Income Tax Appellate Tribunal - Delhi
Navuthan Education Trust, Faridabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SHRI I.C. SUDHIR, HON'BLE JUDICIAL MEMBER AND
SHRI T.S.KAPOOR, ACCOUNTANT MEMBER
I.T.A .NOs. 3536 & 3537/Del/2008
Asstt. Year: NA
Navuthan Educational Trust, Vs. CIT,
C/o Rakesh Raj & Associates, Faridabad.
565, Sector -7B,
Faridabad.
PAN: AABTN0729Q
(APPELLANT) (RESPONDENT)
Appellant by: Shri Rakesh Kumar Gupta, Adv
Respondent by: Smt. Veena Joshi, DR
Hearing on the date: 10/07/12
Date of Pronouncement: 27/07/2012....................
ORDER
PER I.C.SUDHIR, JM:
The assessee has questioned order dated 23/10/2008 of the Ld. CIT passed u/s 12 AA of the Act on the following grounds:
"1. That having regard to the facts and circumstances of the case, Ld. CIT has erred in law and on facts in not granting registration u/s 12AA.
2. That having regard to the facts and circumstances of the case, Ld. CIT has erred in law and on facts in holding that the Trust is constituted to indulge in the business of education in the garb of a charitable trust.
3. That having regard to the facts and circumstances of the case, Ld. CIT has erred in law and on facts in
2 ITA NOs.3536 & 3537/Del/2008 passing the order u/s 12AA (1) (b) (ii) and not granting registration u/s 12AA without giving adequate opportunity of being heard."
2. The relevant facts are that the appellant a trust had filed application for registration u/s 12A(1)(a) of the Act on 28.04.2008 before the Ld. CIT. Several queries were issued time to time by the office of the Ld.CIT and keeping in view the objections raised by Ld. CIT the trust deed were amended. The Ld. CIT was not satisfied with the explanation of the appellant and has rejected the application for registration mainly on the basis that the object of the trust was not charitable and secondly the original trust deed cannot be supplemented.
3. The Ld. AR contended that appellant is an educational trust and imparting of education is its object. The original trust deed was amended twice removing the objections raised by the Ld. CIT. The amended trust deed was also got registered. The Ld. CIT however, did not accept the amended trust deed on the basis that supplementary trust deed is not acceptable. The Ld. AR referred the contents of original trust deed and amended trust deed copies whereof have been made available at page no. 4 to 25, page 42 to 60 and page 61 to 79 of the paper book. The Ld. AR also referred the contents of different 3 ITA NOs.3536 & 3537/Del/2008 paragraphs of the trust deeds whichy have been adversely inferred by the Ld. CIT that objects of the appellant trust are not charitable. As to whether trust deed can be modified the Ld. AR has placed reliance on the decisions: in the case of Laxmi Narain Lath Trust Vs. CIT (1988) 170 ITR 375 (Raj)and (1998) 170 ITR 484 (Raj). He submitted further that the decisions relied upon by the Ld. CIT to deny the supplementary trust deed are having distinguishable facts hence these are not applicable in the present case. The Ld. AR also referred contents of the trust deeds to support his submission that the objects of the appellant trust is imparting of education only. He submitted further that at the stage of registration the Ld. CIT is to verify the object of the trust only. In support he referred the decision of Delhi Bench of the Tribunal in the case of Reliable Educational Alliance Society Vs. CIT 31 DTR 239 (Delhi).
4. The Ld. AR also placed reliance on the following decisions:
1. Director of IT Vs. Garden City Educational Trust 28 DTR 139 (Kar).
2. Dharma Sansthapak Sangh (Iniyas) Vs. CIT, 13 DTR 589 (Delhi).
3. CIT Vs. Red Rose School 212 CTR 394 (All).
4. Dream Land Educational Trust Vs. CIT 109 TTJ 850 (ASR).
4 ITA NOs.3536 & 3537/Del/2008
5. The Ld. AR further pointed out that vide order dated 30th March 2011 the Ld. CIT has allowed registration to the appellant which was sought vide application filed on 12.11.2010. This registration had been granted on similar objects of the appellant for the A.Y. 2011-12 onwards. The Ld. AR also drew our attention to the order dated 30th March 2011 of the Ld. CIT, whereby approval u/s 80 G (5) of the Act has been granted to the donation received from financial year 2010-11 relevant to the A.Y. 2011-12 onwards. The Ld. AR pointed out further that on similar fact the registration u/s 12 A (1) (a) of the Act has been directed to be allowed by the Tribunal in the case of Manav Rachana Educational Society vide order dated 25th May 2012 in ITA Nos.
