M/s. Maa Saraswati Mandir Nyas, New Delhi V. CIT(E), Chandigarh

ITA 3514/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6608 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 02-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY VARMA
• Keywords: Charitable institution; Principle of natural justice; Revocable transfer
• Section: 12A; 12AA; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3514/DEL/2015 ASSESSMENT YEAR: -------- M/S MAA SARASWATI MANDIR NYAS, C/O M/S RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I, NEW DELHI-110049 VS CIT(E), C.R. BUILDING, 4 TH FLOOR, SECTOR-17E, CHANDIGARH-160017 (APPELLANT) (RESPONDENT) APPEL LANT BY: DR. RAKESH GUPTA, ADV. SHRI SOMIL AGGARWAL, ADV. SHRI DEEPESH GARG, ADV. RESPONDEN T BY : SHRI VIJAY VARMA, CIT DR DATE OF HEARING: 26.04.2018 DATE OF PRONOUNCEMENT : 24.07.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 23.04.2015 PASSED BY THE LD. CIT (EXEMPTION), CHANDIGARH WHEREIN VIDE IMPUGNED ORDER, THE LD. COMMISSIONER O F INCOME TAX (E) HAS REJECTED THE ASSESSEES APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 ( HEREINAFTER CALLED 'THE ACT'). ITA NO. 3514/DEL/2015 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A RELIGIOUS TRUST AND THE OBJECTIVES, AS SET OUT IN THE OBJECTI VE CLAUSE OF THE TRUST DEED, ARE RELIGIOUS. THE TRUST WAS DULY REGI STERED VIDE SL. NO. 8383 DATED 6.3.2013. THE ASSESSEE CONSTRUCTED MAA SARASWATI GODDESS OF EDUCATION MANDIR AT HANSI, DISTRICT HISAR ON LAND WHICH HAD BEEN TAKEN BY THE ASSESSEE TRUST ON LEASE VIDE LEASE DEED NO. 2173 DATED 19.06.2013. T HE ASSESSEE TRUST APPLIED FOR REGISTRATION U/S 12AA OF THE ACT, VIDE APPLICATION IN FORM NO. 10A, BEFORE THE LD. C.I.T. (E), HISAR O N 28.10.2014. THE LD. C.I.T. (E), WHILE EXAMINING THE ASSESSEES APPLICATION, NOTED THAT AS PER THE TRUST DEED, THERE WERE ONLY F IVE TRUSTEES AND, FURTHER, AS PER CLAUSES 11(D) AND 11(E) OF THE TRUST DEED, SHRI PRITAM KUMAR GOYAL, THE FOUNDER AND PRESIDENT TRUSTEE WAS TO BE THE LIFETIME PRESIDENT TRUSTEE. FURTHER, SHRI SAJJAN KUMAR, ANOTHER TRUSTEE, WAS TO BE THE LIFE TIME MAN AGING TRUSTEE. LD. COMMISSIONER OF INCOME TAX (E) ALSO N OTED THAT THE PRESIDENT AND MANAGING TRUSTEE WERE TO BE ELECTED F ROM THE INHERITORS OF LATE SHRI MOTI RAM GHIRAIYA AND LATE SHRI LALA DHANIK RAM GHIRAIYA. LD. COMMISSIONER OF INCOME TA X (E) NOTED THAT, THUS, IN VIEW OF THE TRUST DEED, THE PO SITION OF THE PRESIDENT AND THE MANAGING TRUSTEE HAD BEEN RESERVE D ONLY FOR ITA NO. 3514/DEL/2015 3 THE DESCENDENTS OF THE TWO FAMILIES. IT WAS FURTHER NOTED THAT SINCE THE OVERALL CONTROL OF THE TRUST WAS IN THE H ANDS OF THE TWO FAMILIES, IT WAS PRACTICALLY NOT POSSIBLE TO ASCERT AIN THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. THE LD. CIT (E) ALSO NOTED THAT THIS PROVISION IN THE TRUST DEED MADE IT A REVOCABLE TRANSFER IN TERMS OF SECTION 63 OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (E) PROCEEDED TO DENY THE BENEFIT OF REGISTRATION TO THE ASSESSEE TRUST. 2.1 NOW, THE TRUST HAS APPROACHED THE ITAT AND HAS CHALLENGED THE DENIAL OF BENEFIT OF REGISTRATION TO THE TRUST BY RAISING THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(E) HAS ERRED IN L AW AND ON FACTS IN DENYING THE REGISTRATION U/S 12AA T O THE APPLICANT SOCIETY BY MAKING THE FOLLOWING OBSERVATI ONS:- THAT THE OVERALL CONTROL OF THE TRUST IS IN THE HA NDS OF TWO FAMILIES ONLY AND IN THAT EVENTUALITY, THE TRUS T CANNOT BE CONSIDERED AS PUBLIC CHARITABLE TRUST. THAT THE TWO IMPORTANT POSTS OF THE TRUST I.E. PRE SIDENT TRUSTEE AND MANAGER TRUSTEE ARE RESERVED FOREVER ON LY FOR TWO FAMILIES ALTERNATIVELY, AS SUCH THESE CONDI TIONS MAKES THE TRUST A PRIVATE DISCRETIONARY TRUST AND N OT A PUBLIC CHARITABLE TRUST. 2. THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, ACTION OF LD. CIT(E) IN DENYING THE REGISTRATION UN DER SECTION 12AA TO THE APPELLANT SOCIETY IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AS TH E IMPUGNED ORDER HAS BEEN PASSED WITHOUT GRANTING ADEQUATE OPPORTUNITY OF HEARING AND BY RECORDING INCORRECT FACTS AND FINDINGS AND THE APPELLANT SOCI ETY ITA NO. 3514/DEL/2015 4 OUGHT TO HAVE BEEN GRANTED THE BENEFIT OF REGISTRAT ION UNDER THE LAW. 3. THE LD. AR SUBMITTED THAT THE OBSERVATION OF THE LD. C.I.T. (E) THAT BY RESERVING THE OFFICE OF THE PRESIDENT A ND THE MANAGING TRUSTEE TO THE DESCENDENTS OF TWO FAMILIES MADE IT A REVOCABLE TRANSFER WAS INCORRECT. THE LD. AR ALSO SUBMITTED THAT THERE WAS NO ADVERSE INFERENCE DRAWN BY THE LD. C.I.T. (E) WI TH RESPECT TO THE GENUINENESS OF THE OBJECTS OF THE TRUST. IT WA S FURTHER SUBMITTED THAT THE JODHPUR BENCH OF THE ITAT HAD HE LD THAT THE REGISTRATION U/S 12AA OF THE ACT COULD NOT BE REJEC TED ONLY FOR THE REASON THAT THE BOARD OF TRUSTEES WAS CONSTITUTED O F FAMILY MEMBERS AND THERE WAS A CLAUSE IN THE TRUST DEED TH AT IN CASE OF A VACANCY IN THE BOARD OF TRUSTEES, THE REMAINING T RUSTEES WERE TO CO-OPT ANOTHER PERSON FROM THE VERY FAMILY OF TH E OUTGOING TRUSTEE. RELIANCE WAS PLACED ON THE ORDER OF THE I TAT JODHPUR BENCH IN THE CASE OF SMT. MANSUKHI DEVI BIHANI JAN HITKARI TRUST VS C.I.T. REPORTED IN 94 ITD 0001 (JODH) IN T HIS REGARD. IT WAS PRAYED THAT SUITABLE DIRECTIONS MAY BE GIVEN TO THE LD. C.I.T. (E) TO GRANT REGISTRATION U/S 12AA TO THE ASSESSEE TRUST. 4. IN RESPONSE, THE LD. C.I.T. DR PLACED EXTENSIVE RELIANCE ON THE FINDINGS OF THE LD. C.I.T. (E) AND SUBMITTED T HAT SINCE THE ITA NO. 3514/DEL/2015 5 TRUST DEED PROVIDED THAT THE LINEAR DESCENDENTS OF THE TWO FAMILIES WERE TO BE THE MANAGING TRUSTEE AND THE PR ESIDENT, THE SAME WAS A PRIVATE DISCRETIONARY TRUST AND NOT A PU BLIC CHARITABLE TRUST. IT WAS ALSO SUBMITTED THAT SINCE ALL THE POWERS OF GOVERNANCE AND FINANCIAL MATTERS WERE VESTED WIT H THE PRESIDENT AND THE MANAGING TRUSTEE WHO WERE TO BE A PPOINTED FROM TWO FAMILIES, THE SAME BECAME A PRIVATE TRUST AND, THEREFORE, THE DENIAL OF REGISTRATION U/S 12AA OF T HE ACT WAS PERFECTLY JUSTIFIED. THE LD. C.I.T. DR SUBMITTED T HAT THIS PRIVATE DISCRETIONARY TRUST WAS MORE IN THE NATURE OF AN AO P WHERE TWO OR MORE PERSONS HAD JOINED FOR A COMMON PURPOSE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE IMPU GNED ORDER SHOWS THAT THE LD. C.I.T. (E) HAS DENIED THE BENEFI T OF REGISTRATION U/S 12AA OF THE ACT ON THE SOLE GROUND THAT THE PRE SIDENT AND THE MANAGING TRUSTEE WERE TO BE CHOSEN FROM THE TWO FAMILIES VIZ. FAMILY OF LATE SHRI MOTI RAM GHIRAIYA AND LATE SHRI LALA DHANIK RAM GHIRAIYA. AS PER THE LD. C.I.T. (E), TH IS WAS IN THE NATURE OF REVOCABLE TRANSFER WHICH WAS NOT PERMISSI BLE IN VIEW OF SECTION 63 OF THE ACT. HOWEVER, IT IS SEEN THAT TH E LD. C.I.T. (E) HAS NOT EXAMINED THE OBJECTS OF THE TRUST VIS-A-VIS THEY BEING ITA NO. 3514/DEL/2015 6 CHARITABLE IN NATURE, NOR HAS THE LD. C.I.T. (E) RE CORDED ANY FINDING REGARDING THE GENUINENESS OF THE OBJECTS OF THE TRUST. THE ITAT JODHPUR BENCH IN THE CASE OF SMT. MANSUKHI DEVI BIHANI JAN HITKARI TRUST (SUPRA) HAD AN OCCASION TO EXAMINE AN IDENTICAL ISSUE WHERE THE REGISTRATION U/S 12AA OF THE ACT WAS REJECTED SOLELY ON THE GROUND THAT THE BOARD OF TRU STEES WAS CONSTITUTED OF FAMILY MEMBERS AND THERE WAS A CLAUS E IN THE DEED OF TRUST THAT IN THE CASE OF VACANCY IN THE BOARD O F TRUSTEES, THE REMAINING TRUSTEES WERE TO CO-OPT ANOTHER PERSON FR OM THE VERY FAMILY OF THE OUTGOING TRUSTEE. THE ITAT JODHPUR BENCH WENT ON TO HOLD THAT THIS CANNOT BE A VALID REASON FOR REFU SING REGISTRATION TO A TRUST WHICH WAS CREATED HAVING THE MAIN OBJECT IVE OF CHARITABLE PURPOSE. THE RELEVANT OBSERVATIONS OF T HE ITAT ARE CONTAINED IN PARA 8 OF THE AFORESAID ORDER AND THE SAME ARE BEING REPRODUCED HEREUNDER FOR A READY REFERENCE:- 8. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE APPLICATION HAD BEEN FURNISHED IN THE PRESCRIBED FO RM NO. 10A WITHIN THE TIME ALLOWED UNDER S. 12A OF THE IT ACT, 1961 R/W R. 17A OF THE IT RULES, 1962. IT IS A LSO NOT IN DISPUTE THAT THE DOCUMENTS EVIDENCING THE CREATI ON OF THE TRUST WAS FILED ALONG WITH FORM NO. 10A. THE LEARNED CIT HAS ALSO NOT DOUBTED THE OBJECTS I OF T HE TRUST AND ALSO HAS NOT STATED THAT THE TRUST WAS NO T CREATED FOR PUBLIC CHARITY AND ITS INCOME HAD NOT B EEN UTILISED FOR THAT PURPOSE OR THE PROPERTY HELD BY I T WAS USED FOR THE BENEFIT OF THE TRUSTEES OR THEIR FAMIL IES BUT THE ONLY OBJECTION OF THE LEARNED CIT WAS THAT IN T HE ITA NO. 3514/DEL/2015 7 EVENT OF VACANCY, THE TRUSTEES SHALL CO-OPT ANOTHER PERSON OUT OF THE FAMILY MEMBERS OF THAT PERSON TO FILL UP THE VACANCY. THAT REASON CANNOT BE A VALID GROUN D FOR REFUSING REGISTRATION TO A TRUST WHICH IS CREAT ED HAVING THE MAIN OBJECT OF CHARITABLE PURPOSE. IN VI EW OF CLEAR PROVISIONS OF LAW REFERRED TO ABOVE, WE ARE O F THE CONSIDERED VIEW THAT REGISTRATION UNDER S. 12AA OF THE IT ACT, 1961 CANNOT BE REFUSED TO TRUST ON THE BASI S THAT THERE IS A CLAUSE IN THE TRUST DEED THAT IN THE EVE NT OF A VACANCY IN THE BOARD OF TRUSTEES, ANOTHER FAMILY MEMBER OF THE TRUSTEE CAN BE CO-OPTED FROM THE VERY FAMILY OF THE OUTGOING TRUSTEE. WHILE TAKING SUCH A VIEW, WE ARE FORTIFIED BY THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF FIFTH GENERATIO N EDUCATION SOCIETY VS. CIT (SUPRA), WHEREIN IT HAS B EEN HELD THAT THE CIT WAS REQUIRED TO SEE AS TO WHETHER THE OBJECTS OF THE TRUST WERE CHARITABLE OR NOT. HE WAS FURTHER REQUIRED TO SEE AS TO WHETHER THE APPLICATI ON WAS MADE IN ACCORDANCE WITH THE REQUIREMENTS OF S. 12AA OF THE IT ACT, 1961 R/W R. 17 OF THE IT RULES, 1962. FURTHERMORE, IT HAS BEEN HELD IN THE SAID CAS E THAT THE CIT WAS NOT REQUIRED TO EXAMINE THE APPLICATION OF INCOME. 5.1 THUS, IN THE ABOVE CASE, IT HAS BEEN HELD THAT THE TRUST COULD NOT BE DENIED REGISTRATION U/S 12AA OF THE AC T MERELY ON THE GROUND THAT THE BOARD OF TRUSTEES WAS TO BE CON STITUTED OF FAMILY MEMBERS. AS WE HAVE ALREADY NOTED, THE LD. COMMISSIONER OF INCOME TAX (E) HAS NOT EXAMINED THE ASSESSEES APPLICATION FOR REGISTRATION IN LIGHT OF THE GENUIN ENESS OF THE OBJECTS OF THE TRUST. ACCORDINGLY, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE LD. C.I.T. (E) WITH A DIRE CTION TO RE-EXAMINE AND RECONSIDER THE ASSESSEES APPLICATION FOR REGIS TRATION AFTER ITA NO. 3514/DEL/2015 8 DULY EXAMINING THE OBJECTS OF THE ASSESSEE TRUST AN D ALSO AFTER DULY CONSIDERING THE ORDER OF THE ITAT JODHPUR BENC H IN THE CASE OF SMT. MANSUKHI DEVI BIHANI JAN HITKARI TRUST (SUP RA) AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW, AFTER GI VING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. T HUS, THE GROUNDS STAND ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 24 TH JULY, 2018 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 4. DR, ITAT BY ORDER ASSTT. REGISTRAR ITA NO. 3514/DEL/2015 9 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 1