Sagar Memorial Trust, Mangrol V. The Commissioner of Income Tax-III, RAJKOT-GUJARAT

ITA 449/RJT/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6856 (ITAT-RAJKOT)
• Duration Of Justice: 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-07-2014
• Assessment Year: misc
• Appeal Filed On: 21-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: J C RANPURA
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL, SMC BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM ITA NO. 449/RJT/2014 SAGAR MEMORIAL TRUST, C/O. INDRAVADANBHAI G. PUROHIT, KRUPA SAGAR, OPP. GOVT. HOSPITAL, AT. MANGROL, TAL. MANGROL, DIST. JUNAGADH PAN : AANTS 5010 R ( / APPELLANT) THE COMMISSIONER OF INCOME-TAX RAJKOT-III RAJKOT / RESPONDENT / ASSESSEE BY SHRI J.C. RANPURA, CA / REVENUE BY SHRI M.L. MEENA, DR / DATE OF HEARING 28.07.2014 !'# / DATE OF PRONOUNCEMENT 31.07.2014 / ORDER THIS APPEAL BY THE ASSESSEE-INSTITUTION/ASSOCIATION IS AGAINST THE ORDER DATED 23.06.2014 OF COMMISSIONER OF INCOME-TAX, RAJKOT-II I, RAJKOT REJECTING THE APPLICATION OF THE ASSESSEE-INSTITUTION/ASSOCIATION FOR REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE-INSTI TUTION/ASSOCIATION NAMELY SAGAR MEMORIAL TRUST CAME INTO EXISTENCE BY A TRUST DEED ON 23.08.2013 AND THE SAME HAS BEEN REGISTERED UNDER BPT ACT WITH ASSTT. CHARITY COMMISSIONER VIDE CERTIFICATE DATED 15.11.2013. THE MAIN OBJECTS OF THE TRUST ARE TO CARRY OUT CHARITABLE AND EDUCATIONAL ACTIVITIES. THE ASSESSEE-INSTITUTION/AS SOCIATION FILED AN APPLICATION IN FORM NO.10A FOR REGISTRATION U/S 12AA OF THE INCOME -TAX ACT ON 27.12.2013 ALONGWITH REQUISITE DETAILS/DOCUMENTS VIZ. (I) COPY OF TRUST DEED, (II) COPY OF REGISTRATION CERTIFICATE UNDER BPT ACT, 1950, (III) LIST OF NAME AND ADDRESS OF TRUSTEES AND (IV) COPY OF BANK STATEMENT; HOWEVER, THE SAID APPLICATION WAS REJECTED BY LD.CIT, RAJKOT-III, RAJKOT VIDE ORDER DATED 23.06.2 014. THE REASON FOR REJECTING THE APPLICATION OF ASSESSEE-INSTITUTION/ASSOCIATION IS GIVEN BY THE LD. CIT IN PARAGRAPH NOS. 6 & 7 OF THE IMPUGNED ORDER WHICH READ AS UNDE R:- 6. ON THE DATE OF HEARING SHRI RAJESHBHAI DAVE, TA X ASSISTANT FROM C. JAVIA & CO., CAS, DULY AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, ATTENDED AND FURNISHED THE DETAILS AS CALLED FOR VIDE LETTER DATED 09.06.2014. ON VERIFICATION OF SUBMISSION WITH REGARD TO DISSOLUTI ON CLAUSE, THE ASSESSEE TRUST HAS SUBMITTED THAT THE DISSOLUTION CLAUSE IS MENTIO NED IN TRUST DEED AS PER SETTLED POSITION OF LAW. THE ASSESSEE TRUST HAS NOT CLARIFIED THE MATTER WITH 2 449-RJT-2014 SAGAR MEMORIAL TRUST - 12AA- (SMC) REGARD TO DISSOLUTION CLAUSE. IT MEANS THAT THE ASS ESSEE TRUST HAS NOTY MADE ANY ARRANGEMENT OF CESSATION OF ITS LIABILITY AND A SSETS AT THE TIME OF DISSOLUTION. THEREFORE, THE TRUST DEED IS DEFECTIVE TO THAT EXTENT. THE TRUST DEED OF THE TRUST IS INCOMPLETE SO FAR AS NO CLAUSE IS I NCORPORATED REGARDING ITS ASSETS AFTER MEETING ALL LIABILITIES, IN CASE OF DI SSOLUTION. IN ABSENCE OF ADEQUATE WINDING UP CLAUSE IN CASE OF DISSOLUTION O F TRUST, THE ARRANGEMENT OF DISPOSAL OF NET ASSETS AFTER MEETING ITS ALL LIABIL ITIES IS NOT SPECIFIED IN TRUST DEED. FURTHER, THE LOWER AUTHORITIES HAVE ALSO NOT RECOMMENDED THE CASE OF THE ASSESSEE INSTITUTION FOR REGISTRATION U/S 12AA FOR THE SAME REASON. UNDER THESE CIRCUMSTANCES, NO REGISTRATION U/S 12AA OF TH E IT ACT 1961 CAN BE GRANTED TO THE APPLICANT INSTITUTION. 6. IN VIEW OF ABOVE FACTS, IT IS HELD THAT THE ASSE SSEE TRUST DOES NOT QUALIFY FOR REGISTRATION U/S 12AA OF THE ACT. ACCORDINGLY, ASSESSEES APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT IS HEREBY REJECTED . AGGRIEVED WITH THE ORDER OF LD. CIT, THE ASSESSEE-I NSTITUTION/ASSOCIATION IS NOW IN APPEAL BEFORE THIS TRIBUNAL, ON THE FOLLOWING GR OUNDS:- 1. THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE W ITHOUT PREJUDICE TO ONE ANOTHER. 2. THE LEARNED COMMISSIONER OF INCOME TAX, RAJKOT-I II [HEREINAFTER REFERRED TO AS THE CIT] ERRED ON FACTS AS ALSO IN LAW IN REJECTING THE APPLICATION FOR REGISTRATION/S 12AA OF THE ACT ON THE ALLEGED G ROUND THAT THE TRUST DEED DOES NOT CONTAIN ANY CLAUSE REGARDING PROVISIONS IN THE EVENT OF ITS DISSOLUTION TO THE EFFECT THAT UPON THE DISSOLUTION, IF ANY PRO PERTY/ASSETS REMAINS AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES. 2.1 THAT ON FACTS THE LD. CIT FAILED TO APPRECIATE THAT THE APPELLANT TRUST DEED DOES CONTAIN RELEVANT PROVISION AT CLAUSE 14 O F THE TRUST DEED AND THEREFORE, HE OUGHT TO HAVE GRANTED REGISTRATION. T HE LD. CIT BE DIRECTED TO GRANT REGISTRATION. 3.0 YOUR HONOURS APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER, OR WITHDRAW ANY OR MORE GROUND OF APPEAL ON OR BEFORE THE HEARING OF APPEAL. 3. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, ON B EHALF OF THE ASSESSEE- INSTITUTION/ASSOCIATION, SHRI J.C. RANPURA, CA, APP EARED AND POINTED OUT THAT THE DISSOLUTION CLAUSE DOES EXIST IN THE ORIGINAL TRUST DEED OF THE ASSESSEE-TRUST VIZ. CLAUSE NO.14 OF THE TRUST DEED, AND THE ENGLISH TRA NSLATION OF RELEVANT PORTION OF THE AFORESAID CLAUSE HAS ALSO BEEN PROVIDED IN THE PAPE R-BOOK AT PAGE NO.3, WHICH READS AS UNDER:- IN CASE OF ANY ABNORMAL SITUATION IT IS NECESSARY TO CLOSE THIS INSTITUTION, THEN TRUST FUND AND ASSETS MUST BE UTILIZED FOR THE REPA YMENT OF ALL THE LIABILITIES OF THE TRUST, AND DISTRIBUTION OF REMAINING ASSETS, IF ANY, SHALL BE DONE AS PER THE RESPECTIVE LAWS AND BYLAWS PREVAILING AT THAT TIME. WITHOUT PREJUDICE TO ABOVE, WITH RESPECT TO THE TR UST DEED DOES NOT CONTAIN THE SPECIFIC DISSOLUTION CLAUSE; THE LD. COUNSEL OF THE ASSESSEE-INSTITUTION/ASSOCIATION HAS 3 449-RJT-2014 SAGAR MEMORIAL TRUST - 12AA- (SMC) RELIED UPON THE FOLLOWING DECISIONS OF ITAT, SMC BE NCH RAJKOT , WHEREIN THE TRIBUNAL HAS RELIED UPON THE DECISION OF CO-ORDINATE BENCH ( ITAT B BENCH AHMEDABAD) IN THE CASE OF SHREE CHARGAM DASHA PORWAD MAHAMANDAL V . DIT (EXEMPTION) BEARING ITA NOS. 337 & 338/AHD/2013, DATED 08.05.2013. IN THE CASE OF SHREE CHARGAM DASHA PORWAD MAHAMANDAL V. DIT (EXEMPTION) (SUPRA) , IT WAS HELD THAT WHEN THE ASSESSEE-TRUST IS REGISTERED WITH THE SUB-REGISTRAR AS A CHARITABLE TRUST, IN THE EVENT OF FAILURE OF THE TRUST THE NET ASSETS/INCOME WOULD OB VIOUSLY BE TAKEN OVER BY THE CHARITY COMMISSIONER AND THE REJECTION OF REGISTRAT ION ON THIS GROUND WAS HELD NOT ON A SOUND FOOTING. 4. ON THE OTHER HAND, SHRI M.L. MEENA, LD. DEPARTM ENTAL REPRESENTATIVE, APPEARED ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPO RTED THE ORDER OF THE LD. CIT, RAJKOT-III, RAJKOT. HE ALSO POINTED OUT THAT THE T RUST DEED IS DEFECTIVE AS POINTED OUT BY THE LD. CIT SINCE THE TRUST DEED OF THE TRUST IS INCOMPLETE SO FAR AS NO CLAUSE IS INCORPORATED REGARDING ITS ASSETS AFTER MEETING ALL LIABILITIES, IN CASE OF DISSOLUTION. THEREFORE, HE ARGUED THAT THE ACTION OF LD. CIT, RA JKOT-III, RAJKOT REJECTING THE APPLICATION OF THE ASSESSEE-INSTITUTION/ASSOCIATION U/S 12AA OF THE ACT BE UPHELD. 5. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE ORDERS AS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE-INSTITUTION/ASSOCIATION. THE ASSES SEE-INSTITUTION/ASSOCIATION IS A RELIGIOUS TRUST ESTABLISHED SINCE 2013 TO CARRY OUT RELIGIOUS, EDUCATIONAL AND CHARITABLE ACTIVITIES. IT IS ALSO REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 WITH ASSTT. CHARITY COMMISSIONER VIDE CERTIFICATE D ATED 15.11.2013. THE SOLE GROUND RAISED BY THE LD. CIT IN REJECTING ASSESSEE-INSTITU TION/ASSOCIATIONS APPLICATION FOR REGISTRATION U/S 12AA IS THAT THE TRUST DEED OF THE ASSESSEE-TRUST DOES NOT CONTAIN THE SPECIFIC DISSOLUTION CLAUSE IN THE EVENT OF ITS DIS SOLUTION. THIS ISSUE HAS ALREADY BEEN COVERED IN FAVOUR OF ASSESSEE-INSTITUTION/ASSOCIATI ON BY THE DECISIONS OF CO-ORDINATE BENCH [(I) ITAT B BENCH, AHMEDABAD IN THE CASE O F SHREE CHARGAM DASHA PORWARD MAHAMANDAL VS. DIT (EXEMPTIONS), VIDE ITA N O.337 AND 338/AHD/2013 ORDER DATED 8.5.2013 AND (II) ITAT AHMEDABAD C BE NCH IN THE CASE OF SITARAM KUTIR CHARITABLE TRUST V. CIT IN ITA NO.71/AHD/2013, DECI DED ON 17.05.2013)]; WHEREIN IT WAS HELD THAT IN CASE THE TRUST REGISTERED WITH THE SUB-REGISTRAR AS A CHARITABLE TRUST 4 449-RJT-2014 SAGAR MEMORIAL TRUST - 12AA- (SMC) AND THE TRUST BEING AN IRREVOCABLE TRUST, THE OBVIO US POSITION SHALL BE THAT THE CHARITY COMMISSIONER SHOULD TAKE OVER THE ASSETS ON DISSOLU TION; HENCE REJECTION OF REGISTRATION BY THE LD COMMISSIONER ON THE GROUND T HAT THERE WAS NO SPECIFIC CLAUSE IN THE INSTRUMENT IN REGARD TO THE TREATMENT TO BE GIVEN IN THE EVENT OF DISSOLUTION WAS NOT ON A SOUND FOOTING. IN VIEW OF THE FOREGOING, I AM OF THE VIEW THAT THE REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961, AS SOUGHT BY THE ASSESSEE-INS TITUTION/ASSOCIATION, CANNOT BE REFUSED AND I, THEREFORE, DIRECT THE LD. CIT, RAJKO T-III, RAJKOT TO GRANT THE REGISTRATION U/S 12AA TO THE ASSESSEE-INSTITUTION/ASSOCIATION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE-INSTITUTIO N/ASSOCIATION IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- ( $.. &' / T. K. SHARMA) ( ) /JUDICIAL MEMBER *)& +) ,/ ORDER DATE: 31.07.2014 !$ /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT- SAGAR MEMORIAL TRUST, C/O. INDRAVADAN BHAI G. PUROHIT, KRUPA SAGAR, OPP. GOVT. HOSPITAL, AT . MANGROL, TAL. MANGROL, DIST. JUNAGADH 2. / RESPONDENT- THE COMMISSIONER OF INCOME-TAX, RAJK OT-III, RAJKOT 3. ,0,1 * * 2 / CONCERNED JT. CIT, RANGE 1, JUNAGADH 4 . 345 1, * 1#, !$ / DR, ITAT, RAJKOT 5 . 57 89 / GUARD FILE *)& / BY ORDER TRUE COPY TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT