Income Tax Appellate Tribunal - Delhi
Rkm Educational & Charitable Trust, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : F : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE VICE PRESIDENT
AND
SHRI A.D. JAIN, JUDICIAL MEMBER
ITA No.783/Del/2010
Assessment Year : NA
RKM Educational & Charitable Vs. CIT,
Trust, Faridabad.
1288 Prerna Dham,
Sector 15,
Faridabad.
PAN : AAATR6506Q
C.O. No.108/Del/2010
(ITA No.783/Del/2010)
Assessment Year : NA
CIT, Vs. RKM Educational & Charitable
Faridabad Trust,
1288 Prerna Dham,
Sector 15,
Faridabad.
PAN : AAATR6506Q
(Appellant) (Respondent)
Assessee by : Shri S.D. Kapila, Advocate &
Shri Sanjay Kakkar, CA
Revenue by : Shri Satpal Singh, Sr.DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER
This is an appeal filed by the assessee against the order passed by the ld. CIT, Faridabad, dated 22.01.2010 u/s 80G of the IT Act, 1961 read with Rule 11AA (5) of the IT Rules, 1962. The department has filed the Cross Objections.
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2. The assessee Trust filed an application for renewal of exemption u/s 80G on 22.06.2009. The ld. CIT, vide order sheet entry dated 04.12.2009, put the assessee to show cause as follows:-
"1. As per documents furnished, it is noticed that a trust was registered with the Income Tax Department vide order No. 227/24 R 77-78/E dated 06-03-1978 (CIT Rohtak). Please produce original certificate alongwith trust deed.
2. From the documents filed, it is noticed that as per Society Registration Act, there is a certificate in favour of Rattan Kaur Memorial Educational and Charitable Trust, Faridabad dated 23- 10-1981. Please produce certificate in original alongwith MOA and Rules and Regulations. Also produce certificate in original for registration of institution u/s 12A with Income Tax Department.
Please explain, once it is registered as Trust vide order dated 06-03-1978 and secondly it was registered under Societies Act vide certificate dated 23-10-1981.
Further, it is noticed that the documents incorporating this organization is ambiguous and give rise to lot of confusion as to whether the institution/organization is a trust or society. This makes several clauses of the constitution redundant e.g. point 8 on Page 11, clause XXI, XXII, XXIII these clauses refer to 'Board of Trustees' - but Board of trustees does not exist.
Please explain."
3. On 23.12.2009, the assessee filed a reply, which is as follows:-
"1. On 6th March 1978, Rattan Kaur Memorial (RKM) Educational and Charitable Trust was registered with the Income Tax Department vide order No. 227/(24-R) 77-78/E. Original Certificate is being produce for verification.
2. The above trust is also registered as a Society under the Societies Registration Act, 1860 on 23rd October, 1981. In this connection it is submitted that:
A public charitable or religious Institution can be formed either as a Trust or as a Society or as a Company registered u/s 25 of the Companies Act.
3 ITA No783/Del/2010 CO No.108/Del/2010 It generally takes the form of a trust when it is formed primarily by one or more persons.
To form a Society at least seven persons are required. Institutions engaged in promotion of art, culture, commerce etc. are often registered as non- profit companies.
These forms are enumerated as under:
1. Charitable Trust settled by a settlor by a Trust Deed or under a Will.
2. Charitable or religious institution/ association can be formed as society.
Charitable institution can be formed by registering as a company u/s 25 of the Companies Act, 1956, as non profit company (without addition to their name, the word "Limited" or "Private Limited").
Photocopy of above registration and Memorandum etc are already on record. Originals are being produced for verification.
3. Further it is again stated in view of foregoing provisions that there is no bar to a trust being registered as a society and there is no ambiguity. Further point 8 in the Memorandum is a restrictive clause which debars trustees from taking unilateral decisions so that at no stage property of the trust is not jeopardized. Your contention that Board of Trustees does not exist needs to be reconsidered because in the Trust Deed Board of Trustees is defined explicitly.
4. In the last submission Financial Statements for the year ending 31-3-2009 were filed. We are also now enclosing Financial Statements for the year ending 31-3-2008. As you will observe that expenses incurred are for the benefit of general public and are charitable in nature and no benefit accrues to any particular section of society or any specific class of persons.
5. The provisions contained in clause VB of Memorandum and are administrative in nature and only determine how the activities of Trust are to be conducted and in no way are contrary to provisions in section 2(15) of the Act which only defines Charitable Purposes."
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4. Additional Information was asked for from the assessee by the ld. CIT, as follows:-
"1. Whether you are in possession of original trust deed and produce the same for verification. You are also requested to produce original MOA/Rules and regulation which were produced before the Registrar of Societies while obtaining registration certificate dated 23- 10- 1 981 .
2. On perusal of reply dated 23-12-2009 it is noticed that still there is an ambiguity because no trust is registered as society, only society is regd. a society under the Society Act. There is no board of trustees, present entity is not a trust.
3. Furnish/produce copy of resolution to disband the trust which will give its all assets and liabilities; which society/trust was entrusted those assets and liabilities.
5. The assessee filed reply dated 11.01.2010, which is as under:-
"1.1) "Whether you are in possession of original trust deed. Please produce the Memorandum of Association, Rules and Regulations, which were produced before the registrar of Societies, Chandigarh while obtaining registration dated 23 Oct. 1981.
1.2) On perusal of reply dated 23-12-2009, it is noticed that still there is an ambiguity because no trust is registered as society. Only a Society is registered as society under the Act. There is no Board of Trustees; Present entity is not a trust.
1.3) Please furnish/produce copy of resolution to disband the trust which will give it all assets/ liabilities, which society/trust was entrusted with the Assets and Liabilities.
2.1) As regards query no.1), it is submitted that the applicant is in possession of the original trust deed dated 14/04/1976 (Its copy was submitted to the CIT, Rohtak in the proceedings under section 12A of the Income Tax Act, 1961 in 1978. Subsequently a fresh copy was submitted along with the assessee's application dated 18/2/1981 seeking exemption in terms of section 80G of the IT. Act, 1961 for the period 1/4/1981 onwards). The original is produced herewith the caveat that pages 6&7 are missing from the original, which was in the custody of late Sh. Balwant Singh Ahluwalia the author of the Trust, Who expired in 1999. Since then it has been lying in his personal almirah, which was not opened by his son, till a search for it was launched after receiving your requisition for it 5 ITA No783/Del/2010 CO No.108/Del/2010 Page 6& 7 are, however, available in the copy of the deed filed in your predecessor's office on 18/2/1981, as aforesaid;
2.2) Copies of Memorandum of Association & Rules & Regulations, which were produced before the Registrar of Societies, Chandigarh have been filed before you and based on those several questions were raised on 04/12/2009. Copies of the same are again produced herewith. It is to confirm that these very documents were produced before the Registrar of Societies, Chandigarh while obtaining registration dated 23/10/1981.
3) Queries no. 2 & 3 (extracted above) are prima facie based on certain assumptions, presumptions and technical view of law.
Before replying to them it may be useful to note the past history of the applicant.
4.1)(i) The RKM Trust was brought into being vide the trust deed dated 14/04/1976 by the late Sh. BS Ahluwalia for the benefit of the needy people irrespective of caste & creed with the following objects namely,
a) To award Scholarships & Advance loans for the education of indigent, needy & deserving students
b) To support poor patients in hospital for their treatment and
c) Award prizes to the students for distinction in studies and other co curricular activities.
(ii) Clause l(d) of the deed stipulated as follows "In the light of experience gained, the founder in his life time and the Board afterwards, may amend the deed provided the amendment doesn't derograte from the fundamental of the trust as an irrevocable public charitable trust".
4.2)(a)The aforementioned trust deed was submitted to the C.I.T, Rohtak on 22/07/1977 Along with the application under section 12A of the IT Act, 1961 and the said application was entered by the said C.I.T on 06/03/1978 at serial no 24-R in the Register of application under section 12A(a) maintained in his office and intimation in this regard was sent to the secretary of R.K.M. Educational & Charitable Trust and to the secretary of R.K.M. Educational & Charitable Trust and to the ITO Company ward, Rohtak and lAC Rohtak Range, Rohtak Copy of the Trust deed and statement of accounts from 14/04/1976 to 31/03/1977 of the trust were forwarded by the CIT Rohtak, to the I.T.O, Company ward Rohtak.
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(b) As per the law then standing, there was no requirement of passing an order granting registration to the Trust, Section 12M stipulating that an order be passed granting registration came on the statute book with effect from 01/04/1997 vide Finance (no. 2) Act, 1996. The entering of the application at the Sr. no 24-R in the register of applications amounted to registration of the Trust by the C.I.T.
5) Exemption U/S 80G of the IT Act, 1961 was granted to the assessee on 19/X/1978 for the period 1st April 1977 to 31st March 1978. Thereafter it was extended for a period of 3 years from 1st April 1978 to 31st March 1981 vide C.I.T Rohtak order dated 13th June 1979 (copies of the order enclosed for ready reference).
6) On 4th July 1991, the learned C.I.T (Rohtak) extended exemption u/s 80G for one year, from 01/04/1981 to 31/03/1982 vide File No. 228(18R) 79-80/3 (copy enclosed) 7.1) By virtue of the authority granted vide clause l(d) of the Trust deed dated 14th April 1976, the constitution of the trust was amended and a detailed Memorandum of Association, Rules and regulation were drafted in September - October 1981 (approximate period), which were submitted to the Registrar of Firms and societies, Haryana, Chandigarh, who registered the same on 23/X/1981, clause 1 of the memorandum read interalia as below "The name of Public Charitable Trust is Rattan Kaur Memorial Educational & Charitable Trust. For working convenience it would be known as RKM Educational & Charitable Trust. The trust is purely a public trust & public service organization".
7.2) Clause (5) of the Memorandum of Association provided for the "Governing Body" first members of which were named therein, total No. being 17. Seven of these were also members of the "First Board of Trustees" (Named in the Trust deed Dated 14/04/1976) 7.3) Introduction to the "Rules & Regulations" accompanying the aforesaid memorandum of association stated inter alia as below:
"RKM Educational & Charitable Trust, 1288, Sector 15, Faridabad came into being on April 14th, 1976 as a result of an initial donation of Rs. 31393.50/- by Prof Balwant Singh Ahluwalia (Retired Director of Public Instruction) and subsequent donations by other founder members.
7.4) The Term "Founder Members" in Sub Section (a) of Clause 3 of the said Rules & Regulations read as follows:
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a) Founder Members are those who have been actively and closely associated with the setting up of the Trust and its subsequent growth.
7.5) Clause (4) of the Rules described the "Trust Organization"
as below:
The Trust Organization It has two wings:
a) General Body
b) Board of Trustees Sub Clause (a) of this clause defines, "General Body" and sub clause (h) defines "Board of trustees: The management of the trust vests in the Board of Trustees consisting of 11 to 21 members elected by general Body ....."
7.6) Clause V(b) spells out the functions of the Board of Trustees, Clause (VII)(b) lays down the terms of the Board of Trustees. Clause XI prescribes "Office bearers of the Board of Trustees" & Clause XIX talks of "Trust Corpus"
8) The aforesaid documents, namely, the Memorandum of Association & Rules & Regulations were submitted to the Registrar of Firms and Societies, Haryana Chandigarh for registration, who granted registration to the assessee Trust in the following name "Rattan Kaur Memorial Educational and Charitable Trust, Faridabad. A copy of certificate of the Registrar dated 23/10/1981 has already been placed on record.
9.1) As the order granting exemption in respect of section 80G vide order dated 04/07/1981 was valid up to 31/03/1982 only the assessee applied for further extension of the said benefit, which was granted by the Ld. C.I.T. Rohtak, vide his order dated 23/04/1982. This order was to remain in vogue for a period of three years i.e. from 01/04/1982 to 01/03/1985. The assessee's application seeking the benefit of section 80G and documents filed along with it are presently not traceable in assessee's records. It has therefore, moved an application for the inspection of the record of C.I.T. Faridabad. However, in view of Rule 11AA of Income Tax Rules 1962, the presumption is that all the requisite documents including the amended constitution of the Trust must have been filed along with the application and those would be available in your official records. (Pertaining to this subject matter the orders for granting Inspection are awaited.) 8 ITA No783/Del/2010 CO No.108/Del/2010 9.2) On 11/12/1984, the assessee moved an application for further extension of the benefit beyond 31/03/1985. In para 3 of the said application, the following submission was made "The RKM Educational & Charitable Trust (Regd.) since its inception in 1976 has been strictly following the Rules & Regulations laid down by the Income Tax Department from time to time........ " (Copy is enclosed for ready reference). One of the documents attached with that application was the amended constitution of the Trust. The above fact was reiterated in the assessment letter dated 31/01/1985. On 22/05/1985 the assessee again wrote to the C.I.T. Rohtak, reiterating inter alia the following:
"The trust has been enjoying the extension of concession since 1976...."
9.3) The renewal of exemption U/S 80G of the Income Tax Act, 1961 on the basis of the aforesaid representation was allowed vide order of C.I.T Haryana-Rohtak dated 30/04/1985/ 03/05/1985 for a period of three years from 1/04/1985 to 31/03/1988.
10.1) As the end of the period of exemption drew nearer, the assessee moved a fresh application seeking extension of the benefit. Para 3 of the said application again reiterated the submission that" since its inception in 1976, the Trust has been strictly following the Rules & Regulations laid down by the Income Tax Deptt. From time to time"
10.2) In response to this, the C.I.T., Rohtak granted renewal of exemption upto 31/03/1989 vide his letter dated 22/09/1988.
10.3) To seek Extension beyond 31/03/1989 the assessee again moved an application on the basis of which renewal was granted upto 31/03/1992 Vide C.I.T. order dated 04/06/1989.
10.4 Similar has been the pattern of applications for the subsequent period also. Even in its application dated 19/05/2009 presently, under consideration, the assessee has reiterated that "since its inception in 1976, the trust has been strictly following the Rules & Regulations laid down by the Income Tax Department from time to time."
11) As regard the assessments of income of the assessee, benefit of Section 11 has all along been given to the assessee right from the very beginning on the basis of the communication of C.I.T., Rohtak in terms of Section 12A of the Income Tax Act, 1961 (Kindly See Para 4.2(a) supra) dated 06/03/1978.
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12) In the background of the aforesaid facts and events, spanning over a period of 31 years, the issue raised by your Honor that a trust cannot be registered as a Society was to be decided by the Registrar of Societies, who was the competent authority and that authority duly registered the RKM Trust under the Societies Registration Act. This issue should not be raised by the Income Tax Department at this stage especially when for the purposes of assessment of Income Tax, this mere technicality whether The RKM Trust is to be assessed as a Trust or a Registered Society has no real significance as this does not jeopardize the tax revenues in any manner and the spirit of the law governing the grant of Exemption Certificate to the RKM Trust is not diluted compromised or violated in any manner. Its name is "RKM Educational & Charitable Trust", this name has been accepted by the Registrar of Societies without a demur, it has been in existence since 1976, it has been so accepted by the department all along. Requirements U/s 80G(5) have all along been fully met, and the facts continue to remain unchanged even now. The assessee's request may therefore kindly be granted so that the trust may continue to render its services for the poor and the needy.
13) The presumption that the Trust was disbanded is not correct. It has all along been a continuing entity. As explained at para 7.1 before, the constitution of Trust was merely amended and made more elaborate. It did not involve any disbandment of the original Trust. It merely solicited registration under societies Registration Act in 1981. The Registrar of Society granted the registration knowing it fully well that it was a Trust and it was named as such. The validity of the said registration has not been questioned by any one. Moreover the assessment of the assessee is wholly unaffected, whether it is a 'trust' or 'society' its status U/S 2(31) of the IT. Act. 1961 will be that of "an Association of Persons or Body of Individuals". In no way therefore the interest of revenue is affected. As regards the functioning of the trust, it remains governed by its Rules & Regulations. Its status whether it is a trust or Society hardly interferes with the discharge of its charitable functions. Thus taking an overall view of the facts of the present case, the assessee request for grant of exemption U/S 80G may kindly be granted, as has been done hitherto all along. Taking into account its devotion and commitment to the cause of poor and needy the RKM Trust fully deserves to get the requisite exemption certificate, which may kindly be granted."
6. By virtue of the impugned order, the ld. CIT, rejected the claim of the assessee u/s 80G of the IT Act. Aggrieved, the assessee is in appeal before us.
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7. The ld. counsel for the assessee, challenging the order under appeal, has submitted that the ld. CIT has erred in rejecting the application filed by the assessee Trust for renewal of exemption u/s 80G of the IT Act, ignoring that all the conditions prescribed in Section 80G of the Act stand duly satisfied; that right from the year of its inception, i.e., 1978, the assessee Trust has been granted exemption u/s 80G and there was no change in the facts during the year under consideration; that the ld. CIT has erred in observing that there has been a change in the legal status of the assessee from that of a Trust to that of a society; that it was under the authority granted by the Trust Deed dated 14.04.1976 that the constitution of the assessee Trust was amended and a detailed Memorandum of Association, Rules and Regulations were drafted in September-October, 1981; that these were submitted to the Registrar of Firms and Society, Haryana, Chandigarh; that the Registrar of Firms and Societies, Haryana, Chandigarh, registered the same on 23.10.1981, in the name of "Rattan Kaur Memorial Educational and Charitable Trust, Faridabad"; that a certificate in this regard was issued by the Registrar on 23.10.81; that a copy of the certificate was duly placed on record before the ld. CIT; that the benefit of Section 11 of the Act has all along been given to the assessee Trust, right from the very beginning, on the basis of the communication dated 06.03.1978 of the CIT, Rohtak, in terms of Section 12A of the Act; that the issue as to whether a Trust cannot be registered as a society lies within the exclusive purview of the Registrar of Societies and not with the Income-tax authorities; that for income-tax purposes, it is a mere technicality whether the Trust is to be assessed as a Trust or as a registered society and its status u/s 2 (31) of the Act remains that of an association of persons or body of individuals; that the functioning of the Trust remains governed by its Rules and Regulations and whether it is a Trust or Society makes no difference in the discharge of its charitable functions; that the Trust 11 ITA No783/Del/2010 CO No.108/Del/2010 was never disbanded and has continued as such Trust all through since its inception; that the management of the Trust with the Board of Trustees remains so even after its registration as a Society; the objects of the Trust and the Society are similar; that the property of the Trust remains to be of the Trust and it does not belong to the Society after registration and, as such, there is no transfer of the ownership of the property held in Trust; that this is a case of irrevocable charitable trust and the assessee continues to be the indeterminate beneficiary and the ld. CIT has erred in holding that since it was the trust which was approved u/s 12A of the Act and not the Society, the latter is not eligible for grant of certificate u/s 80G (5) of the Act; that the ld. CIT, while illegally rejecting the application of the assessee, has failed to take into consideration all the above facts.
8. The Ld. DR, on the other hand, has placed strong reliance on the impugned order. It has been contended, reiterating the cross objections raised, that the assessee is a Society and not a trust; that the legal status of public charitable trust continued till 22.10.1981, whereafter, a Society was registered on 23.10.1981; that a Society registered under the Societies Registration Act, 1860, cannot claim to be a Trust; that in the Form No.10G, i.e., the application filed by the assessee, the assessee itself mentioned its status to be that of a Society registered under the Societies Registration Act, 1860; that the documents accompanying the application in Form No.10G, as per the assessee itself, prove the status of the assessee to be that of a Society and not that of a Trust; that the assessee Society is not registered u/s 12AA of the Act, which registration is a prerequisite for approval of exemption u/s 80G of the Act; that it is well settled that there is no estoppel against the law, a continuous repetition of a mistake cannot bestow validity on that mistake and, as such, the assessee's contention of continued grant of exemption u/s 80G does not validate 12 ITA No783/Del/2010 CO No.108/Del/2010 the same for the year under consideration also; that u/s 11 of the Act, only income from property held under a legal obligation is exempt; that the assets and funds of one entity cannot be subjected to two different sets of mandatory legal conditions, one operative for a Trust and the other for a registered Society; that it would amount to a criminal breach of trust to conduct the affairs of a Trust in accordance with the provisions of the Societies Registration Act, 1860; likewise, conducting the affairs of a Society in a manner applicable to a Trust would be violative of the provisions of the Societies Registration Act, 1860; that in these facts, the ld. CIT is perfectly justified in rejecting the application filed by the assessee; and that there is no merit whatsoever in the appeal filed by the assessee and the same be rejected outright.
9. We have heard the parties and have perused the material on record. The ld. CIT rejected the application filed by the assessee u/s 80G of the Act, observing as follows:-
"8. I have carefully considered the replies filed by the applicant trust and find that there are two separate entities running under the name of Smt. Rattan Kaur Memorial Educational and Charitable Trust - One as trust vide trust deed dated 14-4-76, secondly, as society vide certificate of registration dated 23/10/1981, issued by the Registrar of Societies, Haryana. No copy of resolution has been filed in response to specific query raised vide order sheet dated 23-12-2009 with regard to closing of the trust. And further all assets and liabilities will be handed over to which society/trust. Further, regarding the first query as to the production of original trust deed, the counsel has stated that the original Trust Deed is not available in entirety, only pages: 1 to 5 and page : 8 are available while pages : 6 & 7 are stated to be missing. Regarding the queries as to the ambiguity in a trust having been registered as a society and the copy of resolution to disband the trust, the counsel has proceeded to give the entire chronological history of the trust and has finally replied in para 12 of his reply that the question as to how a trust can be registered as a society should not be raised by the Income Tax Department, as in the counsel's opinion, the Registrar of Societies should have raised this question but he did not. Further, the counsel has expressed his opinion that the 13 ITA No783/Del/2010 CO No.108/Del/2010 technicality of the applicant trust having been registered as a society is not of real significance.
9. On this issue, it is observed that the counsel's contentions are misfounded. The issue as to whether the applicant is a trust or a society is not merely a technical issue, but is a veritable foundation of any exemption u/ s 80G. In order to avail such exemption, it is necessary that the institution claiming such exemption should have a legal status, i.e. it should be constituted as a trust or registered as a society or a charitable company. Then, it should be registered u/ s 12AA of the Income Tax Act. All these processes of creation of an institution are different from each other and all are governed by separate provisions of law. It is not possible for an institution to comply with the provisions laid down by law and judicial pronouncements in respect of a Trust and simultaneously, to also comply with the provisions laid down by Societies Registration Act, 1860, due to the simple reason that the requirements of law for these two types of Institutions are entirely different. One cannot imagine a Trust being managed by an elected body on the pattern of a society, and the objects of the trust being amended by voting and intimation to Registrar of Societies like those of a Society. Regarding the counsel's contention that the Registrar of Societies had not objected to the Trust being registered as Society, it is observed that it is only the counsel who contends that the trust has been registered as society. Otherwise, the facts clearly bear out that the new society was registered not on the strength of half available trust deed dated 14-04-1976, but on the basis of newly prepared MOA and Rules & Regulations. As such, the apparent conclusion is that the legal status of the applicant is not clear. As the counsel contends that the trust was registered as society, so the applicant's legal status as trust ended on 22-10-1981 and instead of a trust, a new society came into existence on 23-10- 1981.
10. This society was never registered u/s 12A, so where is the question of any claim u/s 80G? In the present proceedings, the issue is whether or not the applicant institution's claim of exemption u/ s 80G justified or not. If the legal status is in confusion, or the trust having been converted into society, and the society not being registered u/s 12A, the applicant institution's claim cannot succeed.
11. Regarding the long chronological history of the trust discussed by the counsel, it is observed that there is no relevance of what the applicant institution has been hitherto doing, or that it has been granted exemption u/ s 80G till now, because there can be no estoppels in law. An error in law cannot gain the strength of a precedent and be allowed to continue in perpetuity. Whatever the applicant institution may have been 14 ITA No783/Del/2010 CO No.108/Del/2010 doing hitherto, in the present proceedings, the position is to be considered strictly in accordance with the provisions of law, as the law concerning charity is always to be construed in a strict manner and any deviation therefrom will obfuscate the very intention of the legislature. In the present case, as already discussed above, the applicant institution's status itself is not clear. It cannot be expected to conform both to the stipulations of the trust deed as a trust and at the same time, to the stipulations of MOA and Rules and Regulations of the society read with provisions of Societies Registration Act, 1860. How can one single institution run equally faithfully under two different instruments? Moreover, at the cost of repetition, it is again mentioned that the latest entity of the Society is not registered u/ s 12AA, which is prerequisite for allowing exemption under sub-section vi of section 80G of the Income Tax Act, 1961 read with clause i of sub-Rule 2 of Rule 11AA of the Income Tax Rules, 1962. As such, the applicant institution's claim of exemption u/ s 80G cannot be accepted."
10. It is seen that the main basis, rather the only basis taken by the ld. CIT to reject the application of the assessee for extension of grant of exemption u/s 80G of the Act has been the reasoning that the assessee, which was initially incorporated as a Trust, ceased to be so after 22.10.1981, as on 23.10.1981, it was registered as a Society under the Societies Registration Act, 1860 under the name and style of "Smt. Rattan Kaur Memorial Educational & Charitable Trust, Faridabad." In the opinion of the CIT, once the entity got registered as a Society, it lost its status of a Trust.
11. Section 12AA of the IT Act provides for the procedure for registration. Section 12AA (1) (relevant portion) reads as follows:-
"12AA.
12AA. (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall--
(a) 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 institution and may also make such inquiries as he may deem necessary in this behalf; and 15 ITA No783/Del/2010 CO No.108/Del/2010
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he--
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :
............"
12. Registration u/s 12AA of the Act is a prerequisite for grant of deduction u/s 80G. Section 80G of the Act talks about deduction in respect of donations to certain funds, charitable institutions, etc. Section 80G (5) provides that the deduction u/s 80G of the Act will apply to donations to any institution or fund referred in Section 80G (2)
(a) (iv), only if it is established in India for a charitable purpose and if it fulfills the conditions laid down in Section 80G (5). Section 80G (5), therefore, is the operative portion so far as the grant/continuance of deduction u/s 80G is concerned. There is no dispute that the assessee is an irrevocable charitable trust. This is available from Clause (d) of the Trust Deed dated 14.04.1976 (copy at APB I, pages 7-13, at APB I, page 8). This clause specifically states the assessee trust to be an irrevocable public charitable trust. It is nowhere the case set up by the ld. CIT that any of the conditions laid down in Section 80G (5) of the Act have been violated by the assessee Trust. His only objection is that the character of the Trust stands changed to that of the Society, taking on a new entity.
13. Now, as rightly contended, as per Section 2 (13) of the Public Trusts Act, a Society registered under the provisions of the Societies Registration Act, 1860, is also included in the definition of Public Trust. It goes without saying that the provisions of the Trust Act do not apply, since the Trust before us is a Public Trust. However, any new scheme 16 ITA No783/Del/2010 CO No.108/Del/2010 relating to the Trust can be implemented only after grant of approval by the court of competent jurisdiction u/s 92 of the CPC. This is so far as regards the legal position qua the entity per se.
14. It has also nowhere been disputed by the ld. CIT that the objects of the Trust and those of the Society are similar. Now, be it a Trust or a Society, the legal status of either is that of a body of individuals and the benefit in either case inures to the same indeterminate public. Neither the Trust nor the Society, by itself, is a "person" u/s 2 (31) of the Act.
15. Moreover, there is nothing on record to show that the management of the Trust has been taken over by the Society, or that the property of the Trust, post registration as Society, belongs to the Society. Undisputedly, the Board of Trustees are the same. The property, as earlier, continues to be held under Trust for pro bono publico or for the benefit of the public. As such, there is no transfer of ownership of property and the assessee continues to be the indeterminate beneficiary and not the Trust. And due to this reason, the ld. CIT has fallen into error in holding that the approval u/s 12A of the Act was granted to the Trust and not to the Society, the Society is not eligible for grant of certificate u/s 80G (5) of the Act. Undeniably, the Trust is an irrevocable Trust. Change over to the status of Society makes no difference in this position and implementation of the objects of the Trust is still a legal obligation to be discharged.
16. Still further, ever since the date of its coming into existence, the Society has remained a mere paper entity. As per the sequence of events (APB II, page 131), no return of the Society has ever been filed, no PAN was applied for, nor was any ever allotted to the assessee.
17 ITA No783/Del/2010 CO No.108/Del/2010 The exemption u/s 80G of the Act was granted to the Trust, for the first time, for the period from 1.4.1977 to 31.3.1978 on 19.10.78. A copy of the certificate dated 19.10.78, in this regard, is at APB I, page 63. Then onwards, the exemption u/s 80G was regularly granted to the Trust. The latest order granting such exemption was that passed on 29.01.2004, for the period from 1.4.2004 to 31.03.2009 (copy at APB I, page 56). This position has not been denied by the ld. CIT. Rather, his case is that grant of further exemption would amount to perpetuating mistake.
17. In view of the preceding discussion, we do not find any mistake likely to occur on grant of further exemption u/s 80G to the applicant Trust. As seen, there has come about no change in facts or circumstances. Merely registration as a Society does not disentitle the applicant from the exemption claimed, has deliberated upon hereinbefore.
18. Therefore, the grievance sought to be raised by the assessee is found to be justified and is accepted as such. The assessee, in fact, in this case, are the indeterminate beneficiaries. Accordingly, the Order passed by the ld. CIT is cancelled. The application filed by the assessee Trust is allowed. The ld. CIT is directed to grant exemption u/s 80G of the Act to the assessee in accordance with law.
19. In the Cross Objections filed by the Revenue, several grounds are raised. However, they are all in support of the order of the CIT passed u/s 80G. The same has been discussed at length while considering the assessee's appeal. Therefore, no separate adjudication of the C.O. is required. The same stood disposed of in terms of our decision in the assessee's appeal i.e., the CO is dismissed.
18 ITA No783/Del/2010 CO No.108/Del/2010
20. In the result, the assessee's appeal is allowed while the Department's CO is dismissed..
The order pronounced in the open court on 28.06.2013.
Sd/- Sd/-
[G.D. AGRAWAL] [A.D. JAIN]
VICE PRESIDENT JUDICIAL MEMBER
Dated, 28.06.2013.
dk
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches