO APPLIED FOR REGISTRATION U/S 12AA OF THE INCOME - TAX ACT BEFORE THE COMMISSIONER OF INCOME - TAX, JAMNAGAR ON 06.08.2012. IN THE COURSE OF REGISTRATION PROCEEDINGS, THE COMMIS SIONER OF INCOME - TAX ISSUED A SHOW - CAUSE NOTICE DATED 05.02.2013 BY WHICH HE CALLED UPON THE ASSESSEE - TRUST TO FURNISH T RUST D EED, CERTIFICATE U/S 13(1)(C) SIGNED BY ALL THE T RUSTEES, PROOF OF ACTIVITY CARRIED OUT, ACKNOWLEDGEMENT OF RETURN OF INCOME 2 ITA 69 /RJT/2013 FILED BY THE T RUST AND CERTIFICATE ISSUED UNDER BPT ACT, 1950. THE ATTENTION OF THE ASSESSEE WAS ALSO INVITED TO THE FACT THAT THERE WAS NO PROVISION IN THE TRUST DEED TO ENSURE THAT THE PROPERTIES OF THE TRUST UPON DISSOLUTION WILL BE TRANSFERRED TO ANOTHER TR UST HAVING SIMILAR OBJECT. IN REPLY, THE ASSESSEE - TRUST SUBMITTED AN UNDATED LETTER BEFORE TH E COMMISSIONER OF INCOME - TAX. AFTER CONSIDERING THE AFORESAID SUBMISSIONS MADE BY THE ASSESSEE, THE LD COMMISSIONER DECLINED TO REGISTER THE ASSESSEE - TRUST WITH TH E FOLLOWING OBSERVATIONS: - 4. THE REPLY OF THE ASSESSEE TRUST HAS BEEN CONSIDERED AT LENGTH AND IS FOUND TO BE UNACCEPTABLE. SINCE THE ASSESSEE TRUST DID NOT COMPLY WITH THE REQUIREMENTS OF THE SHOW CAUSE NOTICE DATED 05.02.2013 AND AS THE TRUST DEED DOE S NOT CONTAIN PROVISIONS IN THE EVENT OF ITS DISSOLUTION TO THE EFFECT THAT UPON THE DISSOLUTION IF ANY PROPERTY REMAINS AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES, THE SAME SHALL BE TRANSFERRED TO THE TRUST HAVING SIMILAR OBJECTS, THE TRUST IS NOT FO UND TO BE FULFILLING THE CONDITIONS LAID DOWN UNDER THE ACT. THEREFORE, REGISTRATION SOU GHT U/S.12(A)(A) OF THE ACT CAN NOT BE GRANTED. HOWEVER, THE TRUST MAY MAKE A FRESH APPLICATION FOR REGISTRATION U/S.12AA WITH REQUISITE MODIFICATION IN THE TRUST DEED AND AFTER RECTIFICATION OF THE ABOVE REFERRED LACUNAS, IF IT WISHES SO. 3. AGGRIEVED BY THE ORDER PASSED BY THE LD COMMISSIONER OF INCOME - TAX, THE ASSESSEE - TRUST IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS WHICH READ AS UNDER: - 1. THE APPLICANT IS TRUST REGISTERED ON 22 ND MARCH, 2012 WITH THE BOMBAY PUBLIC TRUST ACT, 1950 VIDE REGISTRATION CERTIFICATE NO.E - 3471/JAMNAGAR. 2. THE APPELLANT TRUST MADE APPLICA TION FOR REGISTRATION U/S 12(A)(A) OF THE INCOME TAX ACT, 1961 ON 6 TH AUGUST, 2012. 3. THE COMMISSIONER OF INCOME - TAX JAMNAGAR ISSUED SHOW CAUSE NOTICE DTD 5 TH FEB. 2013 STATING YOUR TRUST WAS CREATED ON 22 ND MARCH, 2013. AS PER THE TRUST DEED, THE OB JECTS OF THE TRUST ARE TO CARRY OUT VARIOUS EDUCATIONAL AND SOCIAL ACTIVITIES FOR THE SAKE OF POOR AND NEEDY PEOPLE. 3 ITA 69 /RJT/2013 HOWEVER, ON VERIFICATION OF YOUR APPLICATION SUGGESTS THAT NO ACTIVITIES TOWARDS THE OBJECTS HAVE BEEN CARRIED OUT SINCE THE INCEPTION OF T HE TRUST. FURTHER, THE TRUST DEED DONT CONTAIN PROVISION REGARDING DISSOLUTION OF THE TRUST TO THE EFFECT THAT ON THE DISSOLUTION, THE PROPERTIES OF THE TRUST IF ANY, AFTER MEETING THE LIABILITIES OF THE TRUST WOULD BE TRANSFERRED TO ANOTHER TRUST HAVING THE SAME OBJECTS. 4. THE APPLICANT TRUST HAS SUBMITTED REPLY TO SHOW CAUSE NOTICE ON 18 TH FEB. 2013 THAT. 01 . THE TRUST IS DULY REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950. HENCE THE ALL THE PROVISIONS OF THE BOMBAY PUBLIC TRUST ACT, 1950 ARE APPLI CABLE TO THE TRUST. 02 . NO REVOCABLE TRUST CAN BE REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950. 03 . ONCE THE CHARITABLE TRUST CAME INTO EXISTENCE AND IS DULY REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 IT IS PERPETUAL ENTITY. IT WILL BE INTERESTING TO REFER FOLLOWING SECTIONS OF THE BOMBAY PUBLIC TRUST ACT, 1950 FOR BETTER UNDERSTANDING OF THE PERPETUAL STATUS OF A DULY REGISTERED CHARITABLE TRUST; AS PER SECTION 10 OF THE BOMBAY PUBLIC TRUST ACT, 1950 PUBLIC TRUST CANNOT BE VOID ON THE GROUND OF UNCERTAINTY. AS PER SEC. 12, PUBLIC TRUST CANNOT BE VOID ON GROUND OF ABSENCE OF OBLIGATION. AS PER SEC.13 PUBLIC TRUST CANNOT BE VOID ON FAILURE OF SPECIFIC OBJECT OR SOCIETY ETC. CEASING TO EXIST. 04 . THERE IS NOTHING IN THE BOMBAY PUBLIC TRUST ACT, 1 950 WHICH PRESCRIBES ANY SITUATION IN CASE OF DISSOLUTION OF A CHARITABLE TRUST. THERE IS NO PROVISION AS TO DISSOLUTION OF A REGISTERED PUBLIC TRUST. 5. SIMPLY NOT MENTIONING ANY CLAUSE IN THE TRUST DEED OR NOT MENTIONING ANY WORDS THAT THE TRUST IS IR REVOCABLE, IT DOES NOT MEAN THAT THE TRUST IS NOT A PUBLIC CHARITABLE TRUST ONCE IT IS DULY REGISTERED UNDER THE BOMBAY PUBLIC 4 ITA 69 /RJT/2013 TRUST ACT, 1950. PROVISIONS OF BOMBAY PUBLIC TRUST ACT, 1950 PREVAILS OVER ANY OTHER PROVISIONS MENTIONED IN EITHER THE TRUST DEE D OR ELSEWHERE IF SUCH ARE CONTRARY TO THE PROVISIONS OF THE BOMBAY PUBLIC TRUST ACT, 1950. 6. NON INCLUSION OF DISSOLUTION OF TRUST OF CLAUSE IN TRUST DEED HAVING EFFECT THAT ON DISSOLUTION, THE PROPERTIES OF THE TRUST IF ANY AFTER MEETING THE LIABILITIE S OF THE TRUST WOULD BE TRANSFERRED TO ANOTHER TRUST HAVING SAME OBJECTS. SUCH GROUND FOR NON GRANTING REGISTRATION U/S 12A(A) OF THE ACT, 1961 IS MERE PRESUMPTION AND ON SURMISE THAT THE PROPERTIES AT THE TIME DISSOLUTION SHALL BE DISPOSED OFF BY THE TRU STEE AND NOT TRANSFERRED TO ANOTHER TRUST HAVING SAME OBJECT. 7 . THE LEARNED CIT - JAMNAGAR HAS REJECTED AN APPLICATION FOR REGISTRATION U/S 12A OF THE IT ACT, 1961 BY STATING THAT THE REPLY OF THE ASSESSEE TRUST HAS BEEN CONSIDERED AT LENGTH AND IS FOUND TO BE UNACCEPTABLE. SINCE THE ASSESSEE TRUST DID NOT COMPLY WITH THE REQUIREMENTS OF THE SHOW CAUSE NOTICE DATED 05.02.2013 AND AS THE TRUST DEED DOES NOT CONTAIN PROVISIONS IN THE EVENT OF ITS DISSOLUTION TO THE EFFECT THAT UPON THE DISSOLUTION IF ANY PR OPERTY REMAINS AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES, THE SAME SHALL BE TRANSFERRED TO THE TRUST HAVING SIMILAR OBJECTS, THE TRUST IS NOT FOUND TO BE FULFILLING THE CONDITIONS LAID DOWN UNDER THE ACT. 6. THE APPELLANT TRUST IS DULY REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 AND UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 THE DISSOLUTION OF TRUST, WHETHER THE TRUST DEED CONTAINS CLAUSE OF DISSOLUTION OR NOT, CAN MADE ONLY AFTER THE APPROVAL OF THE COURT. THEREFORE DENIAL OF REGISTRATION IS N OT JUSTIFIED. 7. WE REQUEST HONORABLE ITAT KINDLY DIRECT CIT JAMNAGAR TO GRANT THE REGISTRATION U/S 12A OF THE INCOME - TAX ACT, 1961. RELIANCE IS PLACED ON ITA 2798/AHD/2012 DTD. 19.04.2013. 4. THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO REL IED UPON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT - I V. KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TRUST , [2013] 29 TAXMANN.COM 228 (GUJARAT). 5 ITA 69 /RJT/2013 5 . IN REPLY, THE LD DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE LD COMMISSIONER OF INCOME - TAX . HE ALSO RELIED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF TRUCK OPERATORS UNION V. CIT , (1981) 132 ITR 62 (DEL). 6 . I HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. THE INCOME - TAX ACT ENVISAGE S TWO TYPES OF TRUSTS: (I) REVOCABLE TRUST , THE INCOME OF WHICH IS NOT EXEMPT IN VIEW OF S ECTION 61 OF THE INCOME - TAX ACT; AND (II) TRUSTS FOR CHARITABLE OR RELIGIOUS PURPOSE S , THE INCOME OF WHICH IS EXEMPT U/S 11 UPON FULFILLMENT OF REQUISITE CONDITIONS. THERE IS ANOTHER WAY TO LOOK AT TWO TYPES OF TRUSTS ENVISAGED BY THE INCOME - TAX ACT AND THAT IS (1) A P RIVATE T RUST COVERED BY CHAPTER V OF THE INCOME - TAX ACT; AND (2) A T RUST FOR CHARITABLE OR RELIGIOUS PURPOSES CONTEMPLATED BY SECTION 2 (15) OF THE INCOM E - TAX ACT R.W.S. 11 TO 13B OF THE INCOME - TAX ACT. 7 . THE INCOME OF A TRUST OR INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSE AS DEFINED IN SECTION 2 (15) OF THE INCOME - TAX ACT IS EXEMPT FROM LEVY OF INCOME - TAX ON FULFILLMENT OF THE CONDITIONS LAID DOWN U NDER SECTION 11 TO 13B OF THE INCOME - TAX ACT. ONE OF THE MANDATORY CONDITIONS FOR AVAILING EXEMPTION U/S 11 IS THAT IT SHOULD BE REGISTERED U/S 12A/12AA OF THE INCOME - TAX ACT BY THE CONCERNED COMMISSIONER OF INCOME - TAX . SECTION 12AA REQUIRES THE COMMISSION ER TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND GENUINENESS OF ITS ACTIVIT IES BEFORE REGISTERING IT. 8 . SUB - SECTION ( 15 ) OF SECTION 2 DEFINES CHARITABLE PURPOSE BY WAY OF INCLUSIVE DEFINITION SO AS TO INCLUDE (1) RELIEF TO POOR, (2) EDUCATION, (3) MEDICAL RELIEF, AND (4) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY NOT INVOLV ING THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY . 9 . AS ALREADY STATED EARLIER, THE DEFINITION OF CHARITABLE PURPOSE AS GIVEN IN SECTION 2(15) IS IN THE NATURE OF INCLUSIVE DEFINITION. CHARITY MEANS AN ACT OF PIETY AND BENEVOLENCE INTENDED TO BENEFIT THE SOCIET Y AT LARGE. EDUCATION WOULD QUALIF Y TO 6 ITA 69 /RJT/2013 BE CALLED A CHARITABLE ACTIVITY ONLY IF IT IS OF PUBLIC CHARACTER DIRECTED FOR THE BENEFIT OF THE COMMUNITY OR A SECTION OF THE COMMUNITY AND NOT MOTIVATED BY COMMERCIAL OR BUSINESS CONSIDERATIONS. AN ACTIVITY WHICH IS MOTIVATED BY COMMERCIAL CONSIDERATIONS CAN NEVER QUALIFY TO BE CALLED A CHARITABLE ACTIVITY. THE SAME PRINCIPLE APPLIES TO EDUCATION. THE INHERENT FEATURES OF CHARIT Y MUST BE PRESENT IN ALL THE ACTIVITIES ENUMERATED IN SECTION 2(15) . PERUSAL OF THE TRUST DEED FILED BY THE ASSESSEE - TRUST BEFORE US DOES NOT SHOW THAT THE ACTIVITIES PROPOSED TO BE CARRIED OUT BY THE ASSESSEE - TRUST ARE IN THE NATURE OF CHARITABLE ACTIVITIES. IT IS TRUE THAT CLAUSE 3 OF THE TRUST DEED, WHICH LA YS DOWN THE AIMS AND PURPOSE OF THE TRUST, AUTHORIZES THE ASSESSEE - TRUST TO ESTABLISH AND RUN SCHOOL AND COLLEGES, PRO VIDE MEDICAL RELIEF TO POOR ETC., B UT THERE IS NO STIPULATION IN THE ENTIRE TRUST DEED THAT THE AFORESAID ACTIVITIES WOULD BE CARRIED OUT BY THE ASSESSEE - TRUST AS CHARIT ABLE ACTIVITIES. 10 . THERE IS NO CLAUSE IN THE TRUST DEED TO SHOW THAT THE ASSESSEE - TRUST HAS BEEN CREATED AS IRREVOCABLE TRUST. AS ALREADY MENTIONED EARLIER, A TRUST CAN BE REVOCABLE AS WELL AS IRREVOCABLE. A REVOCABLE TRUST IS NOT ENTITLED TO EXEMPTION IN VIEW OF S ECTION 61 OF THE INCOME - TAX ACT. THE ASSESSEE IS REQUIRED TO ESTABLISH THAT THE TRUST CREATED BY THE TRUST DEE D IS IN THE NATURE OF IRREVOCABLE TRUST. IF NECESSARY, THE TRUST DEED WILL HAVE TO BE APPROPRIATELY AMENDED IN THIS BEHALF. 1 1 . ON PERUSAL OF TRUST DEED, IT IS NOTICED THAT THERE IS NO CLAUSE IN THE TRUST DEED IMPOSING LEGAL OBLIGATION ON THE ASSESSEE - T RUST OR ITS MEMBERS TO HOLD INCOME OF THE ASSESSEE - TRUST ONLY FOR CHARITABLE PURPOSE . THERE IS NO CLAUSE IN THE TRUST DEED BY WHICH THE ELEMENT OF PRIVATE GA IN IS EXCLUDED. SIMILARLY, THERE IS NO CLAUSE IN THE TRUST - DEED TO SHOW THAT THE PROFITS WOULD NOT BE DIVIDED OR DISTRIBUTED AMONG THE MEMBERS AT ANY TIME OR AT THE TIME OF DISSOLUTION. IN THE ABSENCE OF SUCH A CLAUSE, IT IS DIFFICULT TO TREAT THE ASSESSEE - TRUST AS A CHARITABLE TRUST BECAUSE IT IS POSSIBLE FOR THE MEMBERS OF THE TRUST, UPON ITS DISSOLUT ION, TO DIVIDE THE REMAINING FUNDS AMONG TRUSTEES. THE VIEW THAT IS BEING TAK EN IN THE MATTER IS SUPPORTED BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN TRUCK OPERATORS UNION V. CIT (1981) 132 ITR 62 (DEL). 1 2 . IN VIEW OF THE FOREGOING, IT IS CON SIDERED APPROPRIATE TO SET ASIDE THE ORDER PASSED BY THE LD COMMISSIONER OF INCOME - TAX AND RESTORE THE MATTER TO HIS FILE SO 7 ITA 69 /RJT/2013 THAT REASONABLE TIME IS MADE AVAILABLE TO THE ASSESSEE - TRUST TO AMEND THE TRUST DEED AND ALSO ENABLE THE COMMISSIONER OF INCOME - TAX TO TAKE A REASONABLE VIEW IN THE MATTER IN CONFORMITY WITH LAW. THE ASSESSEE - TRUST CAN AMEND THE TRUST DEED WITHIN A PERIOD OF THREE MONTHS FROM THE DATE OF RECEIPT OF THIS ORDER FAILING WHICH THE COMMISSIONER SHALL BE FREE TO PASS SUCH ORDER AS HE CONSI DER S APPROPRIATE IN THE MATTER. APPEAL FILED BY THE ASSESSEE - TRUST IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 20 .06 . 201 3 SD/ - ( D. K. SRIVASTAVA) ACCOUNTANT MEMBER RAJKOT: 20 .06 .2013 BT COPY OF ORDER FORWARDED TO: - 1 . APPELLANT - LATE SHRI MOHANLAL KANJIBHAI PANSARA EDUCATION & CHARITABLE TRUST, VIBHAPAR, HAPA RAJKOT ROAD, JAMNAGAR 361120 2 . RESPONDENT - CIT, JAMNAGAR 3 . CONCERNE D CIT , 4 . DR, ITAT, RAJKOT 5 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT