Income Tax Appellate Tribunal - Mumbai
Jayaben Visanji Maru Foundation , ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'J ' MUMBAI BEFORE SHRI R K GUPTA, JM & SHRI B RAMAKOTAIAH, AM ITA No. 2265/Mum/09 (Asst Year- ) Jayaben Visanji Maru Foundation 4 Zavalkar Mansion Dr Ambedkar Road Parel, Mumbai Vs The Income Tax Officer (Exemption)(HQ), Mumbai (Appellant) (Respondent) PAN AABTJO766D Assessee by: Shri Vijay Mehta Revenue by: Shri L K Agrawal ORDER
PER R K GUPTA:
This is an appeal by the assessee against the order of the Director of Income Tax (Exemption) passed u/s 12AA(1)(b)(ii) r.w.s 12A of the Act.
2 The assessee has raised three grounds of appeal. Ground nos. 1 & 2 were not pressed; therefore, they are dismissed as not pressed. Ground no.3 is against in declining to grant registration u/s 12AA of Act.
3 Briefly stated, the facts in this case are that the assessee is a Trust which was constituted on 22.8.2008 by the Trust Deed/Memorandum of Association. The assessee filed an application in Form no.10A on 23.9.2008 for registration u/s 12A of the Act. A notice dated 20.11.2008 was sent to the assessee requiring to file certain details/documents like PAN, copy of bank accounts, NOC, certificate of registration issued by the Charity Commission, copy of accounts, activity proof, attendance by the Managing Trustees and production of original documents for verification etc. On 16.12.2008, Shri Jayesh Chheda, Trustee attended and made certain submissions.
3.1 After seeing the reply, the ld Director of Income Tax (Exemption) noted that the objects of the assessee are commercial in nature. Accordingly, vide letter dated 18.3.2009, the assessee was requested to explain as to how the objects/activities of the Trust are charitable within the meaning of section 2(15) of the Act. The assessee was also requested to explain the clause no.4 of the objects of the Trust. Vide letter dated 21.3.2009, the clauses 4 (11) to 4(13) were explained. Reliance was placed on the decision of the Supreme Court in the case of Ahmedabad Rana Caste Association reported in 82 ITR 704(SC) and in the case of Ganga Prasad Varma Memorial Society reported in 134 ITR 421.
3.2 After going through the submissions and various judicial pronouncements, the ld Director of Income Tax (Exemption) found that the objects of the assessee are not charitable in nature; in his view, the objects are very vague in nature. It was observed by him that such vague objects may run the risk of the Trust being considered as not satisfying the requirement of having precise objects. The decision of the Supreme Court in the case of Gangabai Charities reported in 197 ITR 416(SC) and the decision of the Hon'ble Madras High Court in the case of Assembly Rooms reported in 241 ITR 76(Mad) were taken into consideration. Thereafter, by observing that the objects read with the judicial pronouncements reported in 197 ITR 417(SC) and 241 ITR 76(Mad) are not charitable within the meaning of sec. 2(15) of the Act and in turn the genuineness of the objects/activities of the Trust is not proved. Accordingly, the application for grant of registration was rejected by the ld Director of Income Tax (Exemption). Now, the assessee is in appeal here before the Tribunal.
4 The ld counsel of the assessee, who appeared before the Tribunal reiterated its contention raised before the ld Director of Income Tax (Exemption). Attention of the Bench was drawn on page 2 to 13 of the compilation where copies of Trust deed, certificate issued by Charity Commissioner, Mumbai are placed on record. The ratio of the decisions in the case of Gangabai Chariteis and Assembly Rooms (supra) were explained and was stated that ratio of the decision of the Supreme Court is in favour of the assessee. It was further submitted that the assessee has formed a Trust and applied for registration. No further activity could be done in absence of the registration. It was submitted that the ld Director of Income Tax (Exemption) has held that the objects of the assessee are vague but how they are vague does not spell as neither the genuineness of the Trust was examined nor there was any other material to hold that the objects of the assessee are profit motive. On the other hand, the ld DR placed reliance on the order of the ld Director of Income Tax (Exemption).
5 We have heard the rival submissions and considered them carefully. We have gone through the deed of Charitable Trust along with the certificate of registration under the Bombay Public Trusts Act placed at page 13 of the compilation. We have also seen the various case laws relied upon by the ld AR and considered by the ld Director of Income Tax (Exemption). After considering all the relevant material on record, we find that the assessee deserves to succeed in this ground.
5.1 Section 12A of the Act provides that;
"the provisions of sec. 11 and 12 shall not apply in relation to the income of any trust or institution unless the conditions are fulfilled i.e. the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973 or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA.
Thereafter, in view the provisions of sec 12AA, the Commissioner, on receipt of an application for registration of a trust or institution shall call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or he shall pass order in writing registering the trust or institution and a copy of such order shall be sent to the assessee.
5.2 In the present case, the Trust was created by deed of Charitable Trust on 22.8.2008 and within a period of one year as provided in clause 12A, the assessee moved application for registration on 23.9.2008. The application for registration therefore, is well in time. However, as stated above, the ld Director of Income Tax (Exemption) rejected the application by observing that the objects of the assessee are vague in nature; therefore, they are not qualified for charitable purposes and hence, registration was rejected.
5.3 We have seen the deed of Charitable Trust and found that the objects of the Trust which are prescribed under clause 4 almost all the objects are in the nature of charitable. The clause 4 of the trust deed is as under:
"OBJECTS OF THE TRUST: The trustees shall stand possessed of the Trust Fund and properties including the movable and immovable properties of the Trust for the following Charitable objects and purposes to the intent that the same shall be applied to charitable purposes in India or accumulated for application to such purposes in India to any member of public without any restrictions as to any particular religion, community, caste or creed and in all respects as the Trustees in their absolute discretion may think fit, that is to say:
The Trust, in detail provided 15 clauses which are its main objects in clause 4. The main objection of the ld Director of Income Tax (Exemption) is in respect to sub. Clauses 11, 12 & 13 of clause 4 of the Charitable Trust, which are as under:
"11. Addressing Housing needs of the needy inter-alia of construction and/or purchasing houses/dwelling units and providing the same to needy at concessional rates or terms, for housing purposes;
12. To print books, pamphlets, handbills and or held lectures, seminars, exhibitions etc. To open, form, establish, promote, set up, run, acquire, maintain, assist, finance, support and/or aid or held in setting up and/or aid or held in setting up and/or maintaining and/or running Swadhaya Hall, Satsangh Sabha Mandap or Temple of Spiritual Value to uplift and to cultivate awareness and public opinion on subjects affecting general wellbeing and spiritual up-liftment and well being of human being without restriction as to caste, creed or religion and without profit motive.
13. To prepare scheme for the residence of the needy people of the society and to give guidance and relief to the needy for their residence needs."
5.4 On the basis of these sub clauses of clause 4, the ld Director of Income Tax (Exemption) has held that the objects of the assessee are vague in nature. In our view, the totality of all the sub. Clauses of clause 4 of Charitable Trust have to be taken into consideration. If the totality of these objects is taken into consideration then it is seen that the objects of the assessee are charitable in nature. In all other clauses, except clause 11, 12 & 13, the objects of the Trust provides that they are charitable in nature. For example, in clause 1 to 4, it is provided that Trust will provide medical relief and help to the poor and deserving persons by providing monetary and/or non-monetary held, and/or to open, form, establish, promote, set up, run, acquire, maintain, assist, finance, support running Hospitals, Nursing Home, Nature Cure Centre, Yoga Centre, Medication Centre etc. To provide for the educational grant, or scholarship, stipends, prizes, rewards, allowances and other financial and/or non-financial assistance in cash or kind to students and/or to open, form, establish, promote, set up run, acquire families, maintain, assist, finance, support in running school, colleges, boarding house, and Chatralaya. To provide livelihood and up-liftment of the children, girls, women men and needy. To pay or contribute partly or full any premium of medical insurance scheme for the medical need of people of the society and needy family.
5.5 Similar objects are provided in clauses 5 to 10 and 14 & 15. As per clauses 11 to 13, the Trust will construct flats for providing the same to needy at concessional rates. Similarly as per clause 12, the Trust will print books, pamphlets, handbills and or held lectures, seminars, exhibitions etc. for the purpose of affecting general well-being and spiritual up-liftment and well-being of human being. Similarly, as per sub. clause 13, the trust shall prepare scheme for the residence of the needy people of the society and to give guidance and relief to the needy for their residence needs.
5.6 Even if these three sub clauses are only taken into consideration, it is seen that again the objects in these sub clauses are charitable in nature. The construction of dwelling unit or purchase of dwelling unit are not for the purposes of profit of the Trust but for the purpose of utilising the profit in up-liftment of needy families in the society.
5.7 Similarly to print books, pamphlets, handbills and lectures, seminars, exhibitions etc., are for the benefit of general public; therefore, it cannot be said that the objects of the Trust are not charitable in nature.
5.8 The ratio of the decision in the case of Gangabai Charitie (supra) goes in favour of the assessee. The Supreme Court in this case has held as under:
"Affirming the decision of the High Court that it was not possible to cull out in clear terms any specific charitable or religious object from the trust deed to conclude that the trust was set up wholly for religious or charitable purposes. The "religious, charitable, cultural and social" purposes referred to in the deed were not avowed as the objects of the trust; they were only the objects of those who wished to put the trust property to use. There was no mention in the deed as to how the income derived from the trust property was to be utilised. There was no mandate that the income was to be spent on religious or charitable purposes. Therefore, the trust deed did not meet the requirements of sec. 11(1) (a) and the income of the trust was not exempt from tax.
5.9 The Hon'ble Apex Court held that the requirement of section 11(1)(a) and the income of the trust was not exempt from tax for the reason that the trust property used by the trust was not for the purposes of charitable nor clauses of objects were clear that how the income derived from the trust property was to be utilised. Therefore, it was held that the requirement of section 11(1)(a) are not satisfied.
6 However, in the present case, it is clearly provided under the clauses of objects that the assessee will construct or will purchase dwelling units for providing needy/weaker sections of the society.
7 Similar objects are provided in other various clauses which are self explanatory.
8 On a later stage, in the case of Babulal Khinchand Trust, the Hon'ble Madras High Court in 243 ITR 79 considering the decision in the case of Gangabai Charities (supra) has held that the Trust was charitable trust. The Hon'ble Madras High Court has held as under:
"A trust was created by a deed dated Oct, 10, 1986. It provided that if, however, the settler leaves no wife or children, the trust properties shall be applied for such charitable purpose as may be decided upon by the trustees.
On the question whether the trust was a valid charitable trust;
Held, that the trust deed clearly provided that the trust property should be applied for such charitable purpose as may be decided upon by the trustees. The discretion given to the trustee was not to choose any purpose, but only purposes which were charitable for which the trust properties and income there from could be utilised. The word "properties" in the trust deed, having regard to the context must be understood as including the income derived from the properties, as the deed specifically provided that the trust property should be applied for charitable purposes. The reference to the application would indicate that the author of the trust intended that all that belonged to the trust was to be utilized for the purposes of charity. The mandate was therefore clear that the properties of the trust which having regard to the context should include the income from the properties, should be applied solely for charitable purposes. The trust was a valid charitable trust."
9 The facts in the present case are similar to the facts before the Hon'ble Madras High Court as in the present case also the property of trust was to be used for the purpose of needy/weaker sections of the society and no profit whatsoever derived from the trust will be utilised for the benefit of the trustee.
10 We have also seen the other case laws relied upon by the ld counsel and found that they are also in support of the case of the assessee. The ratios of the decision of the Supreme Court and the Hon'ble Madras High Court are squarely applicable on the facts of the present case. The Supreme Court as well as Madras High Court have held that intention of the Trust is to be seen that how the property of the Trust is utilised whether the same is for profit or for using the profit for charitable purposes.
11 In the present case also the objects of the Trust are such by which it is clearly established that objects of the assessee are charitable in nature and not for the purpose of profit attributable to the trusted for their own benefits. The clauses of the objects in the present case are for buying the property or construct the dwelling units for the purpose of allotting the same to the needy and weaker section of the society. If by any reason any profit arises out of the activities of the trust than that profit has to be utilised only for the purpose of charitable and not for the purpose of the trustee for their own benefit. Even in the clause 5 of application of income is provided in detail and how and why the funds are to be utilised and no trustee can get any benefit to the funds and income of the trust is to be utilised for the objects of the Trust which are charitable in nature. Therefore, no profit motive is found in the objects of the trust. It is also a matter of fact that the Assistant Commissioner of Charity, Grater Mumbai has granted certificate of Charity to the assessee, copy of which is placed at page 13 of the paper book. Therefore, for this reason, no doubt remains that the assesse's objects are charitably in nature. In view of these facts and circumstances, we direct the ld Director Income Tax (Exemption) to grant registration to the assessee in view of provisions of sec. 12A r.w.s 12AA of the Act. We order accordingly.
12 In the result, the appeal filed by the assessee is allowed in part.
Order pronounced on 10th Dec 2009
Sd/- Sd/-
( B RAMAKOTAIAH )
( R K GUPTA )
Accountant Member
Judicial Member
Place: Mumbai : Dated: 10th Dec 2009
Raj*
Copy forwarded to:
1
Appellant
2
Respondent
3
CIT
4
CIT(A)
5
DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai
ITA No. 2265/Mum/09
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