GOOD SHEPHERED CENTRAL SCHOOL, Trichur V. The CIT, Trichur

ITA 46/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96793 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 18-11-2015
• Assessment Year: misc
• Appeal Filed On: 15-01-2015
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: T K MATHEW
• Keywords: Charitable institution
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO. 46/COCH/2015 ASSESSMENT YEAR : - GOOD SHEPHERD CENTRAL SCHOOL, MULLASSERY, THRISSUR. [PAN:AABTF 45586E] S OF JESUS, KURUMAL, THALAKKOTTUKARA, THRISSUR. VS. THE COMMISSIONER OF INCOME-TAX, THRISSUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) I.T.A. NOS. 45/COCH/2015 ASSESSMENT YEAR : - FRIENDS OF JESUS, KURUMAL, THALAKKOTTUKARA, THRISSUR. [PAN : AAATF 4360L] VS. THE COMMISSIONER OF INCOME-TAX, THRISSUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI T.K. MATHEW REVENUE BY SHRI SHANTAM BOSE, CIT(DR) DATE OF HEARING 18/11/2015 DATE OF PRONOUNCEMENT 20/11/2015 O R D E R PER BENCH: THESE TWO APPEALS OF THE DIFFERENT ASSESSEES ARISE FROM TWO DIFFERENT ORDERS OF THE LD. CIT, THRISSUR AGAINST T HE ORDER PASSED U/S. 12A OF THE INCOME TAX ACT,1961 , EACH DATED 30/09/2 014 . I.T.A. NOS. 46&45/COCH/2015 2 2. SINCE THE ISSUES IN BOTH THE APPEALS ARE IDEN TICAL, THEREFORE, BOTH THE APPEALS ARE BEING DECIDED BY THIS CONSOLIDATED ORDER. 3. THE GROUNDS OF APPEAL IN I.T.A. NO. 46/COCH/ 2015 HAVE BEEN RAISED BY THE ASSESSEE AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, THRISSUR IS CONTRARY TO LAW, FACTS AND OTHER EVIDEN CES. 2. THE LEARNED COMMISSIONER OUGHT TO HAVE UNDERSTOO D THAT THE DESTINY OF THE RESIDUAL ASSETS OF THE TRUST ON DISS OLUTION SHALL NOT BE TO ANY TRUST/INSTITUTION OF RELIGIOUS NATURE AS THE DISSOLUTION CLAUSE IS VERY CLEAR REGARDING THE MATTER. 3. THE LEARNED COMMISSIONER FAILED TO APPRECIATE TH E FACT THAT RELIGIOUS STATUS OF THE PATRON OR BOARD OF TRUSTEES OR RELIGIOUS MINORITY STATUS OF THE SETTLERS SHALL NOT LEAD THEM TO TRANSFER THE RESIDUAL ASSETS TO A RELIGIOUS HEAD. 4. THE LEARNED COMMISSIONER FAILED TO FOLLOW THE PR OVISIONS CONTAINED IN SECTION 12AA(2) BY WHICH HE OUGHT TO H AVE SATISFIED ONLY WITH THE OBJECTS OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES WHILE DISPOSING THE APPLICATION. THE MATTERS IN TH E PROHIBITIVE SECTION 13 SHALL BE CONSIDERED BY THE ASSESSING OFF ICER. 5. THE LEARNED COMMISSIONER FURTHER ERRED IN FINDIN G FAULT WITH THE ACCOUNTS WHICH WERE MAINTAINED CORRECTLY AND SY STEMATICALLY AND IN ORDER. 6. THE LEARNED COMMISSIONER OUGHT TO HAVE CONVINCED WITH THE FACT THAT THE SCHOOL TRUST IS A GENUINE INSTITUTION , PRESENTLY IT RU UP TO 12 TH STANDARD YIELDING MERITORIOUS RESULTS. 7. THE ORDER REFUSING REGISTRATION OUGHT TO HAVE BE EN PASSED AND SERVED TO THE APPLICANT WITHIN THE TIME FRAME OF SI X MONTHS FROM THE MONTH OF FILING THE APPLICATION. THE ORDER WAS RECORDED TO BE ISSUED ON 30.09.2014 AND IT TOOK 49 DAYS TO REACH T HE APPLICANT, CONSEQUENTLY IT IS OUT OF TIME. I.T.A. NOS. 46&45/COCH/2015 3 4. THE GROUNDS OF APPEAL IN I.T.A. NO. 45/COCH/ 2015 ARE RAISED BY THE ASSESSEE AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, THRISSUR IS CONTRARY TO LAW, FACTS AND OTHER EVIDEN CES. 2. THE LEARNED COMMISSIONER OUGHT TO HAVE FOUND TH AT IF THE COMMISSIONER HAD NOT APPROVED THE AMENDMENT, SUCH AMENDMENT SHALL RESULT TO NULLIFY AS PER THE CONDIT ION IN THE TRUST DEED AND ACCORDINGLY, THE PRIOR APPROVAL AND APPR OVAL AFTER AMENDMENT SHALL HAVE THE SAME EFFECT. 3. THE LEARNED COMMISSIONER OUGHT TO HAVE CONVINCED WITH THE FACT THAT THE RESIDUAL ASSETS THAT ARE TRANSFERRED ON DISSOLUTION TO A SIMILAR INSTITUTION IS SYNONYM TO INSTITUTION H AVING SIMILAR OBJECTS. 4. THE LEARNED COMMISSIONER ERRED IN OBSERVING THE SHORT FALL IN LIST OF BENEFICIARIES IN CLAUSE 17(A), IN THE TR UST DEED THEY ARE OPEN TO ALL IRRESPECTIVE OF CASTE, CREED AND COMMU NITY WHEREAS THE INTENTION OF THE ADMINISTRATIVE COMMISSIONER IS THAT IT SHOULD BE OPEN TO GENERAL PUBLIC IRRESPECTIVE OF RELIGION , SEX, COLOUR, ETC. 5. THE LEARNED COMMISSIONER OUGHT TO HAVE UNDERSTOO D THAT EVEN IF THE CLAUSE REGARDING AUDIT OF ACCOUNTS WAS NOT P RESENT IN THE TRUST DEED, IN ORDER TO GET EXEMPTION U/S. 11 AUDIT OF ACCOUNTS WAS NECESSARY AS PER SECTION 12A(B) READ WITH SECTI ON 288(2) BY A CHARTERED ACCOUNTANT. 6. THE LEARNED ADMINISTRATIVE COMMISSIONER AGAIN ER RED IN BRINGING THE PROHIBITIVE SECTION 13(1)(B) WHILE REJ ECTING THE REGISTRATION APPLICATION AS THERE WAS NO RELIGIOUS ELEMENTS IN THE OBJECT CLAUSE 4(J). MINORITY THERE MEANS MINORITY O F ANY CLASS, LINGUISTIC MINORITY AND NOT OF ANY PARTICULAR RELIG ION. 7. THE LEARNED COMMISSIONER FAILED TO FOLLOW THE PR OVISIONS CONTAINED I SECTION 12AA(2) BY WHICH HE OUGHT TO HA VE SATISFIED ONLY WITH THE OBJECTS OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES WHILE DISPOSING THE APPLICATION. THE MATTERS IN THE PROHIBITIVE SECTION 13 SHALL BE CONSIDERED ONLY BY THE ASSESSIN G OFFICER. EGHT I.T.A. NOS. 46&45/COCH/2015 4 8. THE ORDER REFUSING REGISTRATION OUGHT TO HAVE BE EN PASSED AND SERVED TO THE APPLICANT WITHIN THE TIME FRAME OF SI X MONTHS FROM THE MONTH OF FILING THE APPLICATION. THE ORDER WAS RECORDED TO BE ISSUED ON THE LAST DAY OF SEPTEMBER WHICH TOOK 49 D AYS TO REACH THE APPLICANT, CONSEQUENTLY THE ORDER IS SEEN PASSE D OUT OF TIME. 5 . WE SHALL FIRST TAKE UP THE APPEAL OF THE ASSESS EE N I.T.A. NO. 46/COCH/2015 AND OUR ORDER HEREINBELOW SHALL BE IDE NTICALLY APPLICABLE TO THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 45/COCH /2015. 6. THE BRIEF FACTS OF THE CASE IN I.T.A. 46/COC H/2015 AS STATED BY THE LD. CIT(A), THRISSUR ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: ORDER U/S. 12AA OF THE INCOME TAX AC T, 1961 GOOD SHEPHERD CENTRAL SCHOOL MULLASSERY, THRIS SUR, A TRUST CONSTITUTED BY A DEED REGISTERED WITH SUB-REGISTRAR OFFICER, MULLASSERY, THRISSUR ON 17.11.2007, HAS FILED AN AP PLICATION ON 26/03/2014 FOR REGISTRATION U/S. 12A OF THE INCOME TAX ACT, 1961, IN THE PRESCRIBED FORM WITH COPIES OF DEED OF TRUS T REGISTERED ON 17/11/2007 AND AMENDMENT TRUST DEED REGISTERED ON 13/8/2014. 2. THE APPLICANT SUBMITTED DETAILS/CLARIFICATION/ EXPLANATION IN RESPONSE TO THIS OFFICE LETTER DATED 21.08.2014. T HE DETAILS SUBMITTED BY THE APPLICANT WERE EXAMINED. AS PER T HE TRUST DEED, THE STATUS OF THE TRUST IS GOOD SHEPHERD CENTRAL S CHOOL BELONGS TO THE CHRISTIAN MINORITY COMMUNITY. THE CLAUSE NO . 5 OF THE TRUST DEED IS OBJECTS OF THE TRUST WHEREIN 23 OBJECTS A RE SPECIFIED. EVEN THOUGH THE NAME OF APPLICANT IS GOOD SHEPHERD CENTRAL SCHOOL ALL THE OBJECTS ARE NOT RELATED WITH PROVID ING EDUCATION. THE APPLICANT (GOOD SHEPHERD CENTRAL SCHOOL) RUNS A N EDUCATIONAL I.T.A. NOS. 46&45/COCH/2015 5 INSTITUTION BY NAME GOOD SHEPHERDS CENTRAL SCHOOL AT MULLLASSERY, THRISSUR. THE CLAUSE NO.24 OF THE TRU ST DEED IS DISSOLUTION, WHICH IS AS FOLLOWS:- WHEN THE BOARD FEELS THAT IN THE BEST INTEREST OF THE PUBLIC IT IS BETTER TO WIND UP THE TRUST AND THE OBJECTS OF THE TRUST CAN BETTER BE ACHIEVED BY SOME OTHER MANNER, THEY SHALL SUBMIT THE PROPOSAL TO THE PATRON FOR HIS DECISION, AND ACTION SHALL BE TAKEN ACCORDING TO HIS DIRECTIONS. IF THE DECISION OF THE PATRON IS TO WIND UP THE TRUST, THE ASSETS REMAINING AFTER SATISFYING THE LI ABILITIES OF THE TRUST SHALL BE TRANSFERRED TO ANY TRUST/CHARITABLE INSTITUTION WITH SIMILAR OR NEARLY SIMILAR AIMS AND OBJECTIVES OF THE TRUST DULY REGISTERED UNDER THE THEN PREVAI LING LAWS AND WHICH FUNCTION UNDER THE CONTROL OF THE CATHOLI C ARCHDIOCESE OF TRICHUR OR, IN THE ABSENCE OF SUCH A TRUST/CHARITABLE INSTITUTION, TO THE GOVERNMENT. AS PER THE TRUST CONDITION, THE APPLICANT CAN TRANS FER ASSETS TO:- (1) ANY TRUST WITH SIMILAR AIM & OBJECTIVES (2) ANY TRUST WITH NEARLY SIMILAR AIM & OBJECTIVES (3) ANY CHARITABLE INSTITUTION WITH SIMILAR AIM AND OBJ ECTIVES (4) ANY CHARITABLE INSTITUTION WITH NEARLY SIMILAR AIM & OBJECTIVES FIRSTLY, IN SECOND INSTANCE, ANY TRUST WITH NEARLY SIMILAR AIMS & OBJECTIVES, MAY BE EVEN A RELIGIOUS TRUST IF SOME O F ITS OBJECTIVES ARE SIMILAR TO THAT OF THE APPLICANT. SECONDLY, TH E MEANING & INTENTION OF THE WORDS DULY REGISTERED LACKS CLAR ITY SINCE IT IS NOT EXPRESSLY SPECIFIED WHETHER SUCH TRUST/INSTITUT ION IS REGISTERED U/S. 12A AS A CHARITABLE TRUST/CHARITABLE INSTITUTION TRUST. THIRDLY, SECOND CONDITION AS PER THE TRUST DEED IS SUCH TRUST/INSTITUTION SHALL BE WHICH FUNCT ION UNDER THE CONTROL OF THE CATHOLIC ARCHDIOCESE OF TRICHUR WHO IS THE RELIGIOUS HEAD OF CATHOLIC CHRISTIANS. THIS CONDITION APPEAR ED TO BE AGAINST THE TRUE SPIRIT OF THE DISSOLUTION IN THE C ASE OF A PUBLIC CHARITABLE INSTITUTION. ALL THESE POINTS WERE POINT ED TO THE APPELLANT FOR EXPLANATION/CLARIFICATION. 2.1 THE APPLICANT SUBMITTED THEIR REPLY ON 18.09.2 014 VIDE LETTER DATED 04/09/2014. IN THE REPLY, IT IS STATED , INTENTION OF THE SETTLERS ARE THAT THE NET PROCEEDS AROSE ON DIS SOLUTION OF THE DISSOLVED TRUST SHALL BE TO A TRUST OR CHARITABLE I NSTITUTION WITH SIMILAR OR NEARLY SIMILAR AIMS AND OBJECTIVES WHICH WAS I.T.A. NOS. 46&45/COCH/2015 6 ESTABLISHED BY THEM OR TO THE GOVERNMENT. HERE THE SETTLERS OF THE TRUST, WHO ARE THE ARCH DIOCESE OF TRICHUR, RES ERVES THE POWER OF DECIDING THE TRANSFEREE INSTITUTION/TRUST WHICH IS A CHARITABLE INSTITUTION UNDER THE CONTROL OF THE ARC H DIOCESE. ON DISSOLUTION OF THE TRUST, IT IS THE SETTLERS AND TH E TRUSTEES TO DECIDE THE DESTINY OF RESIDUAL ASSETS OF THE TRUST. EVEN IF SUCH CONDITIONS AS SHOWN IN THE CLAUSE IS ABSENT IN THE TRUST DEED, THE SETTLERS AND THE TRUSTEES SHALL TRANSFER THE RE SIDUAL ASSETS ONLY TO THE ENTITIES AS THEY PREFER WHICH WILL BE A TRUST UNDER THEIR CONTROL. IT IS FURTHER STATED, THE PROCEEDS SHALL GO ONLY TO A CHARITABLE TRUST AND NOT TO ANY ENTITIES HAVING R ELIGIOUS OBJECTIVES OR SHALL BE TO THE GOVERNMENT. 2.2 THE ANALYSIS OF THE CLAUSE IN THE TRUST DEED I S DONE AS FOLLOWS:- IF THE DECISION PATRON IS TO WIND UP THE TRUST, THE NET ASSETS SHALL BE TRANSFERRED TO ANY TRUST /CHARITABLE INSTITUTION WITH SIMILAR/NEARLY SIMILAR AIM & OBJECTIVES OF THE TRUS T WHICH FUNCTIONING UNDER THE CONTROL OF ARCH DIOCESE OF TR ICHUR THAT MEANS THE PATRON WHO IS ARCH BISHOP OF CATHOLIC ARC H DIOCESE OF TRICHUR CAN TRANSFER THE NET ASSET TO A TRUST WITH NEARLY SIMILAR OBJECTIVES (TO A TRUST WITH SOME OF THE OBJECTIVES ARE SIMILAR TO THAT OF APPLICANT) WHICH IS UNDER HIS CONTROL. SINC E IT IS NOT SPECIFIED IN THE TRUST DEED THAT SUCH TRUST/INSTITU TION SHALL BE A CHARITABLE TRUST/CHARITABLE INSTITUTION REGISTERED U/S. 12A, IT IS NOTED THAT THE EXPLANATION OFFERED IN LETTER DATED 4/9/2014, PROCEEDS ON DISSOLUTION SHALL GO ONLY TO A CHARITA BLE TRUST AND NOT TO ANY ENTITIES HAVING RELIGIOUS OBJECTIVES IS NOT SPECIFIED IN THE TRUST DEED. FROM ALL THESE, IT IS SEEN THAT THE DISSOLUTION CLAUSE IN THE TRUST DEED OF THE APPLICANT IS NOT AS IT SHOULD HAVE BEEN IN THE CASE OF PUBLIC CHARITABLE INSTITUTION. FURTHER, IT IS ALSO SEEN THAT AS PER THE CLAUSE 7 OF THE TRUST DEE D, FURTHER, IT IS ALSO SEEN THAT AS PER THE CLAUSE 7 OF THE TRUST DEE D, THE TRUSTEES SHALL COLLECTIVELY BE CALLED THE BOARD OF TRUSTEES, HEREINAFTER REFERRED TO AS THE BOARD. THE OVERALL A DMINISTRATION, MANAGEMENT AND CONTROL OF THE TRUST SHALL VEST IN T HE BOARD. THE BOARD SHALL FUNCTION AS PER THE PROVISION OF TH E STATUTES, RULES AND REGULATIONS OF THE CATHOLIC ARCHDIOCESE O F TRICHUR. 2.3 ON AN EXAMINATION OF COPIES OF STATEMENT OF A/ C FOR THE F.Y. 2011-12 SUBMITTED BY THE APPLICANT, IT IS SEEN THAT THE APPLICANT (TRUST) HAS CREDITED ADMISSION FEE OF RS.3,35,400 /- WHEREAS THE AMOUNT CREDITED BY SCHOOL IS ONLY RS.54,000/-. IT IS ALSO I.T.A. NOS. 46&45/COCH/2015 7 SEEN THAT THE APPLICANT (TRUST) HAS BEEN COLLECTING DEVELOPMENT FEE OF RS.12,07,200/-, AS PER THE ACCOUNTS FOR F.Y . 2011-2012, WHEREAS IT IS NOT ACCOUNTED FOR IN THE ACCOUNTS OF SCHOOL WHICH ARE DIRECTLY INVOLVED WITH THE STUDENTS AND FEES. A LL THESE INDICATE THAT THE APPLICANT (TRUST) AND SCHOOL ARE NOT ONE AND THE SAME, THE ACTIVITY OF THE APPLICANT IS SOMETHIN G MORE THAN RUNNING THE GOOD SHEPHERDS CENTRAL SCHOOL. IN THIS CONNECTION, IT IS SEEN THAT THE APPLICANT HAS SHOWN, UNDER CURR ENT ASSETS, RS.1,40,000/- ON ACCOUNT OF GOOD SHEPHERD RCLP SCH OOL. EVEN THOUGH VALUE OF BUILDING IS SHOWN UNDER FIXED ASSET S IN THE ACCOUNTS OF THE APPLICANT, VALUE OF LAND IS NOT SHO WN. 3. IN VIEW OF ALL THESE FACTS STATED ABOVE AND ALS O FOR THE REASON THAT THE EXPLANATION OFFERED BY THE APPLICANT IS NO T SATISFACTORY, AS ALREADY DISCUSSED ABOVE, THE APPLICATION SUBMITT ED ON 26/3/2014 FOR REGISTRATION AS CHARITABLE TRUST U/S. 12A IS REJECTED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FIRST OBJECTION OF THE LD . CIT IN HIS ORDER IS WITH REGARD TO CLAUSE NO. 24 OF THE TRUST DEED WHIC H RELATES TO THE DISSOLUTION OF THE TRUST. THE LD. CIT HAS REFERRED TO CLAUSE 24 OF THE TRUST DEED IN THE ORDER ITSELF WHICH IS REPRODUCED HEREINABOVE. AS REGARDS THE TRANSFER OF ASSETS ON DISSOLUTION TO AN Y TRUST WITH SIMILAR AIMS AND OBJECTS OR NEARLY SIMILAR AIMS AND OBJECT S, WE FIND THAT THERE IS NO AMBIGUITY IN THE CLAUSE MENTIONED IN THE TRUS T DEED. 8. THE SECOND OBJECTION OF THE LD. CIT WAS THAT THE TRUST FUNCTIONS UNDER THE CONTROL OF THE CATHOLIC ARCHDIOCESE OF TR ICHUR WHO IS THE RELIGIOUS HEAD OF CATHOLIC CHRISTIANS WHICH APPEARS TO BE AGAINST THE TRUE SPIRIT OF THE DISSOLUTION IN THE CASE OF A PUB LIC CHARITABLE INSTITUTION. I.T.A. NOS. 46&45/COCH/2015 8 9. IN THIS REGARD AMENDMENT IN THE CLAUSE OF T HE TRUST WAS MADE ON 13 TH AUGUST, 2014 AND A NEW CLAUSE 25 WAS INTRODUCED WH ICH IS VERY RELEVANT TO BE REPRODUCED HEREINBELOW: AFTER THE TWENTY FOURTH CLAUSE OF THE PR INCIPAL TRUST DEED A NEW CLAUSE 25 IS INDUCTED AS SHOWN BELOW:- 25 (1) THE BENEFICIARIES OF THE TRUST SHALL THE PU BLIC AT LARGE IRRESPECTIVE OF CASTE, CREED, RELIGION AND SEX. (2) THE AREA OF OPERATION OF THE TRUST SHALL BE ONL Y WITHIN INDIA. (3) NO FUNDS OR BENEFITS FROM THE TRUST SHALL BE TA KEN AWAY OR ENJOYED BY THE SETTLERS, TRUSTEES, FOUNDERS OR MEMB ERS OF THE TRUST BUT THE FUNDS SHOULD BE UTILIZED ONLY FOR CAR RYING OUT THE OBJECTIVES OF THE TRUST. (4) THAT THE FUNDS OF THE TRUST SHALL BE INVESTED S TRICTLY IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 11(5) READ WITH SECTION 13(1) (D) OF THE INCOME TAX ACT, 1961. (5) REGULAR BOOKS OF ACCOUNTS OF THE TRUST SHALL BE MAINTAINED AND THE ANNUAL ACCOUNTS SHALL BE AUDITED BY A CHART ERED ACCOUNTANT APPOINTED FOR THE PURPOSE. THIS ADDITION SHALL BE IN FORCE FROM THE FORMATION OF THE TRUST. 9. FROM THE READING OF THE AMENDMENT MADE BY THE ASSESSEE-TRUST, IT IS EVIDENT THAT NONE OF THE SETTLERS, TRUSTEES, FOUNDERS OR MEMBERS OF THE TRUST IS ELIGIBLE TO TAKE AWAY OR ENJOY FUND S OR BENEFITS FROM THE TRUST EXCEPT FOR CARRYING OUT THE OBJECTIVES OF THE TRUST DURING THE CONTINUATION OF THE TRUST OR AFTER THE DISSOLUTION OF THE TRUST. IT IS ALSO VERY CLEARLY MENTIONED THAT THE FUNDS OF THE TRUST SHALL BE INVESTED STRICTLY IN ACCORDANCE WITH THE PROVISIONS CONTAINE D IN SECTION 11(5) I.T.A. NOS. 46&45/COCH/2015 9 R.W.S. 13(1) (D) OF THE ACT. REGULAR BOOKS OF ACCOU NT OF THE TRUST SHALL BE MAINTAINED AND THE ANNUAL ACCOUNTS SHALL BE AUDI TED BY THE CHARTERED ACCOUNTANT APPOINTED FOR THE PURPOSE. THE SAID AMENDMENT HAD COME INTO FORCE FROM THE FORMATION OF THE TRUST , I.E., SINCE THE INCEPTION OF THE TRUST. THIS AMENDMENT TRUST DEED W AS PLACED BEFORE THE LD. CIT AS STATED BY THE LD. AR BEFORE PASSING THE ORDER DATED 30- 09-2014. THE LD. CIT HAS NOT TAKEN ANY COGNIZANCE OF THE SAID AMENDMENT TRUST DEED AND HAD PASSED THE ORDER WITHO UT CONSIDERING THE SAME. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, AND IN SUM AND SUBSTANCE, THE OBJECTIVES OF THE TRUST ARE CHARITAB LE IN NATURE AND THE SETTLERS, TRUSTEES, FOUNDERS OR MEMBERS OF THE TRUS T CANNOT ENJOY OR TAKE AWAY THE FUNDS OF THE TRUST DURING ITS CONTINU ATION OR AFTER THE DISSOLUTION OF THE TRUST AND NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE LD. CIT IN THIS REGARD. ACCORDINGLY, THE LD. C IT IS NOT JUSTIFIED IN DENYING THE REGISTRATION AS CHARITABLE TRUST U/S. 1 2A OF THE ACT. ACCORDINGLY, HE IS DIRECTED TO GRANT REGISTRATION A S APPLIED BY THE ASSESSEE-TRUST VIDE ITS APPLICATION DATED 26 TH MARCH, 2014 MENTIONED HEREINABOVE. ACCORDINGLY, THE ORDER OF THE LD. CIT IS DIRECTED TO BE CANCELLED. 10. ONE MORE OBJECTION BY THE LD. CIT WAS RAISE D IN PARA 2.3 WITH REGARD TO VARIATION NOTED IN THE FEES COLLECTION WI TH RESPECT TO SCHOOL I.T.A. NOS. 46&45/COCH/2015 10 FEES, DEVELOPMENT FEES ETC. WHICH WAS CLARIFIED BY THE ASSESSEE THAT IT MAINTAINED ACCOUNTS IN TWO DEPARTMENTS SUCH AS CEN TRAL SCHOOL DEPARTMENT AND TRUST MAIN DEPARTMENT. THE FIRST ONE IS FOR RUNNING CBSE SCHOOL INCORPORATING ITS REGULAR FEES COLLECTI ON , PAYMENT OF SALARY AND OTHER RUNNING EXPENSES AND THE SECOND ON E IS FOR THE TRUST MAIN ACCOUNT WHICH CONTAINS ACTIVITIES OF NURSERY S CHOOL, SCHOOL BUS DEPARTMENT AND FOR RUNNING AND DEVELOPMENT OF THE T RUST. THE CONSOLIDATED ACCOUNTS OF THE UNITS SHALL FORM THE A CCOUNTS OF THE TRUST. THE ASSESSEE HAS FILED THE STATEMENT OF ACCOUNTS OF BOTH THE UNITS ALONG WITH THE APPLICATION FOR REGISTRATION U/S. 12 A OF THE ACT AND THERE IS NO DUPLICATION OF INCOME OR CONCEALMENT. THEREFO RE, THE ASSESSEE HAS SUBMITTED A COGENT EXPLANATION AND THEREFORE, I T DOES NOT EFFECT THE GRANT OF REGISTRATION TO THE ASSESSEE-TRUST. 11. AS REGARDS GROUND NO. 7, THE ASSESSEE HAS R AISED THE GROUND THAT THE ORDER OUGHT TO HAVE BEEN PASSED AND SERVED ON THE APPLICANT WITHIN SIX MONTHS OF FILING OF THE APPLICATION. THE ORDER OF THE LD. CIT WAS PASSED U/S. 12A OF THE ACT ON 30 TH SEPTEMBER, 2014. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT PLACE ANY SUBSTA NTIVE EVIDENCE THAT THE ORDER HAS BEEN SERVED ON THE APPLICANT-TRUST ON 18 TH NOVEMBER, 2014 AND IN THE ABSENCE OF THE SAME, THE DATE OF TH E ORDER, I.E., 30 TH SEPTEMBER, 2014 IS DEEMED TO BE THE DATE OF SERVICE OF THE ORDER I.T.A. NOS. 46&45/COCH/2015 11 WHICH IS THE SETTLED PROPOSITION OF LAW BY VARIOUS COURTS OF LAW. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, GROUND NO. 7 O F THE ASSESSEE IS DISMISSED. OTHER GROUNDS OF THE ASSESSEE IN THIS AP PEAL ARE ALLOWED. 12. WE SHALL NOW TAKE UP THE APPEAL OF THE ASS ESSEE IN I.T.A. NO. 45/COCH/2015. 13. THE BRIEF FACTS OF THE CASE AS STATED BY T HE LD. CIT IN THE ORDER PASSED U/S. 12A OF THE ACT IN THE CASE OF THE ASSES SEE ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: ORDER U/S. 12AA OF THE INCOMETAX ACT, 1961 FRIENDS OF JESUS, THISSUR, A TRUST CONSTITUTE D BY A DEED REGISTERED WITH SUB REGISTRAR OFFICE, ALUVA ON 06.0 2.2014, HAS FILED AN APPLICATION ON 07.03.2014FOR REGISTRATION U/S. 1 2A OF THE INCOME TAX ACT, 1961, IN THE PRESCRIBED FORM. 2. THE APPLICANT WAS REQUESTED TO SUBMIT EXPLANATI ON/CLARIFICATION ON FOLLOWING POINTS WITH SUPPORTING MATERIALS. 2. WHETHER THERE IS CLEAR PROVISION IN THE BYE-LAW THAT ANY AMENDMENT TO THE TRUST DEED SHALL BE MADE ONLY WITH THE PRIOR APPROVAL OF JURISDICTIONAL COMMISSIONER OF INCOME T AX? 3. WHETHER THERE IS CLEAR PROVISION IN THE TRUST D EED SPECIFYING THE MODE OF DISBURSEMENT OF THE ASSETS IN THE EVENT OF DISSOLUTION? 4. WHETHER THERE IS CLEAR PROVISION IN THE TRUST D EED SPECIFYING THAT THE BENEFIT OF THE TRUST ARE OPEN TO ALL IRRESPECTI VE OF CASTE, RELIGION, SEX, ETC.? 5. WHETHER THERE IS CLEAR PROVISION IN THE TRUST DEED STATING THAT THE ACCOUNTS SHALL BE AUDITED BY A QUALIFIED CHARTE RED ACCOUNTANT? 6.(I) IT IS SHOWN AS CLAUSE NO. 5(C) IN SHEET NO. 6 TO ESTABLISH AND MANAGE SCHOOLS, COLLEGES AND OTHER EDUCATIONAL INST ITUTIONS OF I.T.A. NOS. 46&45/COCH/2015 12 SPIRITUAL AND MORAL OBJECTIVES. PLEASE EXPLAIN THE NATURE OF THE SAME? 6.(II) IT IS SHOWN AS CLAUSE NO.9 IN SHEET NO. 9, ALL THE ABOVE POWERS SHALL BE EXERCISED ONLY AS PER THE DOCTRINE OF THE CONSTITUTION OF THE CONGREGATION, CAPUCHIN FRAIRS M INOR. PLEASE EXPLAIN THE SAME? 3. IN RESPONSE, THE APPLICANT SUBMITTED THEIR REPL Y ON 18.09.2014, VIDE LETTER DATED 17.09.2014. ON EXAMINATION OF THE SAME, FOLLOWING DISCREPANCIES ARE NOTICED. REGARDING AMENDMENT CLAUSE: - THE APPLICANT HAS REPLIED THAT IN THE CLAUSE 16(B) OF THE TRUST DEED, IT HAS BEEN INCORPO RATED. THE CLAUSE 16(B) IS AS FOLLOWS:- ANY OF THE PROVISIONS IN THIS DEED SHALL BE AMENDE D OR ANNULLED OR SUBSTITUTED AT ANY TIME BY THE SETTLERS, IF THE BOA RD OF TRUSTEES FEEL THAT SUCH A STEP IS QUITE ESSENTIAL FOR THE SMOOTH FUNCTIONING OF THE TRUST AND IT IS FURTHER PROVIDED THAT SUCH AMENDMEN TS SHALL COME INTO EFFECT ONLY AFTER GETTING THE APPROVAL OF THE COMMISSIONER OF INCOME TAX HAVING JURISDICTION OVER THE TRUST, IF T HE TRUST HAS BEEN GIVEN ANY REGISTRATION OR RECOGNITION UNDER THE INC OME TAX ACT, 1961. THE CLAUSE NO. 16(B) OF THE TRUST DEED LACKS CLARI TY SINCE IT IS NOT SPECIFICALLY EXPRESSED WHETHER THE APPLICANT SHALL GET PRIOR APPROVAL FROM THE JURISDICTIONAL COMMISSIONER OF INCOME TAX FOR MAKING AMENDMENT TO THE TRUST DEED OR SHALL APPLY FOR APPR OVAL AFTER MAKING THE AMENDMENT. REGARDING DISSOLUTION CLAUSE :- THE APPLICANT HAS REPLIED THAT IT HAS BEEN INCORPORATED IN CLAUSE 16(C) OF THE TRUST DEED AS FOLLOWS:- IN THE CASE OF THE TRUST BECOMING IMPOSSIBLE FOR F UNCTIONING IN ACCORDANCE WITH THE PROVISIONS OF THIS DEED, THE SE TTLERS WHEN REQUESTED BY THE BOARD OF TRUSTEES SHALL DECIDE TO WIND UP THE TRUST AND TO TRANSFER THE RESIDUAL ASSETS, IF ANY, AFTER DISCHARGING ALL THE LIABILITIES TO A SIMILAR INSTITUTION AS OF THIS TRUST OR SHALL VEST WITH THE GOVERNMENT. THE DISSOLUTION CLAUSE (CLAUSE 16(C), LACKS CLARI TY SINCE IT IS NOT SPECIFICALLY EXPRESSED THAT THE NET ASSETS SHALL BE TRANSFERRED TO AN INSTITUTION HAVING SIMILAR OBJECTS OF THE APPLICANT . I.T.A. NOS. 46&45/COCH/2015 13 REGARDING BENEFICIARIES OF THE TRUST :- THE APPLICANT HAS REPLIED THAT IT HAS BEEN INCORPORATED IN CLAUSE 17(A). THE CLAUSE 17(A) OF THE TRUST DEED IS AS FOLLOWS: THE SETTLERS HEREBY DECLARE THAT THIS IS PURELY A CHARITABLE TRUST FOR PHILANTHROPIC PURPOSES AND ITS BENEFITS SHALL BE OP EN TO ALL IRRESPECTIVE OF CASTE, CREED AND COMMUNITY AND THAT NO PART OF ITS INCOME OR FUNDS SHALL BE UTILIZED FOR ANY PURPOSE O THER THAN THE OBJECTS NOR SHALL BE DISTRIBUTED AS DIVIDEND OR PRO FIT AMONG THE SETTLERS, MEMBERS OF BOARD OR OFFICE BEARERS OF THE TRUST. THIS CLAUSE LACKS CLARITY SINCE IT IS NOT CLEARLY EXPRESSED THAT BENEFITS SHALL BE OPEN TO GENERAL PUBLIC IRRESPECTI VE OF RELIGION, SEX, COLOR, ETC. REGARDING AUDIT OF ACCOUNTS :- THE APPLICANT HAS REPLIED THAT IT IS INCORPORATED IN CLAUSE 14 OF THE TRUST DEED. IT IS FURTHER STATED, HERE THE CONDITION MENTIONED IS THAT THE ACCOUNTS SHOULD BE AUDITED BY AN AUDITOR ONLY. SECTION12A(B) MAKES IT NECESSARY TO AUDIT THE ACCOUNTS BY AN ACCOUNTANT AS PER SECTION 288(2). SO AS PER LAW THE SAID AUDITOR IS A CHARTERED ACCOUNTANT. SECTION 12A(B) IS VERY CLEAR. CLAUSE NO. 14 OF THE TRUST DEED IS AS FOLLOWS, AN AUDITOR APPOINTED BY THE SETTLERS OF T HE TRUST SHALL AUDIT THE ACCOUNTS. BUT, IN THE CLAUSE NO.14 OF THE TRUS T DEED OR ANYWHERE IN THE TRUST DEED, IT IS NOT SPECIFIED THA T THE AUDITOR, MENTIONED IN THE CLAUSE 14 IS A CHARTERED ACCOUNTAN T OR ACCOUNTANT DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 OF THE INCOME TAX ACT. 4. IN THE DISCUSSION WITH APPLICANTS AUTHORISED REPRESENTATIVE, SHRI T.K. MATHEW, C.A., ON 29.09.2014, IT IS POINTE D OUT THAT THE EXPLANATION/CLARIFICATION OFFERED ON ABOVE TRUST DE ED ARE NOT SATISFACTORY AND THEREFORE, NOT ACCEPTABLE. IT IS A LSO SEEN ON EXAMINATION OF TRUST DEED THAT ONE OF THE OBJECT OF THE APPLICANT IS, AT SL. NO.4 (II), TO ESTABLISH, MANAGE OR PROMOTE AN EDUCATION CENTRE TO IMPART KNOWLEDGE TO THE WEAKER SECTIONS, MINORITIES, DALIT, SC/ST AND RURAL WOMEN. SUCH AN OBJECT CANNOT BE CONSIDERED AS A CHARITABLE ONE BY VIRTUE OF EXPLANATION 2 TO S ECTION 13 R.W.S. 13(1)(B). 5. IN VIEW OF THE AFORESAID REASONS, THE APPLICATI ON FOR REGISTRATION AS CHARITABLE TRUST U/S. 12A SHALL NOT BE GRANTED A ND THEREFORE, THE I.T.A. NOS. 46&45/COCH/2015 14 APPLICATION FILED ON 07/03/2014 BY THE TRUST FOR RE GISTRATION U/S. 12AA OF THE INCOME TAX ACT IS HEREBY REJECTED. 14. FROM THE READING OF THE OBJECTIONS OF THE LD. C IT, WHICH ON THE FACE OF IT, APPEARS TO BE VAGUE. WE HAVE PERUSED THE TRUST DEED AND WITH RESPECT TO CLAUSE 16(B) OF THE TRUST DEED, WE FIND THAT THE ASSESSEE SHALL GET PRIOR APPROVAL FROM THE COMMISSI ONER OF INCOME TAX FOR MAKING AMENDMENT TO THE TRUST DEED. AS REGARDS TRANSFER OF ASSETS ON DISSOLUTION, IN CLAUSE 16(C), IT IS MENTI ONED THAT TRANSFER OF ASSETS WOULD BE TO A SIMILAR INSTITUTION HAVING SIM ILAR OBJECTS. AS REGARDS BENEFICIARIES OF THE TRUST, IN CLAUSE 17(A) , IT IS EXPLAINED THAT BENEFITS OF THE TRUST SHALL BE OPEN TO GENERAL PUBL IC. AS REGARDS AUDIT AND ACCOUNTS, THE AUDITOR MENTIONED IN CLAUSE 14 SHALL INVARIABLY BE A CHARTERED ACCOUNTANT APPOINTED FOR THE PURPOSE AND NO ONE ELSE. AS REGARDS OBJECT CLAUSE 4(J) WITH REGARD TO EDUCATION TO WEAKER SECTIONS OF THE SOCIETY, IT IS SEEN THAT BENEFICIARIES ARE G ENERAL PUBLIC SUCH AS WEAKER SECTIONS, MINORITIES, DALIT, SCHEDULED CASTE S, SCHEDULED TRIBES AND RURAL WOMEN AND THERE IS NO DISTINCTION WITH RE GARD TO RELIGIOUS AND LINGUISTIC MINORITIES ETC. CONCLUDING OUR OBSERVAT ION THAT THERE IS NO VIOLATIVE CLAUSE IN THE TRUST DEED WHICH ARE PROHIB ITIVE TO GRANT REGISTRATION UNDER SECTION 12A OF THE ACT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT IS NOT JUSTI FIED IN DENYING REGISTRATION U/S. 12A OF THE ACT AS APPLIED BY THE ASSESSEE VIDE ITS I.T.A. NOS. 46&45/COCH/2015 15 APPLICATION DATED 7 TH MARCH, 2014. ACCORDINGLY, THE ORDER OF THE LD. CIT, THRISSUR IS CANCELLED AND HE IS DIRECTED TO GR ANT REGISTRATION UNDER SECTION 12A OF THE ACT TO THE ASSESSEE-TRUST. THIS GROUND OF THE ASSESSEE IS ALLOWED. 15. . AS REGARDS GROUND NO. 8 RAISED BY THE ASSESSEE, THE ORDER REFUSING REGISTRATION OUGHT TO HAVE BEEN PASSED AND SERVED TO THE APPLICANT WITHIN THE TIME FRAME OF SIX MONTHS FROM THE MONTH OF FILING THE APPLICATION, OUR ORDER IN I.T.A. NO. 46/COCH/20 15 HEREINABOVE SHALL BE IDENTICALLY APPLICABLE TO THE APPEAL OF THE ASSE SSEE IN I.T.A. NO. 45/COCH/2015. ACCORDINGLY, GROUND NO. 8 OF THE ASS ESSEE IS DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 46/COCH/2015 IS PARTLY ALLOWED AND THE APPEAL OF TH E ASSESSEE IN I.T.A. NO. 45/COCH/2015 IS ALSO PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20-11-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 20TH NOVEMBER, 2015 GJ COPY TO: 1. GOOD SHEPHERD CENTRAL SCHOOL, MULLASSERY, THRISS UR. 2. FRIENDS OF JESUS, KURUMAL, THALAKKOTTUKARA, THRI SSUR. I.T.A. NOS. 46&45/COCH/2015 16 3. THE COMMISSIONER OF INCOME-TAX, THRISSUR. 4. D.R., I.T.A.T.,COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN