Income Tax Appellate Tribunal - Mumbai
Mehta Jivraj Makandas & Parekh ... vs Assessee
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IN THE INCOME TAX APPELLATE TRIBUNAL
"G" Bench, Mumbai
Before Shri Rajendra Singh(AM) and Shri V.D.Rao, (JM)
ITA No.2212/M/2010
Mehta Jivraj Makandas & Parekh The DIT(E), Piramal Chambers
Govindaji Kalyanji Modh Vanik Parel, Mumbai
Vidyarthi Public Trust
15, Gyanjivandas Marg, 3rd Vincent
Square Street, Dadar(C.R.)
Mumbai 400 014.
PAN : AAATM 4796 M
Appellant Respondent
Assessee by : Shri A.H. Dalal
Revenue by : Shri A.K. Nayak
ORDER
PER RAJENDRA SINGH (AM) This appeal by the assessee is directed against the order dated 3.2.10 of the Director of Income-tax (Exemption) (DIT-E). The only dispute raised is regarding renewal of exemption under section 80G which has been denied by the DIT(E).
2. Briefly stated the facts of the case are that the appellant trust had been registered under section 12A of the Income-tax Act vide order dated 21.11.1975 and had also been granted exemption under section 80G earlier. The assessee filed application dated 13.4.2009 requesting for renewal of 2 exemption under section 80G. The DIT(E) noted that the original objects of the trust had been amended and new objects were inserted in view of the order dated 17.3.1994 of the Charity Officer under section 50A(1) of Bombay Public Trust (BPT) Act. The assessee had however not filed any fresh application for registration under section 12A which had been granted only with respect to the original objects. In view of the changes in the objects, the original registration under section 12A did not survive. Reference was made to judgment of Hon'ble High Court of Allahabad in case of Allhabad Agricultural Institute and Others Vs Union of India (291 ITR 116) The DIT(E) therefore asked the assessee to explain as to why the application for grant of approval under section 80G should not be rejected. The assessee explained that the trust had been created in 1945 when the BPT Act had not been enacted. The trust had been formed with the object of running a Vidhyarthi Bhavan (Hostel) for accommodating the students belonging to the Modh community. After demise of the original trustees, the new trustees thought it fit to open admission to all the students without any reservation as to caste and creed. The scheme was therefore prepared in consultation with the Charity Commissioner and the new objects approved by the Charity Commissioner were incorporated in the trust deed which read as under :
"1. To promote and spread education by establishing boarding house enabling the poor and deserving boys belonging to any community to prosecute higher studies, such as Arts, Medical, Engineering, Agriculture, Commerce, Technical Education of any kind and Post Graduate Courses.
2. To provide cheap rent accommodation to poor and deserving students belonging to any Community in Bombay city or Suburbs. 3
3. To provide Medical aid to the poor and deserving including providing hospitalization of any community in Bombay and Maharashtra."
3. The assessee further submitted that there were no real changes in the objects of trust as the new objects were similar to the original objects and the only major change was that it was made applicable to all deserving students and not limited to Modh community. It was also submitted that none of the conditions of section 12A had been contravened and therefore there was no case for cancellation of registration granted under section 12A. The assessee placed reliance on the judgment of Hon'ble Supreme Court in case of Gestetner Duplicators P. Ltd. (117 ITR 1). It was pointed out that judgment of Hon'ble High Court of Allahabad in case of Allahabad Agricultural Institute & Others Vs Union of India (291 ITR 116) was distinguishable as the issue raised therein was not registration under section 80G. The assessee also submitted that it had intimated the changes in the trust deed to the AO. It was accordingly urged that claim of renewal under section 80G should be allowed.
4. The DIT(E) was however not satisfied by the explanation given. It was observed by him that there was no dispute that there had been changes made in the original objects and the assessee had not communicated the changes to the department for almost 15 years. The issue therefore arose whether the registration granted under section 12A on the basis of original objects would survive after the objects were amended. It was observed by him that the issue regarding addition/ deletion of the objects had been dealt with by the Hon'ble High Court of Madras in case of Sakthi Charities Vs CIT (149 ITR 624) and subsequently in the same case as reported in 182 ITR 483. The Hon'ble High Court held as under :
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"(a) a rectification deed cannot be valid unless there is power to alter the objects in the trust deed itself.
(b) once a trust had been founded with certain objects, those objects could not be deleted even by the founder of the trust though it was possible to add some other charitable objects without any detriment to the original objects.
(c) the object of the trust can be amended with the approval of the Hon. High Court."
5. It was thus clear that the objects could not be added or deleted except under the above circumstances. The assessee had also not complied with the requirement in the statutory form No.10A as per which the assessee had to give an undertaking to communicate forthwith any alteration in objects of the trust or in the rules governing the institution. This undertaking was also not fulfilled and change was intimated only after 15 years vide letter dated 23.12.2009. The intimation was given only after the show cause was issued by the DIT(E). He did not accept the plea of the assessee that the registration granted under section 12A could be cancelled under section 12AA(3) only if the activities of the trust were not genuine or were not been carried out in accordance with the objects of trust. It was observed by him that it was not the question of the genuineness of activities. The question was the impact of changes on the validity of trust deed. Once the trust itself became invalid the registration granted under section 12A could not survive. He referred to the judgment of Hon'ble High Court of Allahabad in case of Allahabad Agricultural Institute Vs Union of India (supra) in which the Hon'ble High Court held that where objects of the trust or institution which were the basis of grant of 5 registration were altered, the very foundation of registration having been removed by the voluntary act of the assessee, the registration would not survive. Therefore the said judgment was directly on point and was applicable to the facts of the case. The DIT(E) observed that judgment of Hon'ble Supreme Court in case of Gestetner Duplicators P. Ltd. (supra) relied upon by the assessee was distinguishable and not applicable to the case of the assessee. The DIT(E) following the judgment of Hon'ble High Court of Allahabad in case of Allahabad Agricultural Institute Vs Union of India (supra) held that in view of the changes in objects, the registration granted under the Income-tax Act did not survive and therefore approval under section 80G could not be granted. The registration under section 80G(5) could be granted only to a trust having a valid registration under section 12A. Since the assessee was not having a valid registration under section 12A, the registration could not be granted under section 80G. The DIT(E) therefore rejected the application for renewal of approval under section 80G of the Income-tax Act aggrieved by which the assessee is in appeal before the tribunal.
6. Before us the Learned AR for the assessee assailed the order of DIT(E). It was submitted that in this case the changes in the objects were made under the provisions of section 50A(1) of the BPT Act and therefore in respect of such changes no sanction of the High Court was necessary. It was also submitted that there were no changes in the objects of the trust which remained the same and the only change was that the area of application was enlarged and it was made applicable to all deserving students. The objects remained charitable even after changes. It was also argued that judgment of Hon'ble High Court of Allahabad in case of Allahabad Agricultural Institute & Anr. Vs Union of India (supra) was distinguishable as in that case there were several changes made in 6 the objects of trust. As regards the intimation regarding changes in the objects, as provided in the form No.10A, it was submitted that the assessee was not aware of the said provision. Moreover it was also pointed out that there was no time limit prescribed for intimating the changes and therefore there was no violation of the provisions as the intimation was ultimately given. It was further pointed out that there were no statutory provisions for such intimation and intimation was mentioned only in the form No.10A. It was submitted that rule could not go beyond the law. Reliance was placed on the judgment of Hon'ble High Court of Madras in case of MCT Muthiah Chettiar Family Trust Vs ITO (86 ITR 282). The trust had otherwise been found in order as observed by DIT(E) himself and the registration under section 12A having not been cancelled, the claim of the assessee of renewal under section 80G could not be rejected. The Learned AR placed reliance on the following judgments in support of the case :
(i) 300 ITR 214 (SC) in case of ACIT Vs Surat City Gymkhana
(ii) 119 TTJ 121 (PUNE) Bharatiya Vidhya Bhavan Vs ITO
(iii) 46 DTR 121 (LUCK) Chaturvedi Harprasad Educational Society
7. The Learned DR on the other hand strongly supported the order of DIT(E) and placed reliance on the findings given by the DIT(E). It was submitted that the judgment of Hon'ble High Court of Allahabad in case of Allahabad Agricultural Institute Vs Union of India (supra) and the judgment of Hon'ble High Court of Madras in case of Sakthi Charities (supra) supported the case of the revenue. It was accordingly urged that the order of DIT(E) should be upheld.
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8. We have perused the records and considered the rival contentions carefully. The dispute is regarding renewal of exemption under section 80G of the Income-tax Act. One of the conditions for granting exemption under section 80G is that the trust must be registered under section 12A of the Income-tax Act as a charitable institution. In this case trust had been registered as a charitable institution under section 12A of the Income-tax Act vide order dated 27.11.1975. The registration so granted had not been cancelled even till date. The original objects of the trust based on which registration under section 12A had been granted was running a Vidhyarthi Bhavan (Hostel) for accommodating students belonging to Modh community. Subsequently in view of the order dated 17.3.1994 of the Charity Officer under section 50A(1) of BPT Act, objects of the trust were amended. The new objects have been reproduced at page 2 of this order. The case of the revenue is that the objects of the trust cannot be amended without the approval of the Hon'ble High Court. Reliance has been placed on the judgment of Hon'ble High Court of Madras in case of Sakthi Charities Vs CIT (149 ITR 624). It has also been argued that the changes in the objects of the trust was not intimated to the department as provided in the form No.10A. The revenue has therefore taken the view that the trust originally constituted was no longer valid in view of the changes made in the trust. DIT(E) therefore rejected the application for grant of renewal under section 80G.
8.1 The case of the assessee is that changes had been made to the objects of trust in view of the order dated 17.3.94 of the Charity Officer under section 50A(1) of the BPT Act. Therefore in such cases approval of the High Court was not necessary. It has also been submitted that there was no statutory requirement of intimating the changes. The requirement of intimation was 8 provided only in the form No.10A which was not a statutory requirement. Therefore registration could not be denied only for not intimating the changes. It has also been submitted that even after changes the objects remained charitable and there was no changes in the original object which was only enlarged and made applicable to all students. Moreover it has also been pointed out that registration granted under section 12A had not been cancelled and was still in force and therefore the assessee was entitled for renewal of exemption under section 80G.
9. We have considered the various aspects carefully. The objects in this case had been changed under section 50A(1) of the BPT Act. We have perused the said provisions. Under section 50A(1), the Charity Commissioner either on his own or on an application made in writing by two or more persons having interest in a public trust and after giving the trustees an opportunity of being heard can frame a scheme for management or administration of such public trust. Thus section 50A(1) empowered the Charity Commissioner only for framing a scheme for the management or administration of public trust. The said section does not give any power for making changes in the objects of trust. We are therefore unable to accept the argument that changes in the objects could be made without approval of the High Court in case the changes were made in pursuance of order of Charity Commissioner under section 50A(1). However, we note that the trust is already registered under section 12A which has not been cancelled. We also note that the original object of the trust of providing hostel accommodation to the students has not been deleted. The object has only been modified so as to include other deserving students also in addition to the students of Modh community. There is only one addition in the objects which is providing medical aid to the poor and deserving persons 9 of any community. Thus even the amended objects remain charitable and have not caused any detriment to the original objects as students of the Modh community continued to be eligible for the benefits. Further the trust had already been granted exemption under section 80G based on the amended objects for the subsequent period. There is no statutory requirement of intimating the changes to the Income-tax Department. The requirement of intimation is mentioned only in the form No.10A and even in the form No.10A there is no time limit prescribed. The assessee has already intimated the changes to the department though later and therefore technically there is no violation on the part of the assessee because of no time limit being prescribed. Moreover, there being no statutory requirement of intimating changes, registration cannot be cancelled or the trust cannot be declared invalid only on the ground that changes were not intimated.
9.1 The other argument of the revenue is that because of the changes made in the trust which was not legal, the trust has become invalid and therefore the registration already granted under section 12A could not survive. Reliance has been placed on the judgment of Hon'ble High Court of Allahabad in case of Allahabad Agricultural Institute & Others Vs Union of India (supra). We have gone through the said judgment. In that case the assessee had been granted registration under section 12A based on certain objects. Subsequently there were changes made in the objects which were not intimated to the department. The AO therefore held that the registration granted under section 12 A was not valid and thus did not grant exemption under section 11 of the Income-tax Act. The decision of the AO was challenged in a writ petition under Article 226 of the Constitution. The Hon'ble High Court noted that there were wholesale changes in the objects. The number of objects had been increased to 14 from 6 objects 10 in the original deed. The High Court also observed that the trust could not show that the revised objects were practically the same or were charitable. It was under these circumstances that the writ petition of the assessee was dismissed. It was held that the order of AO did not call for interference by the court in the exercise of equitable and discretionary jurisdiction under Article 226. The case of the assessee is different. There were practically no changes in the objects. The original object of providing hostel accommodation remained the same. Only the scope was enlarged to all students. The only new object was medical aid to poor which was also charitable. Thus the objects continued to be charitable. Therefore the judgment of Hon'ble High Court of Allahabad relied upon by the revenue is distinguishable and can not be applied to the facts of the present case.
10. The trust has already been registered under section 12A and the registration has not been cancelled. The AO therefore can not probe the objects and declare the trust invalid. The judgment of Hon'ble Supreme Court in case of CIT Vs Surat City Gymkhana also supports the case of the assessee in which it was held that the registration under section 12A was a fait accompli to hold back the AO from further probe into the objects of the trust. The original objects continue to exist and the amended objects remain charitable and the trust continues to be eligible for registration under section 12A. Principle of consistency is also in favour of the assessee as based on the amended objects renewal of approval under section 80G has already been granted and factual and legal position remaining the same, we se no justification for rejecting the application for renewal under section 80G.
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11. In view of the foregoing discussion and for the reasons given above, the order of DIT(E) rejecting the application for renewal of approval under section 80G cannot be sustained. DIT(E) is therefore directed to grant renewal of approval under section 80G to the assessee.
12. In the result appeal of the assessee is allowed.
13. The decision was pronounced in the open court 11.03.2011.
Sd/- Sd/-
( V.D. RAO ) (RAJENDRA SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 11.03.2011
At :Mumbai
Copy to :
1. The Appellant
2. The Respondent
3. The CIT(A), Mumbai concerned
4. The CIT, Mumbai City concerned
5. The DR "G" Bench, ITAT, Mumbai
// True Copy//
By Order
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
Alk