1148/Del/2010 and others (A.Ys. 2006-07 and 2007-08).
6. The Ld. DR on the other hand tried to justify the order of the Ld. CIT rejecting the requested registration on the basis that supplementary trust deed cannot be accepted and secondly the objects of the trust are not charitable. She referred contents of Para no. 17of the trust deed dated 1st April 2008, wherein the manner of making, altering and rescinding Rules and Regulations has been provided. She argued that the change or amendment made in the original trust deed 5 ITA NOs.3536 & 3537/Del/2008 was not as per the provisions of Para no. 17 of the trust deed, hence Ld. CIT has rightly refused to entertain the amended trust deed.
7. Considering the above submissions and having gone through the decisions relied upon we are of the considered view that as per the several decisions of different forums the Ld. CIT at the stage of granting registration u/s 12 A of the Act is to verify as to whether the objects of the applicant are charitable in nature. In the case of Reliable Educational Alliance Society Vs. CIT (Supra) the Delhi Bench of the Tribunal has held that the Ld. CIT was only required to satisfy himself about the objects of the trust and the genuineness of its activities while granting registration u/s 12 A to a charitable trust. In the case of Director of IT Vs. Garden City Educational Trust (Supra) the Hon'ble Karnataka High Court has been pleased to hold that imparting of education being the main object of the assessee trust, it has to be accepted that assessee exist for a charitable purpose and therefore, it is entitled to registration u/s 12 A. It has been further held that manner of application of funds and allowability of benefit of exemption under Sections 11-12 are matters which are to be examined by the AO at the time of assessment and not by the CIT. Likewise the Hon'ble Allahabad High Court in the case of CIT Vs. Red Rose School 6 ITA NOs.3536 & 3537/Del/2008 (Supra) has been pleased to hold that that Section 12 AA does not speak anywhere that the CIT, while considering the application for registration, was also to see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. It has been held that the CIT was not justified in refusing registration u/s 12 AA to assessee Educational Society and Tribunal was justified in granting the same. The Amritsar Bench of the Tribunal in the case of Dream Land Educational Trust Vs. CIT (Supra) on the scope of inquiry by the CIT for granting registration u/s 12 A has held that the CIT having found no fault with objects of the trust and genuineness of its activities, was not justified in refusing registration u/s 12 A on extraneous considerations. Thus it is clear that at the stage of granting registration on the application of registration by trust, the Ld. CIT has to verify the objects of the trust as to whether it is charitable and the genuineness of its activities. He is not required to refuse registration u/s 12 A on extraneous considerations. Now we have to examine the order impugned as to whether the Ld. CIT was justified in coming to the conclusion that objects of the trust were not charitable. Having gone through the order impugned we find that the Ld. CIT has given his finding on the 7 ITA NOs.3536 & 3537/Del/2008 eligibility of the required registration in Para no. 6 to 17 of the first appellate order. The Ld. CIT has referred several objects of the trust and after noting his discussion on the same has held that these are not for charitable purpose. The Ld. CIT has referred object nos. 4
(i),(ii),(iii),(iv),(v),(vi) & (vii) of the trust deed dated 1st April 2008 and has come to the conclusion that these objects are having full potential of business activities and hence not charitable. For the ready reference the above objects enumerated in Para no. 4 (i) to (vii) of the trust deed dated 1st April 2008 are being reproduced hereunder:
(i) "To establish, manage, control, superintendent, run, lease out Training / Coaching Centres, Schools, Colleges etc. for imparting education in various disciplines, but primarily for Technical Education, Medical Education, Dental Education, Para-medical Colleges / Diploma / undergraduate / Post graduate courses on various fields such as Ayurvedic, Homoeopathy, Naturopathy, Pharmacy, Nursing, Laboratory, Radio diagnosis, Occupational therapy, Dietician, Acupuncture / Acupressure therapy, Management courses and all other such disciplines and prescribed courses by the state govt. and central govt. and central govt., public limited companies and foreign Universities / Institutions from time to time to help the Industrial and economical development of the country.
(ii) To establish, manage, control, superintendent, run, lease out and grant in aid as cash or kind to other societies, trusts, firms etc. including 8 ITA NOs.3536 & 3537/Del/2008 Medical, Dental, Technical, Ayurvedic, Naturopathy, Homeopathy, Pharmacy and all other such colleges and hospitals and specialized studies and research Institutions to provide standard and high class education for MBBS, MD, BDS, MDS, MBA, MCA, BE / B.Tech. M.E / M.Tech, B.Pharma / M.Pharma, Computer courses, various Medical and Technical Diploma Courses, Under Graduate, post Graduate & Doctorate Courses of various Universities, etc. and all related courses to the students according to the rules and regulations of State /' Central Govt.
(iii) To provide all type of consultancy services to professional colleges such as Engg Colleges, Medical Colleges, Dental Colleges, Pharmacy Colleges, Management Colleges etc for accreditations withs the top accrediting bodies in India like NBA, NAAC etc and abroad, obtaining quality certifications such as ISO 9000 / ISO 14000 series etc from agencies in India and abroad through eminent professionals / educationists / technologists for reputed educational Institutions such as IITs, IIMs, IIs, other reputed professional institutes etc.
(iv) To established University under the laws of the land, institutions of higher learning offering innovative and job oriented courses with special emphasis on research and development in the fields of technical education, health sciences including medical /Para medical /dental education, law, schience and technology etc. at par with the best in India and abroad.
(v) To provide for instruction and training insuch branches of learning as it may deem fit and to manage and run.
9 ITA NOs.3536 & 3537/Del/2008
(vi) To provide for research, innovation and for the advancement of and dissemination of knowledge.
(vii) To undertake extramural studies, extension programmes and field outreach activities to contribute to the development of society".
8. Referring above objects the Ld. CIT in Para no 4 of the order impugned has observed that except the aims at no. 4 (iii) and (vii) all other aims/objects are "objects" having full potential of carrying on activities in the nature of trade, commercial, or business, in spite of declaration to the contrary mentioned in object no. 4 (vii). The Ld. CIT invited comments of the appellant on above observation but he was not satisfied with the reply of the appellant. Having gone through the above objects we find that all the objects mentioned in Para no. 4 of the trust deed are relating to imparting of education only and incidental thereto.
9. The appellant had also furnished supplementary trust deed dated 5.9.2008 regarding which the submission of Ld. AR remained that the original trust deed dated 1st April 2008 was modified time to time to make the objects more clear and to remove the doubt expressed by the Ld. CIT. The Ld. CIT has however, held that those supplementary trust deed dated 5.9.2008 and 22.9.2008 are not in 10 ITA NOs.3536 & 3537/Del/2008 accordance with the provisions of Indian Trust Act 1882 and judicial decision. The contention of the Ld. AR remained that the Ld. CIT has not pointed out any provision of the Indian Trust Act 1882 or any judicial decision which shows as to how the supplementary trust deeds dated 5.9.2008 and 22.9.2008 are not in accordance with law. The Ld. CIT in Para no. 12 of the order impugned has observed further that the appellant made frequent alteration in the original trust deed dated 1.4.2008. They have made alteration therein on 5.9.2008 and 22.9.2008 which itself shows that the aims/objectives of the appellant trust were admittedly repugnant to the provisions of the IT Act 1961. The Ld. CIT has placed reliance on some decisions and has held that there exists no legal provision to amend and re-amend the trust deed and such supplementary trust deeds cannot be given any credence. The Ld. CIT has cited following decisions in support :
(i) Sakti Charities Vs. CIT (1994) 149 ITR 624 (Mad).
(ii) Thanthi Trust Vs. ITO 91 ITR 261 (Mad).Shri Agasthyar Trust Vs. CIT (1999) 236 ITR 23 (SC).
11 ITA NOs.3536 & 3537/Del/2008
10. The contention of the Ld. AR remained that the above cited decisions having distinguishable facts are not relevant in the present case. On the issue as to whether trust deed can be modified or not he placed reliance on the following decisions of Hon'ble Rajasthan High Court in the case of Laxmi Narain Lath Trust Vs. CIT (Supra). Having gone through the above cited decisions relied upon by the Ld. CIT and the Ld. AR, we find that in the case of Laxmi Narain Lath Trust Vs. CIT (Supra) the Hon'ble Rajasthan High Court has been pleased to hold that for modification of original trust deed by supplementary deed having the fact of altering an object of non-charitable nature into a charitable one, consent of beneficiaries is not required in the case of a public charitable trust, this is because beneficiaries in a public trust are generally indeterminate. It was held further that the Settlor felt that in one of the original object clauses true intention was not being reflected hence modification to this effect to clarify his intention by the supplementary deed is permissible. The exemption u/s 11 of the Act was allowed. In the present case both the supplementary trust deeds are duly registered by the Sub-registrar, Faridabad and there is no reason to doubt the explanation of the appellant that modifications were made in the original trust deed to make the objects of the trust 12 ITA NOs.3536 & 3537/Del/2008 more clear. It is not the case of the revenue that in the supplementary trust deed some non-charitable objects have been introduced. In absence of such observation by the revenue we do not find reason to doubt the validity of the supplementary trust deed executed on 22nd Sep. 2008 which is the finally amended trust deed. The Ld. CIT has not specified as to how the supplementary trust deed dated 22.9.2008 is not in accordance with law. The finding of Ld. CIT in this regard is thus not justified. The decisions relied upon by the Ld. CIT to justify his action in refusing the validity of supplementary trust deed are also having distinguishable facts, hence they are not helpful to the revenue. In the case of Sakti Charity Vs. CIT (Supra) the assessee trust having charitable objects was also having objects of promoting welfare of employees of a company which was not a charitable purpose. The trustees were having discretion to spend on any object. The trust executed rectification deed for removal of the certain clauses from the objects. The tribunal held that rectification deed was not valid since trustees had no power to revoke or modify any of the objects of the trust originally constituted. It was further held that even the founder is not competent to delete any object though some other charitable object can be added without detriment to the original objects. The 13 ITA NOs.3536 & 3537/Del/2008 Hon'ble Madras High Court has approved the decision of the Tribunal. In the present case the appellant was not having any non- charitable objects in the original trust deed and alteration/modification were introduced only to make the objects of the trust more clear. Thus facts of the cited decision are different.
11. Likewise in the case of Shri Agasthyar Trust Vs. CIT (Supra) Trust was established under a partnership deed. Trustee made amendment of object clause. In a suit filed by one of the partner, the Hon'ble High Court held the trust to be irrevocable. All objects of the trust as originally established were of charitable nature. It was held that neither the trustee nor the founder could change the objects as set out in the partnership deed when the founders of the trustee have no power to alter or vary the terms of a trust, a trustee appointed to manage the properties of the trust for securing its object, can under no circumstances be regarded as having such a power especially when the original deed did not bestow such power on him. It was held that document executed by the trustee subsequently which in effect changed the objects of the trust radically was having no authority and therefore was nonest. Thus we see that facts of this case of the 14 ITA NOs.3536 & 3537/Del/2008 Hon'ble Supreme Court are different from the facts of the present appellant.
12. In Thanthi Trust Vs. ITO (Supra) it was held that if a valid trust has been created, the deviation by the founder or the trustees of the trust would amount to breech of trust and would not detract from the declaration on trust. This decision is also not applicable in the case of the present appellant since there is no allegation against the founder or the trustees that they have detracted from the declaration of the trust.
13. There is also no substance in the contention of the Ld. DR that while making alteration in the trust deed the appellant has violated the provisions laid down in clause 17 of the original deed which provides the manner of making, altering or rescinding Rules and Regulations. There is no specific allegation as to how the appellant has violated the provisions laid down under clause 17 of the trust deed hence the allegation is vague. Undisputedly the supplementary trust deed dated 22nd Sep. 2008 in question is a registered deed.
14. Besides, the appellant under similar facts has been granted registration by the Ld. CIT vide order dated 30th March 2011 for the A.Y. 2011-12 onwards. The Ld. CIT has also granted approval sought 15 ITA NOs.3536 & 3537/Del/2008 u/s 80 G (5) of the Act on 30th March 2011 for the A.Y. 2011-12 onwards.
15. In view of the above discussion we do not concur with the finding of the Ld. CIT that the objects of the appellant are not for imparting education hence not charitable nor was any reason with the Ld. CIT to treat the supplementary trust deed executed on 22nd Sep. 2008 as invalid. We thus while setting aside the order impugned direct the Ld. CIT to grant registration to the appellant as sought for in their application for registration u/s 12 A (i) (a) filed on 28.4.2008. The grounds are accordingly allowed.
16. Consequently appeal is allowed.
ITA No. 3537/Del/2008
17. In this appeal the assessee has questioned the order dated 24th Oct. 2008 of the Ld. CIT whereby he has refused the granting of the approval u/s 80 G of the Act by rejecting application filed on 28.4.2008 for the same.
18. The Ld. CIT has refused the desired approval in view of his finding on the application for registration u/s 12 A of the appellant. Since in ITA No. 3536/Del/2008 hereinabove we have directed the 16 ITA NOs.3536 & 3537/Del/2008 Ld. CIT to grant registration as prayed for in the application for the same dated 28.4.2008 filed by the appellant, we direct the Ld. CIT also to grant approval sought for by the appellant vide their application for exemption u/s 80 G filed on 28.4.2008. The grounds are thus allowed. In result appeal is allowed.
19. In summary both the appeals are allowed.
20. The orders pronounced in the open Court on the date 27/07/2012.
Sd/- Sd/-
(T.S.KAPOOR) (I.C.SUDHIR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 27 /07/2012
*AK VERMA*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
17 ITA NOs.3536 & 3537/Del/2008