Nandani Educational & Charitable Trust, Lucknow V. CIT, Lucknow

ITA 49/LKW/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78614 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-06-2014
• Assessment Year: misc
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 12A; 12AA; 12; 92

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.49/LKW/2011 ASSESSMENT YEAR:N.A. NANDINI EDUCATIONAL & CHARITABLE TRUST, B - 13, SECTOR - C, ALIGANJ, LUCKNOW. PAN:AABTN3246J VS. C.I.T. - I, LUCKNOW. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY SHRI MANOJ KUMAR GUPTA, CIT, D.R. DATE OF HEARING 24/06/2014 DATE OF PRONOUNCEMENT 0 4 /07/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT - I, LUCKNOW DATED 28/12/2010 U/S 12AA(1) OF THE ACT. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE LD. CIT HAS ERRED IN LAW AND ON FACTS IN REJECTING THE APPELLANT'S APPLICATION FOR REGISTRATION UNDER SECTION 12AA ON THE GROUND THAT: A) SOME OF THE CLAUSES/SUB - CLAUSES OF THE APPELLANT IS NOT IN ACCORDANCE WITH THE 'INDIAN TRUST ACT, 1882' AND B) CONSTRUCTION OF A SCHOOL BUILDING AND OPERATION OF A SCHOOL IS FOR COMMERCIAL ACTIVITIES. 2.1 BECAUSE THE 'INDIAN TRUST A C T 1882' AS PER DEFINITION GIVEN IN SECTION 3 OF THE SAID ACT, IS APPLICABLE TO A 2 PRIVATE TRUST ONLY, WHICH IS CREATED BY AN AUTHOR FOR THE BENEFIT OF A PARTICULAR PERSON AND THE SAID ACT DOES NOT EXTEND TO A CHARITABLE TRUST FORMED FOR CARRYING OUT CHARITABLE ACTIVITIES AND THE VIEW TAKEN BY THE LD. CIT IS WHOLLY ERRONEOUS AND MISPLACED. 2.2 BECAUSE UNDER NO CIRCUMSTANCES THE DEFINITION OR THE PROVISIO N OF 'INDIAN TRUST ACT' ARE APPLICABLE IN THE CASE OF THE APPELLANT AND THE OBSERVATION MADE BY THE LD. CIT FOR REJECTING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA THAT THE APPELLANT ACTIVITIES IS NOT IN CONSONANCE WITH 'INDIAN TRUST ACT' IS WHOL LY INCORRECT AS CHARITABLE TRUST ARE GOVERNED BY THE PROVISION OF SECTION 92 OF CPC. 3. BECAUSE LD. CIT HAS FAILED TO APPRECIATE THE 'OBJECTS' OF THE APPELLANT TRUST WHICH WAS SOLELY FOR THE EDUCATIONAL PURPOSES AND AS SUCH ITS ACTIVITIES FALLS WITHIN THE DEFINITION OF 'CHARITABLE PURPOSES' AS DEFINED UNDER SUB SECTION (15) OF SECTION 2 OF THE INCOME TAX ACT AND THE VIEW TAKEN BY HIM THAT 'ALL ITS ACTIVITIES AND CLAUSES OF TRUST DEED INDICATE THAT IT WAS CREATED ONLY WITH INTENTION TO DO COMMERCIAL ACTIVIT IES WITH A RUNNING OF SCHOOL OF HIGH STANDARD', FOR REJECTING THE REGISTRATION UNDER SECTION 12AA IS ERRONEOUS BOTH IN LAW AND ON FACTS. 4. BECAUSE AT THE TIME OF GRANTING REGISTRATION THE CIT IS REQUIRED TO LOOK INTO THE OBJECTS WHETHER THEY ARE IN THE N ATURE OF CHARITABLE ACTIVITIES AS DEFINED IN SECTION 2(15) OF THE INCOME TAX ACT OR NOT AND THE GENUINENESS OF THE ACTIVITIES IN CONSONANCE WITH SUCH 'OBJECTS' AND IN THE CASE OF THE APPELLANT THE LD. CIT HAS FAILED TO SO AND THEREFORE, ORDER PASSED BY HIM REJECTING THE GRANT OF REGISTRATION UNDER SECTION 12A IS WHOLLY ERRONEOUS IN LAW AND ON FACTS. 5 . BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IN THE PRESENT CASE, CIT(A) HAS REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION 3 U/S 12AA OF THE ACT ON THE BASIS THAT THE ASSESSEE HAS NOT COMPLIED WITH CERTAIN PROVISIONS OF INDIAN TRUST ACT, 1882. HE SUBMITTED THAT THE PROVISIONS OF INDIAN TRUST ACT, 1882 ARE APPLICABLE IN RESPECT OF PRIVATE TRUST AND NOT IN RESPECT OF PUBLIC TRUST, WHICH IS GOVERNED BY SECTION 92 OF CPC. HE FURTHER SUBMITTED THAT THE PURPOSE OF GRANTING REGISTRATION U/S 12 AA OF THE ACT, THE CIT IS REQUIRED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AND HE IS NOT SUPPOSE D TO DECIDE THE COMPLIANCE OF PROVISIONS OF INDIAN TRUST ACT, 1882. 4. AS AGAINST THIS, LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF CIT. HE ALSO SUBMITTED THAT WHEN VALID TRUST IS NOT CREATED, NO REGISTRATION CAN BE GRANTED TO THE ASSESSEE U/S 12AA OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT IN HIS ORDER THAT CERTAIN CLAUSES/SUB CLAUSES OF THE TRUST DEED ARE NOT IN ACCORDANCE WITH THE INDIAN TRUST ACT, 1882. HE HAS MENTIONED CLAUSE 7, 8, 9 AND 15 OF THE TRUST DEED, WHICH ARE NOT IN ACCORDANCE WITH THE INDIAN TRUST ACT, 1882 AS PER CIT. THEREAFTER, CONSIDERING THE REPLY OF THE ASSESSEE DATED 27/12/2010, HE HAS PASSED THE ORDER THAT AS PER INDIAN TRUST ACT, 1882, TRUST ACTIVITIES SHOULD CONFINE TO INDIAN TERRITORIES AND THERE IS NO CONCEPT OF PRIMARY OR PERMANENT MEMBERS IN THE INDIAN TRUST ACT, 1882 AND THE TRUSTEE HAVE NO SUCH POWER TO APPOINT THEIR SUCCESSOR IN THEIR OFFICE EITHER IN HIS LIFE TIME OR THROUGH WILL. HE HAS ALSO OBSERVED THAT THE TRUSTEES OF THE TRUST HAVE NO POWER TO CHANGE THE NATURE OF THE DONATION RECEIVED FROM DONOR WITH A SPECI FIC DIRECTION. ON THIS BASIS, THE CIT CAME TO CONCLUSION THAT THE TRUST IS NOT VALID TRUST. 6. NOW IN THE LIGHT OF THESE FACTS, WE CONSIDER THE ISSUE IN THE LIGHT OF ARGUMENTS OF BOTH THE SIDES. REGARDING THIS ARGUMENT OF LEARNED A.R. OF 4 THE ASSESSEE TH AT CIT IS NOT REQUIRED TO EXAMINE THE VALIDITY OF THE TRUST AND HE IS ONLY REQUIRED TO EXAMINE ABOUT THE OBJECTS OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES, WE ARE OF THE CONSIDERED OPINION THAT AS PER THE PROVISION OF SECTION 12A , ONLY A TRUST OR INST ITUTION IS ELIGIBLE FOR REGISTRATION U/S 12AA. IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSEE IS NOT A TRUST BUT AN INSTITUTION. THE ASSESSEE ALSO SAYS THAT IT IS TRUST BUT THE PROVISIONS OF INDIAN TRUST ACT, 1882 ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE IT IS PUBLIC CHARITABLE TRUST AND NOT A PRIVATE TRUST. IT IS THE ARGUMENT OF THE ASSESSEE THAT TO THE ASSESSEE TRUST, THE PROVISION OF SECTION 92 OF CPC ARE APPLICABLE AND NOT THE INDIAN TRUST ACT, 1882. BUT AT THE SAME TIME, WE FIN D THAT NO SUCH ARGUMENT WAS MADE BEFORE THE CIT THAT INDIAN TRUST ACT, 1882 IS NOT APPLICABLE TO THE ASSESSEE AND THE ASSESSEE IS GOVERNED BY SECTION 92 OF CPC ONLY. BEFORE US ALSO, ONLY THIS ARGUMENT WAS MADE BUT RELEVANT PROVISION S OF SECTION 92 OF CPC WERE NOT PRODUCE D BEFORE US TO ESTABLISH THAT THE ASSESSEE TRUST IS COVERED BY CPC. IN THE PAPER BOOK, THE ASSESSEE HAS FURNISHED COPY OF INDIAN TRUST ACT, 1882 ALSO BUT HE DID NOT POINT OUT ANY RELEVANT PROVISION OF THIS INDIAN TRUST ACT, 1882 TO ESTABLI SH THAT THIS ACT IS APPLICABLE ONLY TO PRIVATE TRUST AND NOT PUBLIC TRUST. WE FEEL IT PROPER THAT THE ISSUE SHOULD GO BACK TO CIT. ALL THE ARGUMENTS SHOULD BE MADE BEFORE THE CIT AND HE SHOULD GIVE A FINDING ABOUT ALL THE ARGUMENTS AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. MOREOVER, IF THE CIT FINDS THAT THE ASSESSEE IS A VALID TRUST AS PER THE PROVISION OF INDIAN TRUST ACT, 1882 OR AS PER SECTION 92 OF CPC, AS CL AIMED BY THE ASSESSEE, THEN HE SHOULD GIVE HIS FINDING ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF THE ACTIVITIES AND DECIDE THE ISSUE REGARDING REGISTRATION OF THE ASSESSEE TRUST U/S 12AA OF THE ACT. AS WE FEEL THAT BEFORE GOING INTO THIS ASPEC T I.E. OBJECTS OF THE TRUST AND ITS ACTIVITIES, IT IS VERY MUCH ESSENTIAL TO SEE THAT THE ASSESSEE IS 5 A VALID TRUST BECAUSE THE REGISTRATION IS AVAILABLE ONLY TO A TRUST AND SPECIFIED INSTITUTIONS AND NOT TO ANY OTHER PERSON. WITH THESE OBSERVATIONS, WE R ESTORE THE MATTER BACK TO THE FILE OF CIT IN THE LIGHT OF ABOVE DISCUSSION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUN IL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 4 /07/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR