ITO (OSD), CHENNAI V. Suganthi Educational Trust, CHENNAI

ITA 2695/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90585 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 01-06-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 27-10-2014
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ
• Section: 12AA; 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . , ! '# $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2695/MDS/2014 / ASSESSMENT YEAR : 2011-12 THE INCOME TAX OFFICER (OSD) (EXEMPTIONS)-III CHENNAI VS. M/S SUGANTHI EDUCATIONAL TRUST NO.15, CORPORATION COLONY KODAMBAKKAM CHENNAI 600 024 [PAN AAATS 4315 A] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI N. RENGARAJ, CIT /RESPONDENT BY : SHRI ANANDD BABUNATH, CA / DATE OF HEARING : 01-06-2015 ! / DATE OF PRONOUNCEMENT : 30-06-2015 / O R D E R PER N.R.S GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VII, CHEN NAI, DATED 23.7.2014 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. SHRI N. RENGARAJ, LD. DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT THE ASSESSEE-TRUST IS RUNNING SEVERAL EDUCATI ONAL INSTITUTIONS. THE ASSESSEE-TRUST WAS ALSO REGISTERED INITIALLY U /S 12AA OF THE ACT. ITA NO. 2695/14 :- 2 -: SUBSEQUENTLY, THE ASSESSEE-TRUST AMENDED ITS TRUST DEED ON 31.3.2000. SUBSEQUENTLY, THE AMENDMENT DEED DATED 31.3.2000 W AS REVOKED BY ANOTHER DEED DATED 17.4.2003 AND ANOTHER AMENDMENT DEED WAS EXECUTED ON 21.11.2005. THE LD. DR FURTHER POINTED OUT THAT BY AN AMENDMENT DEED DATED 11.4.2006 A MINOR AGED ABOUT 8 YEARS WAS INDUCTED AS ONE OF THE TRUSTEE. ON 23.10.2007 ANOT HER MINOR AGED ABOUT 15 YEARS WAS INDUCTED AS ANOTHER TRUSTEE BY W AY OF AN AMENDMENT DEED. ACCORDING TO THE LD. DR, THE TRUST EE CANNOT BE MINOR. THE TRUSTEE HAS TO PERFORM THE LEGAL OBLIG ATIONS CONFERRED ON THE TRUST THEREFORE, THE ASSESSING OFFICER FOUND TH AT THE TRUST IS NO LONGER VALID AND ACCORDINGLY, DENIED EXEMPTION U/S 11 OF THE ACT. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) FOU ND THAT THERE IS NO PROHIBITION UNDER THE ACT FOR INDUCTION OF MINOR AS TRUSTEE IN THE TRUST, THEREFORE, EXEMPTION U/S 11 CANNOT BE DENIED . THE MAIN OBJECTION OF THE LD. DR IS THAT NO MINOR CAN BE A T RUSTEE WITHOUT THE KNOWLEDGE OF THE DEPARTMENT. THE AMENDMENT DEED EX ECUTED BY THE TRUSTEES TO INDUCT THE MINORS AS TRUSTEES WAS NOT I NFORMED TO THE DEPARTMENT AND NO APPROVAL OF THE DIRECTOR OF INCOM E- TAX(EXEMPTIONS) WAS OBTAINED. THEREFORE, ACCORDING TO THE LD. DR, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 11 OF T HE ACT. 3. ON THE CONTRARY, SHRI ANANDD BABUNATH, LD. REPRESEN TATIVE FOR THE ASSESSEE SUBMITTED THAT UNDER SECTION 10 O F THE INDIAN TRUSTS ITA NO. 2695/14 :- 3 -: ACT, 1882, EVERY PERSON CAPABLE OF HOLDING PROPERTY CAN BE A TRUSTEE. UNDER SECTION 11 OF THE INDIAN CONTRACT ACT, 1872, A MINOR CAN ALSO HOLD THE PROPERTY THROUGH A GUARDIAN. THEREFORE, A CCORDING TO THE LD. REPRESENTATIVE, THERE IS NO PROHIBITION UNDER THE A CT FOR A MINOR BECOMING TRUSTEE OF THE TRUST. THE TRUST WAS CREAT ED BY A DEED DATED 11.11.1993. THE ORIGINAL TRUSTEES ARE DR. G. KATHA MUTHU, MRS ALAGUSUNDARI W/O G. KATHAMUTHU, MISS K. SUJATHA, D/ O G. KATHAMUTHU, MISS K.K.SUGANTHI, D/O G. KATHAMUTHU. THE FOURTH T RUSTEE NAMELY, MISS K.K.SUGANTHI INTENDED TO RESIGN FROM THE TRUST EE. ON THE BASIS OF THE VOLUNTARY RESIGNATION, THE TRUST DEED WAS AMEND ED ON 31.3.2000 ACCEPTING HER RESIGNATION. SUBSEQUENTLY, BY ANOTHE R DEED DATED 17.4.2000 THE AMENDMENT DEED DATED 31.3.2000 WAS RE VOKED. ANOTHER DEED WAS ALSO EXECUTED ON 21.10.2005. BY W AY OF AMENDMENT DEED DATED 11.4.2006, BABY S. KHIRAN KUMA R WAS INDUCTED AS ONE OF THE TRUSTEE. ACCORDING TO THE L D. REPRESENTATIVE, SHRI S. KHIRAN KUMAR IS AGED ABOUT 8 YEARS AND HE W AS REPRESENTED THROUGH HIS MOTHER AND NATURAL GUARDIAN SMT SUJATHA BALASUBRAMANIAN. BY WAY OF ANOTHER DEED DATED 23.1 0.2007, BABY S. ROHINI JEYA PRIYA AGED ABOUT 15 YEARS WAS INDUCTED AS ONE OF THE TRUSTEE TO BE REPRESENTED BY HER MOTHER AND NATURAL GUARDIAN MRS. SUJATHA BALASUBRAMANIAN. AS PER SECTION 10 OF THE INDIAN TRUSTS ACT, 1882, EVERY PERSON CAPABLE OF HOLDING PROPERTY CAN BE A TRUSTEE. ITA NO. 2695/14 :- 4 -: ACCORDING TO THE LD. REPRESENTATIVE, MINORS CAN AL SO HOLD PROPERTY THROUGH THEIR RESPECTIVE GUARDIAN, THEREFORE, THE C IT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT I S NOT IN DISPUTE THAT THE TRUST WAS ESTABLISHED BY A DEED DATED 11.11.199 3. THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) BY ORDER DATED 29.6.1998 GRA NTED REGISTRATION U/S 12AA OF THE ACT. A COPY OF THE TRUST DEED IS N OT FILED BEFORE THIS TRIBUNAL. THEREFORE, WE ARE UNABLE TO EXAMINE THE OBJECTS OF THE TRUST AND POWER OF THE TRUSTEES. IT IS NOT KNOWN WHETHER THE FOUNDER/TRUSTEE HAVE ANY POWER TO AMEND THE TRUST D EED OR NOT. IT IS ALSO NOT KNOWN WHETHER THE TRUST IS AN IRREVOCABLE TRUST OR REVOCABLE TRUST. FROM THE MATERIAL AVAILABLE ON RECORD IT AP PEARS THAT THE ORIGINAL TRUSTEES ARE (I)DR. G. KATHAMUTHU (II)MRS ALAGUSUNDARI W/O G. KATHAMUTHU (III) MISS K. SUJATHA, D/O G. KATHAMUTHU ,AND (IV) MISS K.K.SUGANTHI, D/O G. KATHAMUTHU. FROM THE ORDERS OF THE LOWER AUTHORITIES IT APPEARS THAT BY A DEED OF AMENDMENT DATED 31.3.2000, MISS K. SUJATHA WAS RELIEVED FROM THE BOARD OF TRUS TEES BECAUSE OF HER VOLUNTARY RESIGNATION. BY ANOTHER DEED DATED 17.4. 2003, THE AMENDMENT DEED DATED 31.3.2000 APPEARS TO HAVE REVO KED. BY AMENDMENT DEEDS DATED 11.4.2006 AND 23.10.2007, BAB Y S.KHIRAN KUMAR AND BABY RHINI JEYA PRIYA WERE INDUCTED AS TR USTEES IN THE TRUST ITA NO. 2695/14 :- 5 -: TO BE REPRESENTED BY THEIR MOTHER AND NATURAL GUARD IAN SMT. SUJATHA BALASUBRAMANIAN. FROM THE ORDER OF THE CIT(A) IT APPEARS THAT ANOTHER AMENDMENT DEED WAS ALSO EXECUTED ON 22.11.2 005. HOWEVER, THE PURPOSE FOR WHICH THE AMENDMENT DEED D ATED 22.11.2005 WAS EXECUTED IS NOT AVAILABLE ON RECORD. COPY OF THE TRUST DEED OR THE COPIES OF THE AMENDMENT DEEDS WER E NOT FILED EITHER BY THE DEPARTMENT OR BY THE ASSESSEE BEFORE THIS T RIBUNAL. THEREFORE, THIS TRIBUNAL IS UNABLE TO EXAMINE THE P OWER OF THE TRUSTEES TO AMEND THE TRUST DEED. UNLESS AND UNTIL A SPECIF IC POWER IS CONFERRED ON THE FOUNDER OR THE TRUSTEES, THE TRUST DEED CANNOT BE AMENDED. FURTHER MORE, THE APPROVAL OF THE COMPETE NT COURT WAS NOT OBTAINED SO FAR. THE DIRECTOR OF INCOME-TAX(EXEMPT IONS) WAS ALSO NOT INFORMED ABOUT THE INDUCTION OF MINORS AS TRUSTEES. 5. WE FIND THAT THE HON'BLE APEX COURT IN THE CASE OF SRI AGASTHYAR TRUST VS CIT [1999] 236 ITR 23, HAD AN OC CASION TO CONSIDER THE POWER OF THE FOUNDER/TRUSTEE TO AMEND THE TRUST DEED. AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE MADRA S HIGH COURT IN THANTHI TRUST VS ITO [1973] 91 ITR 261, THE HON'BLE APX COURT FOUND THAT THE TRUSTEE HAD NO AUTHORITY OR JURISDICTION T O EXECUTE A FRESH TRUST DEED AND THE DOCUMENT EXECUTED SUBSEQUENTLY IS OF N O CONSEQUENCE AND IT IS ONLY A SCRAP OF PAPER. IN FACT, THE HON' BLE APEX COURT AFTER ITA NO. 2695/14 :- 6 -: EXTRACTING THE JUDGMENT OF HON'BLE MADRAS HIGH COUR T, HAS OBSERVED AS FOLLOWS: WHEN THE FOUNDERS OF THE TRUST HAVE NO POWER TO ALT ER OR VARY THE TERMS OF THE TRUST, A TRUSTEE APPOINTED TO MANAGE THE PROPERTIES OF THE TRUST FOR SECURING ITS OBJECT , CAN UNDER NO CIRCUMSTANCES BE REGARDED AS HAVING SUCH A POWER SPECIALLY WHEN THE ORIGINAL DEED DATED NOVEMBER 28, 1941, DOES NO T BESTOW SUCH POWER ON HIM. SUCH A QUESTION ALSO CAME UP FOR CONSIDERATION BEFORE THE MADRAS HIGH COURT IN THANT HI TRUST V. LTO [1973]91 ITR 261. DEALING WITH THE QUESTION WHETHE R THE FOUNDER OF A TRUST HADPOWER TO REVOKE THE SAME, THE COURT OBSERVED AS FOLLOWS (PAGES 284-85): 'IT IS WELL ESTABLISHED THAT THE SUBSEQUENT ACTS AN D CONDUCT OF THEFOUNDER OF THE TRUST CANNOT AFFECT THE TRUST IF THERE HAS BEEN ALREADY A COMPLETE DEDICATION. (VIDE KRISHNASWAMY PILLAI V. KOTHANDARA MA NAIC KEN [1914] 27 MLJ 582 ; SUNDER SINGH MALLAH SINGH SANATHAN DHARAM HIGH SCHOOL TRUST V. MANAGING COMMITTEE, SUNDER SINGH MALLAH SINGH RAJPUT HIGH SCHOOL [1938] 1 MLJ 359 ; AIR 1938 PC 73, AND GOKULDOSS JAMNADOSS AND CO. V. LAKSHMINARASIMHALU CHETTI [1940] 2 MLJ 409; AIR 1940 MAD 920). IF A VALID AND COMPLETE DEDICATION HAD TAKEN PLACE, THERE WOULD BE NO POWER LEFT IN TH E FOUNDER TO REVOKE AND NO ASSERTION ON HIS PART OR THE SUBSEQUENT CONDUCT OF HIMSELF OR HIS DESCENDANTS CONTRARY TO SUCH DEDICATION WOULD HAVE THE EFFECT O F NULLIFYING IT. IF THE TRUST HAD BEEN REALLY AND VAL IDLY CREATED, ANY DEVIATION BY THE FOUNDER OF THE TRUST OR THE TRUSTEES FROM THE DECLARED PURPOSES WOULD AMOUNT ONLY TO A BREACH OF TRUST AND WOULD NOT DETRACT FROM THE DECLARATION OF TRUST. THEREFORE, THE SUBSEQUENT CONDUCT OF THE FOUNDER IN DEALING WITH THE FUNDS OF THE TRUST LONG AFTER THE CREATION OF THE TRUST MAY NOT PUT AN END TO THE TRUST ITSELF .' ITA NO. 2695/14 :- 7 -: WE ARE IN FULL AGREEMENT WITH THE PRINCIPLE STATED IN THE AFORESAID PASSAGE AND WE HOLD THAT THE TRUSTEE HAD NO AUTHORITY OR JURISDICTION TO EXECUTE A FRESH TRUST D EED AND THE DOCUMENT DATED JULY I, 1944, IS OF NO CONSEQUENCE AND IS NO MORE THAN A SCRAP OF PAPER. THE TRUST AS ORIGINA LLY ESTABLISHED BY THE DEED DATED NOVEMBER 28, 1941, REMAIN ED UNCHANGED OR UNAFFECTED BY THE LATER DOCUMENT DATED JULY 1, 1944. 6. IN VIEW OF THE ABOVE JUDGMENT OF THE HON'BLE APEX C OURT, WE HAVE TO EXAMINE WHETHER THE TRUSTEES HAVE POWER TO AMEND, ALTER, VARY OR NOMINATE THE TRUSTEES. SINCE THE COPY OF T HE TRUST DEED IS NOT AVAILABLE BEFORE THIS TRIBUNAL, WE ARE UNABLE TO EX AMINE THE POWER OF THE TRUSTEES TO AMEND THE TRUST DEED. APART FROM T HAT, EXPLANATION 1 TO SECTION 60 OF THE INDIAN TRUSTS ACT, 1882, CLEAR LY SAYS THE PERSONS WHO ARE NOT PROPER PERSON TO BE APPOINTED AS TRUST EES. WE ARE CONSCIOUS THAT THE INDIAN TRUSTS ACT, 1882 IS APPLI CABLE ONLY IN RESPECT OF PRIVATE TRUSTS AND NOT TO THE PUBLIC TRUSTS. TH EREFORE, IT HAS TO BE EXAMINED WHETHER THE PRINCIPLES LAID DOWN IN EXPLAN ATION 1 TO SECTION 60 OF THE INDIAN TRUSTS ACT, 1882, ARE APPLICABLE T O THE PUBLIC TRUST OR NOT? IN THE ABSENCE OF ANY OTHER PROVISION IN ANY O THER ENACTMENT. THE PROVISIONS OF SECTION 60 OF THE INDIAN TRUSTS A CT WERE NOT BROUGHT TO THE NOTICE OF THE LOWER AUTHORITIES OR TO THE A SSESSEE. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE IS ITA NO. 2695/14 :- 8 -: REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRESH AND FIND OUT WHETHER THE TRUSTEES HAVE POWER TO AMEND/NOMINATE THE TRUSTEES AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF SRI AGASTHYAR TRU ST (SUPRA) AND WHETHER THE PROVISIONS OF EXPLANATION 1 TO SECTION 60 OF THE INDIAN TRUST ACT, 1882, ARE APPLICABLE TO PUBLIC TRUSTS OR NOT? THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH AND DECID E THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( . ) (D. KARUNAKARA RAO) ! / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 30 TH JUNE, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF