M/s Har Nihal Charitable Trust, Chandigarh V. CIT (Exemptions), Chandigarh

ITA 409/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5044 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 03-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: PARAMNOOR SINGH
• Keywords: Charitable institution; Competent authority
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.409/CHD/2017 (UNDER SECTION 12AA(1)B)(II) HAR NIHAL CHARITABLE TRUST, VS. THE C.I.T.(EXEMPTIONS), HOUSE NO.68, SECTOR 5, CHANDIGARH. CHANDIGARH. SECTOR 17. PAN: AABTH4603D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARAMNOOR SINGH RESPONDENT BY : SHRI RAVI SARANGAL, CIT DR DATE OF HEARING : 11.07.2017 DATE OF PRONOUNCEMENT : 26.07.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF LD. COMMISSIONER OF INCOME TAX(EXEMPTI ONS), CHANDIGARH DATED 30.12.2016 DENYING THE ASSESSEE REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: I) THAT THE LEARNED COMMISSIONER OF INCOME TAX (EX EMPTION) CHANDIGARH HAS ERRED IN PASSING THE ORDER UNDER SEC TION 12AA(L)(B)(II) OF THE INCOME TAX ACT 1961 WITHOUT C ONSIDERING THE SUBMISSION MADE DURING THE COURSE OF PROCEEDINGS AN D REFUSED TO REGISTER THE CHARITABLE TRUST. II) THAT IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTION) CHANDIGARH MAY KINDLY BE SET ASIDE AND NECESSARY ORDER FOR REGISTRATION MAY KINDLY BE PASS ED KEEPING IN VIEW THE ACTIVITIES BEING CARRIED OUT BY THE TRUST WITHIN A SHORT PERIOD. 2 III) THAT THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OF. 3. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE ASSESSEE HAD FILED APPLICATION FOR SEEKING REGISTRA TION U/S 12A TO THE CIT(EXEMPTIONS). THE LD.CIT(EXEMPTIONS) OBSERVED THAT THE ASSESSEE WAS AN ONGOING ENTITY IN OPERATION SINCE 23.12.2015. THE CIT (EXEMPTIONS) AL SO FOUND THAT ITS STATED OBJECTS WERE TO PROVIDE MEDIC AL RELIEF BY RUNNING HOSPITALS, DISPENSARIES, ETC. AND TO PRO MOTE EDUCATION AMONGST THE NEEDY AND ECONOMICALLY WEAKER SECTION OF THE SOCIETY PARTICULARLY AMONGST GIRLS, WIDOWS AND ORPHANS, THEN TO ESTABLISH SCHOOLS FOR EMPLOYME NT GENERATION FOR THE WEAKER SECTIONS OF THE SOCIETY A ND TO ADVANCE ANY OTHER OBJECTS RELATED TO OR CONNECTED T O THE FULFILLMENT OF THE ABOVE. THEREAFTER THE LD.CIT(EX EMPTIONS) ISSUED NOTICES TO THE ASSESSEE SEEKING CLARIFICATIO N ON VARIOUS ISSUES. DUE REPLY WAS FILED BY THE ASSESSE E. AFTER CONSIDERING THE SAME LD.CIT(EXEMPTIONS) CONCLUDED T HAT THE GENUINENESS OF THE ACTIVITIES CARRIED OUT BY TH E ASSESSEE HAD NOT BEEN ESTABLISHED FOR THE REASON THAT; A) NO CORROBORATIVE EVIDENCE WAS FILED BY THE ASSES SEE TO PROVE WHETHER THE CHARITABLE ACTIVITIES CARRIED BY IT WERE ONE OFF EPISODES OR UNDERTAKEN ON A SYSTEMATIC BASIS INVOLVING THE ASSESSEES OUTREACH IN SEEKING OUT THE NEEDY AS PER ITS STATED OBJECTS; B) DESPITE THE ASSESSEE HAVING HUGE FUNDS AT ITS DISPOSAL IN THE FORM OF FIXED DEPOSITS OF RS.75 LAC S AND INVESTMENTS IN UTI MUTUAL FUND OF RS.75 LACS INCLUD ED IN THE TOTAL ASSETS BELONGING TO THE TRUST OF RS.1. 62 CRORES, NO CHARITABLE ACTIVITY WAS CARRIED OUT AS 3 REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT FOR THE IMPUGNED PERIOD I.E. ENDING ON 31.3.2015; C) THE ASSESSEE TRUST HAD RECEIVED HUGE DONATION AMOUNTING TO RS.1.57 CRORES FROM M/S MATA NARAYAN KAUR CHARITABLE TRUST WHICH APPEARED TO BE A METHOD OF TRANSFER OF FUNDS FROM A NON FUNCTIONAL TRUST HE ADED BY HUSBAND TO THE ASSESSEE TRUST WHICH WAS HEADED B Y WIFE AND COULD HAVE BEEN A METHOD TO PRECLUDE THE DISSOLUTION OF THE DONOR TRUST; D) THE AUTHOR OF THE ASSESSEE TRUST WAS THE SOLE TR USTEE OF THE ASSESSEE TRUST WHICH WAS IN CONTRAVENTION OF EXPLANATION-2 OF SECTION 60 OF THE INDIAN TRUST ACT , 1882 WHICH REQUIRED ATLEAST TWO TRUSTEES FOR ADMINISTERING A TRUST WHICH INVOLVED RECEIPT AND CUSTODY OF MONEY; E) AS PER THE RELEVANT CLAUSES OF THE TRUST DEED IT APPEARED THAT THE TRUSTEESHIP OF THE ASSESSEE TRUST WAS SO ARRANGED THAT IT REMAINED WITHIN THE FAMILY. THIS WAS DEEMED TO BE RESTRICTIVE ARRANGEMENT NOT INTENDED FOR PUBLIC BENEFIT BY THE LD.CIT(EXEMPTION S). 4. THE RELEVANT FINDINGS OF THE LD.CIT(EXEMPTIONS) AT PARAS 4 TO 8 OF THE ORDER ARE AS UNDER: 4. THE PROVISIONS NECESSITATE EXAMINATION OF TWO B ASIC CONDITIONS FOR GRANT OF REGISTRATION U/S 12AA. THE SAME INCLUDE, APART FROM THE EXAMINATION OF OBJECTS OF THE SOCIETY, SATISFACTION OF THE COMPETENT AUTHORITY IN RESPECT OF GENUINENESS OF ACTIVITIES AS WELL PARTICULARLY WHEN THE APPLICANT IS AN ONGOING ENTITY AS ALSO THE FACT IN THE PRESENT CASE THAT SIZEABLE DONATIONS HAVE BEEN RECEIVED FROM ANOTHER TRUST WHE RE THE HUSBAND OF THE MANAGING TRUSTEE WAS AT THE HELM O F AFFAIRS. 5. IN ORDER TO ACCORD AN OPPORTUNITY THE DATE WAS FIX ED ON 02.11.2016. THE MATTER WAS FIXED FOR 11.11.2016. SUBSEQUENTLY, ANOTHER SHOW-CAUSE LETTER DATED 10.11.2016 WAS ISSUED FIXING THE CASE FOR 18.11.2016. ON THE BASIS OF MATERIAL AVAILABLE WITH THE APPLICATION THE SHOW-CAUSE LETTER WAS ISSU ED 4 VIDE WHICH IT WAS REQUESTED THAT THE FOLLOWING DOCUMENTS/CLARIFICATIONS BE PROVIDED BY THE FIXED DATE. (I) DETAILS OF PROPERTY VESTED IN THE TRUST, AS ENVISAGED U/S 11 OF THE L.T. ACT, INCOME FROM WHICH IS SOUGHT TO B E EXEMPTED. (II) DETAILS OF VOLUNTARY CONTRIBUTIONS RECEIVED BY THE TRUST, AS ENVISAGED U/S 12 OF THE L.T. ACT AND WHETH ER ANY SPECIFIC DIRECTION HAS BEEN RECEIVED BY THE PER SONS MAKING VOLUNTARY CONTRIBUTIONS. (III) THE ORIGINALS OF TRUST DEED/BYE-LAWS OF THE TRUST ALONG WITH THE REGISTRATION CERTIFICATE. (IV) COPIES OF BANK STATEMENTS THROUGH WHICH A CTIVITIES ARE BEING PROPAGATED. THE RECEIPTS OF THE SCHOOL AND TH E DIFFERENT ITEMS OF EXPENDITURE THAT ARE BEING CLAIMED MAY BE HIGHLIGHTED. (V) COMPLETE DETAILS OF THE DONATIONS RECEIVED OR INTENDED TO BE RECEIVED AND DOCUMENTARY EVIDENCE AS REGARDS TO GRANTS RECEIVED. (VI) THE COPIES OF THE I.T RETURNS FILED SINCE INCEPT ION. (VII) DONATIONS RECEIVED UNDER FCRA ALONGWITH RELEVA NT DETAILS SUCH AS COPY OF THE RETURN FOR FCRA-AND THE COPY OF SPECIFIED BANK ACCOUNT. (VIII) DETAILS OF CORPUS FUND AND WHETHER THE SAME ARE WITH ANY WRITTEN SPECIFIC DIRECTIONS. (IX) DETAILS REGARDING CHARITABLE ACTIVITIES BEING C ONDUCTED BY THE TRUST CLARIFYING AS TO WHICH SPECIFIC LIMB UNDER SECTION U/S 2(15) OF THE I.T.ACT THE ACTIVITIES ARE BEING PURSUED. (X) RECEIPTS AND PAYMENT ACCOUNTS OF THE TRUST SIN CE INCEPTION. (XI) EXPLANATION IF ANY EXEMPTION IS ALREADY BEIN G CLAIMED BY THE TRUST UNDER THE INCOME TAX ACT, 1961 AND THE SAME HAVE LEEN AVAILED WHILE FILING ITS ITR IN EARLI ER YEARS. (XII) WHETHER ANY GRANTS HAVE BEEN RECEIVED BY THE TRUST STATING WHETHER THE GRANTS SO RECEIVED (IF ANY) HAV E BEEN UTILIZED FOR THE PURPOSE FOR WHICH THE SAME ARE RECEIVED. (XIII) FINANCIAL STATEMENTS OF THE TRUST SINCE ITS CREATION I.E. FROM 23.12.2015. THE APPLICANT WAS FURTHER ASKED TO PROVIDE A RATIONAL E WHY REGISTRATION SHOULD BE GRANTED IN THE ABSENCE OF ANY 5 APPARENT CHARITABLE ACTIVITY BEING PURSUED. SHRI VINE ET MAGO, CHARTERED ACCOUNTANT ATTENDED ON 25.11.2016-AND SUBMIT TED WRITTEN REPLY VIDE LETTER DATED 22.11.2016. THE APP LICANT SUBMITTED THAT THE INCOME TAX RETURN HAS NOT YET BEE N FILED BECAUSE THE TRUST HAS RECENTLY BEEN CREATED ON 23 RD DECEMBER, 2015 AND NO MAJOR ACTIVITY HAS BEEN CARRIED OUT DURI NG THE YEAR 2015-16. FURTHER THE APPLICANT SUBMITTED THAT THE TRUST CONDUCTED CHARITABLE ACTIVITIES IN MEDICAL RELIEF TH ROUGH HOSPITAL, HEALTH, SCHOOL, COLLEGES, SOCIAL SERVICES AN D PROMOTION OF EDUCATION AND LEARNING AMONGST THE NEEDY ECONOMICALLY WEAKER AND POOR SECTION OF THE SOCIETY. THERE IS, HOWEVER, NO CORROBORATIVE EVIDENCE WHETHE R SUCH ACTIVITIES WERE ONE OFF EPISODES OR UNDERTAKEN ON A SYSTEMATIC BASIS THAT INVOLVED SOCIETY'S OUTREACH IN SEEKING OUT THE NEEDY. EFFORTS MADE BY ANY SOCIETY TOWARDS ATTAINMENT OF ITS OBJECTIVES ARE AN ESSENTIAL ELEME NT TO BOLSTER CLAIMS OF CHARITABLE ACTIVITIES. 6.1 TOTAL ASSET OF THE APPLICANT TRUST AT THE END OF F.Y. 2015-16 IS RS. 1,62,05,097/- INCLUDING A FIXED DEPOS IT OF RS. 75,00,000/- & AN INVESTMENT OF RS. 75,00,000/- IN U TI MUTUAL FUND BUT AT THE SAME TIME HAVING NO CHARITABLE ACTIVIT Y AS PER THE INCOME & EXPENDITURE ACCOUNT OF THE SAME PERI OD. IT IS ALSO SEEN THAT THE APPLICANT TRUST RECEIVED VOLUNTARY CONTRIBUTION OF RS. 1,57,00,000/- FROM M/S MATA NARAYAN KAUR CHARITABLE TRUST [PAN- AAATM9159Q], LUDHIANA DURING JANUARY 2016 AND FEBRUARY, 2016. THIS ISSUE OF TRANSFER OF FUND ALONG WITH CLAIM OF THE TR UST TO HAVE CONDUCTED CHARITABLE ACTIVITIES WERE RAISED BEFORE THE APPLICANT VIDE SHOW-CAUSE LETTER DATED 14.12.2016. THE APPLICANT TRUST WAS ALSO REQUESTED TO EXPLAIN THE E XACT NATURE OF ACTIVITIES CARRIED OUT ALONGWITH CORROBOR ATIVE EVIDENCE FOR SUCH CHARITABLE ACTIVITY. 6.2 ON THE ISSUE OF TRANSFER OF FUNDS THE APPLICANT VID E ITS REPLY DATED 20.12.2016 SUBMITTED AS UNDER;- 'THE RATIONALE BEHIND THIS TRANSFER IS THAT M/S MATA NARAYAN KAUR CHARITABLE TRUST, LUDHIANA IS 30 YEAR OLD CHARITABLE TRUST AND DOING VARIOUS CHANTIES INFIELD O F MEDICAL AND EDUCATION ETC, SINCE THEN. IT ALSO ENJOYS EXEMPTIO N U/S 12AA OF THE INCOME TAX ACT. MR. GURPARSHAD SINGH GREW AL IS A FOUNDER AND SOLE TRUSTEE OF THIS TRUST. HIS DATE O F BIRTH IS 30.06.1931 AND NOW HE IS 86 YEARS OLD SO DUE TO HIS AGE HE IS NOT ABLE TO MANAGE THE AFFAIRS OF THE TRUST SO IN OR DER CARRYING THE SAME OBJECTS OF CHARITY A NEW TRUST I.E. M/S HA R NIHAL CHARITABLE TRUST HAS BEEN CREATED IN WHICH HIS WIFE MRS. SARBINDER GREWAL IS A MANAGING TRUSTEE. SO THIS AMOUN T OF RS. 1,57,00,000/- HAS BEEN TRANSFERRED TO M/S HAR NIHA L CHARITABLE TRUST TO CARRY OUT SAME OBJECTS OF M/S MA TA NARAYAN KAUR CHARITABLE TRUST.' WITH RESPECT TO THE ABOVE NO EVIDENCE HAS BEEN ADDUCED HOW THE TWO TRUSTS IN CONTENTION HAD SIMILAR OBJECTS ARID OPERATIONS. IF WE GO BY THE CLAIMED ACTIVITIES OF THE 6 APPLICANT RUST AND DRAW ANALOGY IT WOULD BE SAFE TO A SSUME THAT THE TRANSFEROR TRUST ALSO DID NOT PURSUE ITS ST ATED OBJECTS OF OPENING HOSPITALS, DISPENSARIES ETC AND HAD ACCUMUL ATED OVER THE YEARS LARGE AMOUNTS OF SURPLUS BY UTILISING ITS EXEMPT STATUS. IT ALSO HAS NOT BEEN BROUGHT OUT WHE THER THE DONATIONS WERE MADE FROM THE CORPUS FUNDS OR ACCUMU LATED FUNDS OF THE DONOR TRUST. IT'S WELL NIGH POSSIBLE THAT CORPUS FUNDS THAT ARE INALIENABLE AND NOT TO UTILIZED IN ANY SITUATION SAVE EMERGENCY HAVE BEEN TRANSFERRED TO THE DONE TR UST. IT IS ALSO POSSIBLE THAT UNUTILIZED INCOME THAT GOT ACCUMUL ATED AND COULD NOT BE SPENT WITHIN THE STIPULATED TIMEFRA ME HAVE FOUND SHAPE IN THE FORM OF A DONATION. NOTHING TO CONT RADICT THESE POSSIBILITIES HAVE BEEN ADDUCED BY THE APPLICANT. SEEMINGLY THIS APPEARS TO BE A METHOD TO TRANSFER FUN DS FROM A NON-FUNCTIONAL TRUST (BY ITS OWN ADMISSION THE TRUS T COULD NOT BE MANAGED) HEADED BY THE HUSBAND TO A TRUST HE ADED BY THE .WIFE. THE WIFE WHO IS THE MANAGING TRUSTEE (AUTH OR OF THE TRUST) IN THE NEW TRUST COULD WELL HAVE BEEN INCORPORA TED IN THE DONOR TRUST IN ORDER TO SHORE UP ITS ACTIVITIES. T HIS MAY HAVE BEEN A METHOD TO PRECLUDE THE DISSOLUTION OF TH E DONOR TRUST WHICH IN TURN MAY HAVE THROWN OPEN THE POSSIBILIT IES OF THE ASSETS AND LIABILITIES TO BE TRANSFERRED TO ANY TRUST. THIS WAS A POSSIBILITY THAT HAS BEEN PRECLUDED BY THIS METH OD. 7. THIS ISSUE FURTHER GETS AGGRAVATED WHEN THE COMPOSIT ION OF THE TRUST IS EXAMINED. THE AUTHOR OF THE TRUST IS AT PRESENT THE SOLE TRUSTEE. NOT ONLY IS THIS A CONTRAVENTION OF EXPLANATION II OF SECTION 60 IN TH E INDIAN TRUSTS ACT, 1882 THAT REQUIRES THAT WHEN THE ADMINISTRATION OF THE TRUST INVOLVES RECEIPT AND CU STODY OF MONEY, THE NUMBER OF TRUSTEES SHOULD BE TWO AT LEAS T, THERE ARE FURTHER ARRANGEMENTS TO KEEP THE SOLE TRUSTEESH IP WITHIN THE FAMILY. THIS IS DEEMED TO BE RESTRICTIVE ARRANGEM ENT WHERE THE CONTROL OVER THE FINANCES AND ASSETS OF TH E TRUST REMAIN CONFINED TO THE FAMILY. SUCH ARRANGEMENTS IN N O WAY CAN BE SAID TO INTENDED FOR PUBLIC BENEFIT. RELEVAN T EXTRACTS FROM THE TRUST DEED ARE AS FOLLOWS: BOARD OF TRUSTEE: THE SOLE TRUSTEE, OR IN CASE THERE ARE TWO OR MORE TRUSTEES, SHALL CONSTITUTE THE BOARD OF TRUSTEE. THE NUMBER O F TRUSTEES INCLUDING THE AUTHOR OF THE TRUST SHALL NOT BE MORE T HAN THREE PERSONS. THE SOLE TRUSTEE/BOARD OF TRUSTEES SHALL UNANIMOUSLY NOMINATE AND INVITE ANY PERSON/PERSONS TO BE THE OTHER TRUSTEE FOR SUCH PERIOD, AS THEY MAY DEEM FIT AND PROPER. TERM OF OFFICE OF THE TRUSTEES: THESE TRUSTEES SHALL HOLD OFFICE FOR SUCH DURATION A S MAY BE SPECIFIED BY THE TRUST OR THE BOARD OF TRUSTEES AS THE CASE MAY BE. 7 APPOINTMENT OF TRUSTEES: (I) THE FOUNDER OF THIS TRUST SHALL BE THE FI RST SOLE TRUSTEE OF THIS TRUST. SHE WILL HOLD THE OFFICE FOR LIFE OR TILL SHE VOLUNTARILY RESIGNS OR OTHERWISE CEASES TO BE A TRUS TEE UNDER ANY OF THE PROVISIONS OF LAW. (II) IN CASE OF VACATION OF THE OFFICE OF THE SO LE TRUSTEE BY REASON OF DEATH, INCAPACITY OR ON ACCOUNT OF ANY OF THE REASONS (S) MENTIONED IN CLAUSE (9) OF THIS TRUST DEED, HER PLA CE AS SOLE TRUSTEE WILL BE TAKEN BY HER DAUGHTER, SMT. KUSHA L DHILLON, WHO SHALL IN THAT EVENTUALITY, BE THE SOLE TRUST EE FOR LIFE OR TILL SHE VOLUNTARILY RESIGNS OR OTHERWISE CEA SES TO BE A TRUSTEE UNDER ANY OF THE PROVISIONS OF LAW. (III) IN CASE SMT. KUSHAL DHILLON DOES NOT ASSUME RESPONSIBILITY FOR ANY REASON, WHATSOEVER, IN THAT EVE NTUALITY SMT. SARBRINDER GREWAL SHALL NOMINATE ANY OTHER PERS ON/ PERSONS TO BE TRUSTEE/TRUSTEES. (IV) IN CASE OF VACATION OF THE OFFICE OF TRUS TEE, FOR ANY REASON WHATSOEVER, BY SMT. SARBRINDER GREWAL AND SMT.KUSHAL DHILLON, THE SOLE TRUSTEE/BOARD OF TRUST EES MAY WITH UNANIMOUS CONSENT OF ALL THE TRUSTEE, IN CAS E THERE ARE MORE THAN ONE TRUSTEES, INVITE ANY PERSON/ PERSON S TO BE THE OTHER TRUSTEES FOR SUCH PERIOD, AS THEY MAY DEE M FIT AND PROPER. 8. IN THE INSTANT CASE, GIVEN ALL OF THE ABOVE, THE RE IS NO WAY THE GENUINENESS OF ACTIVITIES OF THE TRUST C AN BE GAUGED TO BE IN SYNC WITH ITS STATED OBJECTS. THE IN TENTION TO RECEIVE FUNDS AND ASSETS OF M/S MATA NARAYAN KAU R CHARITABLE TRUST, LUDHIANA AND KEEP THEM UNDER SOLE TRUSTEESHIP IS ALSO ESTABLISHED. IT HAS BEEN ELUCID ATED THAT THE PROCESS OF TRANSFER AND STRICT CONTROL ON THE SA ME THEREAFTER DOESN'T ENTHUSE CONFIDENCE IN THE CHARITAB LE INTEND OF THE TRUST. ALSO THE STATED ACTIVITIES NOT ONLY ARE MINISCULE BUT ALSO DO NOT POINT TOWARDS SYSTEMATIC EF FORTS BEING MADE BY THE APPLICANT TO REDEEM ITS CHARITABLE INTENT. ACCORDINGLY, THE APPLICATION UNDER SECTION 12A FOR GRAN T OF REGISTRATION IS REJECTED. 5. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED T HE PRESENT APPEAL BEFORE US. DURING THE COURSE OF HEA RING BEFORE US, THE LD. COUNSEL FOR ASSESSEE RAISED THE CONTENTION THAT ITS SUBMISSIONS MADE BEFORE THE LD.CIT(EXEMPTION) HAD NOT BEEN CONSIDERED WHILE REJ ECTING ITS APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT. THE LD. COUNSEL FOR ASSESSEE FILED A PAPER BOOK EX HIBITING 8 THE SHOW CAUSE NOTICE ISSUED TO IT DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND ALL REPLIES FILED BY THE ASSESSEE IN RESPONSE TO THE SAME. FURTHER DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR ASSESSEE WAS ASKED AT BAR TO PRODUCE ALL EVIDENCES ESTABLISHING CHARITABLE ACTIV ITIES CARRIED OUT BY THE ASSESSEE TILL DATE. IN RESPONSE TO THE SAME, SUBMISSIONS GIVING THE AFORESAID DETAILS WERE FILED ON THE HEARING CONDUCTED ON 11.7.2017. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(EXEMPTION) AND FURTHER STATED A ND EMPHASIZED THAT FROM THE MANNER IN WHICH THE PRESEN T TRUST WAS CREATED BY WAY OF TRANSFER OF FUNDS TO TH E TUNE OF RS.1.57 CRORES FROM M/S MATA NARAYAN KAUR CHARITABL E TRUST WHICH WAS UNDER THE TRUSTEESHIP OF THE HUSBAN D OF THE IMPUGNED TRUSTEE AND FURTHER ON ACCOUNT OF CLAU SE IN THE TRUST DEED WHICH REQUIRED THE DAUGHTER OF THE T RUSTEE OF THE ASSESSEE TRUST TO BECOME THE SOLE TRUSTEE ON THE VACATION OF OFFICE BY THE SOLE TRUSTEE OF THE ASSES SEE TRUST WHO WAS MOTHER, IT APPEARED TO BE A FAMILY ARRANGEM ENT AND CLEARLY NOT INTENDED FOR PUBLIC BENEFIT. THE L D. DR ALSO POINTEDLY REFERRED TO THE OBSERVATIONS OF THE LD.CI T (EXEMPTION) VIS--VIS CONTRAVENTION OF THE PROVISIO NS OF INDIAN TRUST ACT, 1882 BY HAVING SOLE TRUSTEE ADMIN ISTERING THE TRUST WHICH INVOLVED RECEIPT AND CUSTODY OF MON EY. 7. HAVING HEARD BOTH THE PARTIES AND HAVING PERUSE D THE ORDER OF THE LD.CIT(EXEMPTION) AND ALSO DOCUMEN TS PLACED BEFORE US, WE FIND THAT THE LD.CIT(EXEMPTION ) HAD 9 DENIED EXEMPTION FOR VARIOUS REASONS WHICH ACCORDIN G TO HIM CUMULATIVELY LED TO THE CONCLUSION THAT THE ASS ESSEE TRUST WAS NOT GENUINELY INVOLVED FOR CHARITABLE ACT IVITIES THOUGH ITS OBJECTS APPEAR TO BE CHARITABLE. WE SHA LL BE DEALING WITH EACH REASON GIVEN BY THE LD.CIT(EXEMPT ION) INDIVIDUALLY. 8. WE SHALL FIRST BE TAKING UP THE REASON POINTED OUT BY THE LD.CIT (EXEMPTION) THAT THE TRANSFER OF THE FUNDS FROM M/S MATA NARAYAN KAUR CHARITABLE TRUST TO THE ASSESSEE TRUST OF RS.1.57 CRORES APPEAR TO BE A MET HOD TO TRANSFER FUNDS FROM A NON FUNCTIONAL TRUST HEADED B Y THE HUSBAND TO A TRUST HEADED BY WIFE TO PRECLUDE THE POSSIBILITY OF THE DISSOLUTION OF THE DONOR TRUST. DURING THE COURSE OF PROCEEDINGS BEFORE HIM THE LD.CIT (EXEMP TION) HAD FOUND THAT THE ASSESSEE TRUST HAD RECEIVED CONT RIBUTION OF RS.1.57 CRORES FROM M/S MATA NARAYAN KAUR CHARIT ABLE TRUST WHICH WAS CONFRONTED TO THE ASSESSEE, IN RESP ONSE TO WHICH THE ASSESSEE HAD REPLIED THAT M/S MATA NARAYA N KAUR CHARITABLE TRUST WAS 30 YEARS OLD TRUST DOING VARIO US CHARITY IN THE FIELD OF MEDICAL AND EDUCATION SINCE THEN AND ENJOYING EXEMPTION U/S 12AA OF THE ACT AND WHOSE FO UNDER AND SOLE TRUSTEE WAS MR.GURPARSHAD SINGH GREWAL. T HE LD. COUNSEL FOR ASSESSEE STATED THAT SINCE HE WAS NOW 8 6 YEARS OLD AND UNABLE TO MANAGE ALL AFFAIRS OF THE TRUST, THEREFORE, THE SAID FUNDS HAD BEEN TRANSFERRED TO THE ASSESSEE TRUST TO CARRY OUT THE SAME OBJECTS AS M/S MATA NARAYAN KAUR CHARITABLE TRUST. THE LD.CIT(EXEMPTIONS) ON THE BA SIS OF 10 THIS SUBMISSION HELD THAT NO EVIDENCE HAD BEEN ADDU CED BY THE ASSESSEE AS TO HOW THE TWO TRUSTS HAD SIMILAR O BJECTS AND OPERATIONS. HE FURTHER PRESUMED THAT THE ASSES SEE TRUST WAS CARRYING OUT NO ACTIVITIES AND EVEN THE D ONOR TRUST WAS ALSO NOT CARRYING OUT ANY ACTIVITIES AND POSSIBLY THE CORPUS FUND WHICH WAS OTHERWISE INALIENABLE HAD BEEN TRANSFERRED TO THE DONEE TRUST. THE LD.CIT(EXEMPTI ONS) FURTHER PRESUMED THAT IT WAS ALSO POSSIBLE THAT THE UNUTILIZED INCOME WHICH HAD ACCUMULATED OVER THE YE ARS AND COULD NOT BE SPENT WITHIN THE STIPULATED TIME F RAME, HAD BEEN SO DONATED. HE, THEREFORE, HELD THAT IT A PPEARED TO BE A METHOD TO TRANSFER FUNDS FROM A NON-FUNCTIO NAL TRUST HEADED BY A HUSBAND TO A TRUST HEADED BY THE WIFE TO PRECLUDE THE POSSIBILITY OF DISSOLUTION OF THE DONO R TRUST WHICH WOULD HAVE RESULTED IN THE ASSETS AND LIABILI TIES BEING TRANSFERRED TO ANY OTHER TRUST. 9. WE FIND NO MERIT IN THIS ARGUMENT OR IN THIS REASON OF THE LD.CIT(EXEMPTIONS) IN HOLDING THAT TH E ASSESSEE TRUST FOR THE ABOVE REASON WAS NOT ENTITLE D TO REGISTRATION U/S 12AA OF THE ACT. THE FACT REMAINS AND WHICH ARE NOT DISPUTED BY THE LD.CIT(EXEMPTIONS), A RE THAT THE ASSESSEE TRUST HAD RECEIVED DONATION OF RS.1.57 CRORES FROM M/S MATA NARAYAN KAUR CHARITABLE TRUST. WHETH ER THE SAID DONATION WAS TO PRECLUDE DISSOLUTION OF TH E DONOR TRUST OR THAT IT WAS MADE FROM ACCUMULATED FUNDS WH ICH HAD NOT BEEN UTILIZED IN THE SPECIFIED TIME FRAME, HAVE NO EFFECT NOR DO THEY AFFECT THE GENUINENESS OF THE AS SESSEE 11 TRUST. WHATEVER MAY HAVE BEEN DONE BY THE DONOR TRU ST, MAY HAVE AN IMPACT ON THE GENUINENESS OF THE DONOR TRUST AND THERE IS NO REASON IN HOLDING THE DONEE TRUST T O BE INGENUINE ON THAT ACCOUNT. BESIDES IT IS AN UNCONT ROVERTED FACT THAT THE DONOR TRUST WAS ALSO ENJOYING EXEMPTI ON U/S 12AA OF THE ACT AND ANY SUCH DONATION MADE BY A CHARITABLE TRUST ARE ENTITLED TO BE TREATED AS DONA TION OF THE SAID TRUST. FOR THE ABOVE REASON, WE REJECT THE CO NTENTION OF LD.CIT(EXEMPTIONS) THAT SINCE THE DONATIONS WERE RECEIVED FROM M/S MATA NARAYAN KAUR CHARITABLE TRUS T, THEY MAKE THE ACTIVITIES OF THE ASSESSEE TRUST INGE NUINE. 10. THE NEXT REASON GIVEN BY THE LD.CIT(EXEMPTIONS ) IS THAT THE AUTHOR OF THE ASSESSEE TRUST IS THE SOL E TRUSTEE OF THE TRUST AND SINCE TRUST INVOLVES RECEIPT AND C USTODY OF MONEY IT HAS VIOLATED THE PROVISIONS OF INDIAN TRUS T ACT, 1882 WHICH REQUIRES THE NUMBER OF TRUSTEES TO BE AT LEAST TWO IN SUCH CASES. 11. THIS CONTENTION OF THE LD.CIT(EXEMPTIONS), WE HOLD, IS TO BE OUTRIGHTLY REJECTED, SINCE THE PROVI SIONS OF THE INDIAN TRUST ACT, 1882 DO NOT APPLY TO CHARITABLE T RUSTS AT ALL. 12. FURTHER, LD.CIT(EXEMPTIONS) HAS HELD THAT CLA USE OF THE TRUST DEED OF THE ASSESSEE TRUST REQUIRING T HE DAUGHTER OF THE SOLE TRUSTEE OF THE ASSESSEE TRUST TO TAKE HER PLACE IN THE EVENTUALITY OF HER VACATING THE OF FICE, SHOWS THAT IT IS A FAMILY ARRANGEMENT NOT INTENDED FOR PUBLIC BENEFIT. 12 13. WE FIND NO MERIT IN THIS CONTENTION OF THE LD.CIT(EXEMPTIONS) ALSO. MERELY BECAUSE THE TRUST BY VIRTUE OF CLAUSES IN THE TRUST DEED REMAIN WITH A P ARTICULAR FAMILY HAS NO REASON TO HOLD THAT IT IS A FAMILY TR UST FOR THE BENEFIT OF PARTICULAR FAMILY. MERELY BECAUSE THE T RUSTEESHIP REMAINS WITH THE PARTICULAR FAMILY IT DOES NOT MEAN THAT THE TRUST IS FOR THE BENEFIT OF A PARTICULAR FAMILY ONL Y. TRUSTEES ARE ONLY GUARDIANS OF THE TRUST AND NO BENEFIT ENUR ES TO THEM. IN THE ABSENCE OF ANY FINDING BY THE LD.CIT(EXEMPTIONS) THAT THE BENEFITS FROM THE ASSES SEE TRUST ACCRUE OR ARISE TO A FAMILY ONLY, THERE IS NO MERIT IN THE FINDING OF THE LD.CIT(EXEMPTIONS) THAT THE ASSE SSEE TRUST IS FAMILY TRUST NOT INTENDED FOR PUBLIC BENEF IT. 14. THE LAST REASON GIVEN BY THE LD.CIT(EXEMPTIONS ) FOR REJECTING THE APPLICATION OF THE ASSESSEE IS TH AT IT HAS CARRIED OUT NO CHARITABLE ACTIVITY IN THE YEAR ENDI NG OF 31.3.2015 AS PER ITS INCOME AND EXPENDITURE ACCOUNT DESPITE HAVING ASSETS TO THE TUNE OF RS.1.62 CRORES AND FOR THE REASON THAT NO EVIDENCE TO SHOW THAT THE CHARIT ABLE ACTIVITIES WERE BEING CARRIED OUT BY IT ON SYSTEMAT IC BASIS WAS ADDUCED BY THE ASSESSEE. 15. WITH RESPECT TO THE SAME WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED BEFORE US THAT IT HAD FILED ADEQUATE REPLIES BEFORE THE LD.CIT(EXEMPT IONS) DEMONSTRATING THAT IT HAD CARRIED OUT CHARITABLE A CTIVITIES IN THE IMPUGNED YEAR WHICH WAS THE FIRST YEAR OF CO MING INTO EXISTENCE SINCE IT WAS FORMED ONLY ON 23.12.2 015. 13 FURTHER WE FIND THAT THE ASSESSEE HAD ADDUCED EVIDE NCE OF HAVING CARRIED OUT CHARITABLE ACTIVITIES THEREAFTER ALSO. MOREOVER, EVEN BEFORE US THE LD. COUNSEL FOR THE AS SESSEE HAS ADDUCED VOLUMINOUS EVIDENCES TO DEMONSTRATE THA T THAT IT WAS INVOLVED CONTINUOUSLY IN CARRYING OUT CHARIT ABLE ACTIVITIES AS PER ITS STATED OBJECTS. THE LD.CIT(E XEMPTIONS), WE FIND, HAS NOT DEALT WITH AND CONSIDERED THE SUBM ISSIONS OF THE ASSESSEE. WE, THEREFORE, CONSIDER IT FIT TO RESTORE THE ISSUE BACK TO THE FILE OF THE LD.CIT(EXEMPTIONS) TO RECONSIDER SUBMISSIONS OF THE ASSESSEE VIS--VIS CH ARITABLE ACTIVITIES CARRIED OUT BY IT AND THEREAFTER ADJUDIC ATE THE ISSUE OF GRANT OF REGISTRATION UNDER SECTION 12AA O F THE ACT IN ACCORDANCE WITH LAW. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH JULY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH