Income Tax Appellate Tribunal - Mumbai
Sola Hakim Medical Research Trust, ... vs Dit (E), Mumbai on 26 April, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "E", BENCH
MUMBAI
BEFORE SHRI M.BALAGANESH, AM
&
SHRI AMARJIT SINGH, JM
ITA No.7781/Mum/2011
(Assessment Year :2010-11)
Sola Hakim Medical Vs. The Director of Income -
Research Trust Tax(Exemption), Mumbai
9, Hamton Court
Colaba,
Mumbai - 400 005
PAN/GIR No.AACTS2195J
(Appellant) .. (Respondent)
Assessee by Shri J.D. Mistri
Revenue by Shri R. Manjunatha Swamy
Date of Hearing 22/04/2019
Date of Pronouncement 26/04/2019
आदे श / O R D E R
PER M. BALAGANESH (A.M):
This is an appeal preferred by the assessee against the rejection of
grant of approval u/s.80G of the Income Tax Act (hereinafter referred to
as an Act) by the ld. Director of Income Tax (Exemption) [DIT(E) in
short].
2. Brief facts of this issue are that the assessee trust had preferred an
application for the first time on 03/12/2008 for grant of approval u/s.80G
of the Act even though the trust is in existence for the last 30 years and
had been granted registration u/s.12A of the Act on 18/04/1977. The
assessee trust for the A.Y.2010-11 showed long term capital gain of
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Rs.75,04,500/- and claimed exemption for the same u/s.11(1A) of the
Act. The assessee submitted before the ld. DIT(E) as under:-
"Exemption U/s.11(1A) :
A part of the trust property was sold during the A.Y. 1983-84 for a
consideration of Rs.9,00,000/- which was credited in the books as advance
received. During the year under consideration, the balance property has
also been sold for a consideration of Rs.68,00,000/-.
Computation of long terms capital gains on sale of property:
Sale consideration received in A.Y. 1983-84 9,00,000/-
Sale consideration received in A.Y. 2010-11 68,00,000/-
77,00,000/-
Less: Cost of property 1,95,500/-
(As per Gift deed dated 30 March 1972}
Capital Gains 75,04,500/-
Less: Exempt u/s. 11(1 A) 75,00,000/-
Balance to be treated as income 4,500/-
=======
* Out of the total consideration of Rs.75,04,500/- received on sale of
property, an amount of Rs.75,00,000/- has been invested in Tax Savings
Bonds and Bank deposits. Accordingly, the capital gains too this extent is
exempt in terms of section 11(1A) of the Income-tax Act, 1961."
2.1. The assessee submitted before the ld. DIT(E) that though approval
for sale of part of the land belonging to the assessee trust was indeed
obtained from the Charity Commissioner way back in the year 1982, the
assessee had inadvertently omitted to include a part of a particular survey
number while obtaining the approval from the Charity Commissioner. In
order to rectify the same, the assessee again applied for permission of
the Charity Commissioner by making an application u/s.36-1(a) of the
Bombay Public Trusts Act, 1950 on 18/11/2009 and the same was
pending before the Charity Commissioner.
2.2. The assessee also filed a copy of sale deed and the agreement of
sale dated 21/04/2009 entered into between the assessee and "New Shri
Swami Samartha Borivade Village Co-operative Housing Society Ltd." The
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assessee also drew the attention of the ld. DIT(E) to the relevant portions
of the sale agreement as under:-
"4. It is observed from the copy of sale deed filed, the agreement of sale is
dated 21.04.2009 which is between the trust and 'New Shri Swami Samartha
Borivade Village Co-operative Housing Society Ltd. The relevant portions
of the sale agreement is reproduced as under :-
"(f) The said property is reserved under the Thane Development Plan
for 'Playground'.
(g) As the purchaser has already acquired all the adjoining
surrounding pieces of land the purchaser requested the vendors to sell the
said property which the vendors have agreed on 'as is where is basis' for
the consideration and on the terms and conditions hereinafter
mentioned including the condition that sanction of the Charity
Commissioner shall be obtained for sale of the said property.
(h) This agreement is stamped with the same amount of stamp as
would be affixed on a conveyance under Article 25(b) of the Bombay
Stamp Act. Subject to permission of the Charity Commissioner, the
parties intend to execute in the same transaction several documents,
including power of attorney, conveyance etc and therefore for purposes of
section 4 of the Bombay Stamp Act, this Agreement for Sale is deemed to
be 'principal instrument' and is stamped with the maximum stamp
affixable.
II. The purchaser confirms that prior to entering into this agreement has
made necessary enquiries and satisfied itself as to the state of the vendors
title to the said property, therefore the purchaser confirms that this
agreement is on "as is where is basis" and on an understanding that except
for : (a) obtaining sanction of the Charity Commissioner and (b) execution
of a forma! conveyance conveying and transferring the said property there
are no obligations remaining on the vendors. The purchaser confirms that
such obligation as the vendors owed to the purchaser as regards making out
a title to the said property have been discharged, there are now DO other
obligations remaining on part of the vendors except as mentioned
hereinabove.
III. The vendors hereby declare that:
(a) No other person except the vendors have any right, title, claim or
demand in respect of the said property or any part thereof
(b) The said property is reserved under the Development Plan for
playground.
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IV. Simultaneously with the execution of this agreement the vendors
shall apply for sanction of the Charity Commissioner permitting the sale of
the said property to the purchaser and purchaser confirms that it shall be
responsible for obtaining sanction of the Charity Commissioner including
all costs, legal fees to be incurred etc.
V. On issuance of sanction of the Charity Commissioner, the vendors
shall execute a conveyance of the said property in favour of the purchaser in
the form annexed hereto marked as Annexure 'B'.
VI. At the time of executing conveyance, the vendors shall also execute a
writing, recording that they have given possession of the said property to
the purchaser"
2.3. The ld. DIT(E) observed that stamp duty has been paid by the
assessee on 15/04/2009. The ld. DIT(E) observed that assessee has
entered into conveyance deed with the purchaser even though no prior
approval of Charity Commissioner had been taken before sale of the
property. The ld. DIT(E) observed that assessee had preferred an
application seeking approval for sale of property before the Charity
Commissioner on 18/11/2009 which is after the date of execution of sale
deed. The ld. DIT(E) reproduced relevant portion of the said application
made before the Charity Commissioner as under:-
"8. The applicant submits that the trustees had entered into agreement
dated 17!h June, 1982 for sale of approximately 83 pieces of land situated at
Village Borivade, Taluka District Thane on the terms and conditions more
specifically mentioned therein with Samarth Development Corporation.
Accordingly, the trustees of the trust in question filed application no. 235 of
1982 with the office of the Charity Commissioner, Maharashtra State,
Bombay. By order dated 31^' July, 1982, the Hon'ble Charity
Commissioner, Maharashtra State, Bombay was pleased to pass necessary
orders to grant permission for sale of the property. In the meantime, the
interest of the purchaser came to be assigned to New Shri C Swami
Samarth Borivade Village Co-operative Housing Society Limited.
9. The applicant submits that during the course of time, a Deed of
Conveyance . came to be executed on 9th December, 1989 which mentions
the remaining lands for which the sanction was granted except the land in
question which remained inadvertently to be covered under the Deed of
Conveyance. A copy of the Deed of Conveyance was forwarded to the office
of the Charity Commissioner, Maharashtra State, Bombay with request for
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extension of time granted under order dated 31st July, 1982, the Hon'ble
Charity Commissioner, Maharashtra State, Bombay was pleased to extend
time vide order dated 9lh July, 1991.
15. The applicant submits that basically, this is an application for
extension of time and modification of the amount of consideration to be
recorded as Rs.68 lakhs or in the alternative, the application may be treated
as a full-fledged fresh application only in respect of property bearing survey
No.55/3 of village Borivade, District Thane.
18(g) The applicant submits that the property in question is not involved
in any litigation.
18(h) The applicant submits that the trustees do not intend to advertise
the property for sale but are proceeding with the transaction based on
private negotiations and therefore, procedure as regards to the publication
of public notice may please be dispensed with."
2.4. The ld. DIT(E) in these facts and circumstances proceeded to deny
the approval u/s.80G of the Act to the assessee trust on the following
reasoning:-
"The agreement dated 17.06.1982 is between the trust and 'Samarth
Development Corporation' whereas the agreement of property sold on
21.04.2009 is between the trust and 'New Shri Samarth Borivade Village
Co-op, Hsg. Soc. Ltd. The trust has taken permission from the Charity
Commissioner office on 17.06.1982 to sell land to "Samarth Development
Corporation" whereas the trust has sold the land to "New Shri Samarth
Borivade Village Co-op. Hsg. Soc. Ltd." There is a change in the identity of
the purchaser, the trust should have taken prior permission of Charity
Commissioner which it has failed to do so.
ii) The trust has applied for extension of time with regard to conveyance
which has lapsed on 16.07.1991. Thereafter no extension has been granted
by the Charity Commissioner. Since the office of the Charity Commissioner
has not given further extension, it implies that the trust had no right to sell
the land without taking prior approval of the Charity Commissioner. The
agreement entered into by the trust and the purchaser is illegal and void.
iii) The applicant trust has sold the property without the prior approval of
the Charity Commissioner. As per Appendix C, point 15 as reproduced
above, the trust has itself made an alternative plea that the application may
be treated as full-fledged fresh applications. This is because the trust has
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failed to obtain extension of time from Charity Commissioner after 1
6/07/1991 .
iv) the land sold by the trust is to be exclusively used as a playground, it
cannot be used for any other purpose. The trust has sold this land to a co-
op. Hsg. Soc. Ltd. without intimating/taking prior approval of the local
municipality/panchayat. Since the land in question is sold without getting
proper value as the real worth of the land could be many times more. No
submission in respect of valuing the land at Rs.68 lacs is made in the
submissions filed."
2.5. Finally, the ld. DIT(E) concluded that since trust has sold the land
without taking prior approval of the office of Charity Commissioner, the
transaction of sale of property made by the assessee was illegal and bad
in law. Moreover, the land which was to be used for play ground in
consonance with the main object of the assessee trust of imparting
education , the sale of play ground land would amount to parting with the
main object being pursued by the assessee trust. With these
observations, he denied the grant of approval u/s.80G of the Act to the
assessee trust.
3. Aggrieved, assessee is in appeal before us.
4. We have heard rival submissions. At the outset, we find that for the
purpose of grant of approval of Section 80G of the Act what is to be seen
is the compliance to conditions prescribed in Section 80G(5) of the Act.
For the sake of convenience, the said provisions are reproduced
hereunder:-
(5) This section applies to donations to any institution or fund referred to
in sub- clause (iv) of clause (a) of sub- section (2), only if it is established
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in India for a charitable purpose and if it fulfils the following conditions,
namely:--
(i) where the institution or fund derives any income, such income would
not be liable to inclusion in its total income under the provisions of
sections 11 and 12 [***][***] or clause (23AA)] 5 or clause (23C)] of
section 10:
[Provided that where an institution or fund derives any income, being
profits and gains of business, the condition that such income would not be
liable to inclusion in its total income under the provisions of section 11
shall not apply in relation to such income, if,-
(a) the institution or fund maintains separate books of account in respect
of such business;
(b) the donations made to the institution or fund are not used by it, directly
or indirectly, for the purposes of such business; and
(c) the institution or fund issues to a person making the donation a
certificate to the effect that it maintains separate books of account in
respect of such business and that the donations received by it will not be
used, directly or indirectly, for the purposes of such business;]]
(ii) the instrument under which the institution or fund is constituted- does
not, or the rules governing the institution or fund do not, contain any
provision for the transfer of application at any time of the whole or any
part of the income or assets of the institution or fund for any purpose other
than a charitable purpose;
(iii) the institution or fund is not expressed to be for the benefit of any
particular religious community or caste;
(iv) the institution or fund maintains regular accounts of its receipts and
expenditure; ]
(v) the institution or fund is either constituted as a public charitable trust
or is registered under the Societies Registration Act, 18608 (21 of 1860 ),
or under any law corresponding to that Act in force in any part of India or
under section 25 of the Companies Act, 19569 (1 of 1956 ), or is a
university established by law, or is any other educational institution
recognized by the Government or by a university established by law, or
affiliated to any university established by law, or is an institution financed
wholly or in part by the Government or local authority.
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(vi) in relation to donations made after the 31st day of March, 1992 , the
institution or fund is for the time being approved by the Commissioner in
accordance with the rules made in this behalf [and]
(vii) Where any institution or fund had been approved under clause (vi) for
the previous year beginning on the 1st day of April, 2007 and ending on the
31st day of March, 2008, such institution or fund shall, for the purposes of
this section and notwithstanding anything contained in the proviso to
clause (15) of section 2, be deemed to have been----------
(a) Established for charitable purposes for the previous year beginning on the
1st day of April, 2008 and ending on the 31st day of March, 2009; and
(b) Approved under the said clause (vi) for the previous year beginning on the
1st day of April 2008 and ending on the 31st day of March, 2009)
5. We find that the ld. DIT(E) had not brought any evidence on record
to prove that assessee falls under any of the aforesaid negative conditions
prescribed in the Act. In other words, no violation of conditions prescribed
u/s.80G(5) of the Act had been pointed out by the ld. DIT(E) in the order.
Once, the same are not done, then the assessee cannot be denied
approval u/s.80G of the Act. In this regard, it would be pertinent to look
into the relevant rule 11AA of the Income Tax Rules which are required to
be verified / examined for grant of approval u/s.80G of the Act by the ld.
DIT(E). For the sake of convenience, the relevant rule is reproduced
hereunder:-
[Requirements for approval of an institution or fund under section 80G.
11AA . (1) The application for approval of any institution or fund under clause (vi)
of sub-section (5) of section 80G shall be in Form No. 10G and shall be made in
triplicate.
(2) The application shall be accompanied by the following documents, namely :--
(i) Copy of registration granted under section 12A or copy of notification
issued under section 10(23) or 10(23C) ;
(ii) Notes on activities of institution or fund since its inception or during the
last three years, whichever is less ;
(iii) Copies of accounts of the institution or fund since its inception or during
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the last three years, whichever is less.
(3) The Commissioner may call for such further documents or information from the
institution or fund or cause such inquiries to be made as he may deem necessary in
order to satisfy himself about the genuineness of the activities of such institution or
fund.
(4) Where the Commissioner is satisfied that all the conditions laid down in
clauses (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or
fund, he shall record such satisfaction in writing and grant approval to the
institution or fund specifying the assessment year or years for which the approval
is valid.
(5) Where the Commissioner is satisfied that one or more of the conditions laid
down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall
reject the application for approval, after recording the reasons for such rejection
in writing :
Provided that no order of rejection of an application shall be passed without
giving the institution or fund an opportunity of being heard.
(6) The time limit within which the Commissioner shall pass an order either
granting the approval or rejecting the application shall not exceed six months from
the [end of the month in] which such application was made :
Provided that in computing the period of six months, any time taken by the
applicant in not complying with the directions of the Commissioner under sub-rule
(3) shall be excluded.]
6. We find that all the details that are necessary and called for by the
ld. DIT(E) in compliance with Rule 11AA of the Act had been duly
furnished by the assessee trust and there is absolutely no reason or any
iota of doubt to suspect the genuineness of activities carried out by the
assessee trust. It is not in dispute that assessee trust is in existence from
1977 onwards as Registration u/s.12A of the Act was granted to the
assessee-trust on 18/04/1977. The assessee chose not to apply for
approval u/s.80G of the Act till A.Y.2008-09 and had preferred application
seeking grant of approval u/s.80G of the Act for the first time on
03/12/2008. We find that the reasoning given by the ld. DIT(E) for the
rejection on grant of approval u/s.80G of the Act is in gross violation of
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provisions of Section 80G(5) of the Act and Rule 11AA of the IT rules. In
case if the property has been sold by the assessee without the approval
of Charity Commissioner, it is the look out of the office of the Charity
Commissioner to take necessary action against assessee trust and that
would not in any way jeopardize the grant of approval u/s.80G of the Act
by the ld DIT(E) to the assessee trust. We would like to state that the
purpose of seeking approval u/s 80G of the Act is to enable the donors to
claim deduction u/s.80G of the Act in their returns in respect of
contributions / donations made to the recognised trust such as assessee.
Even otherwise, the allegations leveled by the ld. DIT(E) could be very
much looked into by the ld. AO in the course of assessment proceedings
of the assessee trust and the same cannot be a hindrance for denying
grant of approval u/s.80G of the Act.
7. We find that the reliance placed by the ld. AR on the co-ordinate
bench decision of Chandigarh Tribunal in the case of Shri Krishna Kirpa
Gaushala Samiti vs. CIT(E) reported in 64 taxmann.com 420 is well founded
wherein the CIT(E) in that case denied approval u/s.80G of the Act on the
ground that the said trust was in respect of anonymous donations which are
liable to be taxed u/s.115BBC of the Act. In the said judgment, the Co-ordinate
Bench of Chandigarh Tribunal had categorically held that while granting the
approval u/s.80G of the Act, the only provision as per the rules is that the
rejection can be made if one or more conditions as laid down in Clauses-(i) to
(v) of 80G(5) are not fulfilled. It was not held that there is no clause in Section
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80G(5) of the Act which says that the approval u/s.80G be rejected if any
institution accepts anonymous donations. Finally, it held that these factors are
not relevant for granting approval u/s.80G of the Act and the same could very
well be taken care at the time of assessment proceedingd by the ld. AO.
7.1. The ld. AR also placed reliance on the decision of Hyderabad Tribunal in the
case of Jagdish and Kamla Mittal Museum of Indian Art vs. Director of Income
Tax (Exemptions) reported in 47 taxmann.com 264 which also endorsed the
similar view taken by the Chandigarh Tribunal (supra).
8. On merits, we find that the Charity Commissioner, Maharashtra State,
Mumbai in application no.10/2010 u/s.36(3) of the Maharashtra Public Trusts
Act1950 and miscellaneous application no.28/2010 and 29/2010 dated
26/05/2017 had addressed the entire issue by duly narrating the entire facts of
the assessee with regard to the subject mentioned land sale transactions which
are reproduced hereunder for the sake of convenience:-
"These three proceedings are relating to the same property of the trust
which have been sold by the trust by the sanction order passed by this
authority which the applicants are challenging. They' are heard
together. It would be appropriate to pass a Common Judgment and
Orders in these cases.
2. The applicants herein are seeking revocation of the sanction order
passed by this Authority on 31-07-1982 under Section 36(2) of the
Maharashtra Public Trusts Act, 1950 (hereinafter referred as the Act
for the sake of brevity) after 28.years by submitting application under
Section 36(2) in October, 2010. It is not in dispute that on 9 th
December, 1989, Deed of conveyance was executed on behalf of the
trustees by their constituted power of attorney Shri Walawalkar in
favour of the purchasers. The impugned sanctioned order permitted the
trust to sell 304 Acres of agricultural land in light of the agreement of
sale between the parties for a consideration of Rs. 9,00,000 (Rupees
Nine Lakhs only). As per the terms of agreement, the Deed of
Conveyance is thus executed in favour of Samartha Development
Corporation, M/s. Venus Housing Enterprises, New Shree Swami
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Samarth Borivade Village Co-operative Housing Society Limited
(hereinafter referred as the purchasers).
3. It is worth to note that by the gift deed dated 30-03-1972, Settler Dr.
S. A. E. Hakim and Smt. M. A. Hakim donated their 2/3 rd undivided
share in the agricultural land at village Borivade, Dist.Thane
admeasuring 629 Acres. By the change report dated 8-8-1975, 2/3rd
undivided share of the said Settlers in the said properties was recorded
as the trust property. By the Deed of Conveyance, 304 Acres and 3
Gunthas land which was recorded as a trust property is, sold to the
purchasers. By the sanction order the conveyance\deed was to be
executed within a period of six months from the date of obtaining No
Objection Certificate of Urban Land and 'Ceding Regulation Act,
1976, provided that such application for No objection Certificate is
made within a period of month from the date of sanction order.
4. It is a matter of record that the Deed of Conveyance could not be
executed within the time stipulated and therefore, on 29-01-1990
application for extension of time for executing the Deed of Conveyance
was submitted. It was submitted by C.A. of trust Shri K. L. Walawalkar
in the format of letter. The Superintendent of Charity Commissioner by
the letter dated 16-04-1990 called upon Shri Walawalkar to submit an
explanation why extension was not applied in time. Then by the letter
dated 25-06-1990, the explanation was tendered by Shri Walawalkar.
Then on 2; 04-1991, an affidavit was sworn by the trustees Mr. A. S.
Hakim and Dr. R. P. Jehangir to explain the delay for seeking
extension. According]/- on 9th July, 1991. the trustees were
communicated by the Superintendent of this Authority that the period
of validity of sanction order to complete the transaction in the matter
was extended up to 16l July, 1 991. It is worth to note here that the
Deed of Conveyance was infact executed prior to submission of the
extension of time on 9-32-1989. The extension of time is granted later.
It is therefore contended on behalf of the applicants that such ex-post'
facto' sanction of time should not have been granted and is illegal.
5. Alongwith the revocation proceeding, two more proceedings
initiated by the trust for modification in the sanction order have also
been heard bearning Nos. 28/2010 and 29/2010. M.A. No.-28/2010 is
submitted to permit the trust to sale property bearing S.No.55/3
admeasuring 0.12.1HRP mentioned in the sanction order and the
agreement as well as the application for permission to sale. It is
submitted that this land is also in fact sold by the trust along with other
properties but through oversight it was not mentioned in the deed of
conveyance. The purchasers have already paid Rs. 68 Lakhs for this
property as per the agreement dated 21-04-2009. In the application, it
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is prayed that the sanction order may be modified and the trust may be
.permitted to execute the Deed of Conveyance of this property also. In
the proceeding No.29/2010, rectification is sought in description of the
properties made in the sanction order to mention Survey No. 55/1 in
spite of 55/2 at Sr,:No. 68. It is submitted that in the agreement dated
17-06-1982, the specification of the said two properties is also made
and the sanction order permits the sale of properties described in the
agreement and therefore, mere contradiction in the description of the
properties in the sanction order will not affect the rights of the
purchaser or the
6. In this background, the applicants are claiming revocation of the
sanction order alleging that it is fraudulently obtained. Following are
the grounds made out by the applicants--
i. The trustees sold the property at a very low value without even
ascertaining it from a Government Recognized Valuer.
ii. The trustees did not pass a proper resolution for justifying their
decision of selling the property.
iii. Public notice for a very short period was given and on
publication of notice on 28-06-1982 in Navakal and Free Press
Journal, offers were invited on 7-7-1982.
iv. The agricultural land could not have been sold to an non-
agriculturist even then by violating the revenue authorities, the trustees
sold the trust property to the purchasers who were non-agriculturists.
v. The date of opening the tender was 8-7-1982 and they were
signed
by the trustee Dr. Smt. Dina Hakim on 9-7-1982 shows that the tender
formality was merely a show.
vi. The valuation report submitted before the Charity Commissioner
prepared for the tap. purpose and it was not depicting the true value of
the property. The true value of the property was Rs. 20.7 lakhs but the
Valuer's report placed on record showed it at Rs. 9 Lakhs only?
vii. The application under Section 36(l)(a) of the Act was not
presented iik me proper form. No court fee stamps wee affixed an d
even no prayer was made for authorizing the trustees to sell the
property because the trust deed was not authorized them to sell the
trust property. No sanction could have been granted in the absence of
the trust deed provided ay authority to the trustees to sell the property.
The land gifted to the trust was 2/3 of 629 Acres i.e. 420 Acres even
then the entire property has been transferred to the purchasers for
throw away for the price of Rs. 9 Lakhs only.
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viii. The trustees had their adjoining property to the trust property
which they were intending to sell the same purchasers and therefore,
they had personal interest in selling the trust property to the same
developer.
ix. The trustees did not receive the entire amount of consideration
within six months from the date of sanction order.
x. Nothing was mentioned in the application as to what the trustee is
going to do with the balance land after selling 304 Acres of land.
xi. In the Deed of Conveyance dated 9-12-1989 the constituted
attorney Shri Walawalkar had shown the deceased trustee M.A. Hakim
as a party to the document, though died on 1-8-1983.
xii. The trustees had no authority to sell the property through the
power of attorney holder as the trustees cannot delegate their powers.
xiii. The trustees were granted extension on 9-7-1991 as they pointed
out that no conveyance deed was executed by them. If that was so, the
Deed of Conveyance purporting to be executed on 9-12-1989 was not a
conveyance at all and was ab initio void.
xiv. As there is no provision of granting ex-post facto sanction, the
Deed of Conveyance dated 9-12-1989 beyond the stipulated period
cannot be treated as valid transfer and the extension order dated 9-7-
1991 cannot validate the Deed of Conveyance executed much before
the grant of extended period.
xv. Market price of the property at present is Rs. 446 Cores, whereas
the purchasers the Trust is intending to sell it at a throw value and
therefore, to protect the trust, sanction order needs revoked.
7. The opponents were served with the notice and they have filed their
reply. Their main contention's that the trust property once sold, it loses
its character of a trust property and the Charity Commissioner cannot
then pass any order which can affect the rights of the third party
purchaser. It is further contended that neither the trustees nor the
purchasers have committed any fraud upon the Charity Commissioner
and therefore, the question of revoking the sanction order does not
arise. The trust property transferred in favour of nominees of Samarth
Development Corporation who have been not made party to this
application and therefore, their non-joinder makes this proceeding
under Section 36(2) of the Act prima facie riot maintainable.
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8. So far as the exact area of 2/3 rd of the undivided share in 629 Acres
of the property, it is submitted by the opponents that the trust is
actually gifted 305 Acres (2/3rd of 629 Acres i.e. 419 - 104 Acres land
acquired by the State Government for the various purpose).
Surprisingly there is no such corresponding entry in the Public
Trusts Register maintained by the Public Trusts Registration Office,
Greater Mumbai but this cannot be a reason for disbelieving
the opponents because unfortunately the records. maintained by this
Office are in a pathetic condition. There are many entries taken long
back of 30 to 35 years, not endorsed by the officers or the
superintendents. Change reports are also not taken cognizance for
years together. About 40,000 registered trusts have not been yet
included in the records. These facts may not be necessarily relevant in
this matter but they are reproduced to show how much presumption of
correctness can be attached to the entry of 629 Acres land in the trust
record.
9. So far as the short time of the public notice is concerned, the
opponents contend that notice published in the newspaper Navakal and
Free Press Journal was published with a sufficient period before the
tenders were accepted (publication on 28 June, 1982 and tenders were
opened on 8-7-1982). It is also submitted that as per Rule 24 of the
Maharashtra Public Trusts Rules, 1951, the process of publication
and inviting tenders is not mandatory.
10. So far as the objection of the applicants regarding powers to
soil to the trustees, it is contended that, the Charity Commissioner has
powers to authorise the trustees to sell the property if it is necessary
for If the benefit and protection of the trust. Accordingly, the
Charity Commissioner has exercised powers in favour of the trust. It
is contended that the trustees have received the amount of
consideration long back before the execution of the sale deed and that
for the "omission of specific number of properties S.No. 55/3, the
trustees have submitted application baring No. 28/2010 and for this
compliance, purchasers have already paid Rs, 68 Lakhs in addition
though infact this property was contemplated in the agreement of sale
as well as the application for permission.
11. It is submitted on behalf of the trust in this context that the entire
trust property was sold by the Deed of 1989 but in the deed of
conveyance, the number of property S.No. 5573 was not mentioned
through over sight. That it is a minor mistake committed neither by the
trustee nor the purchasers but by the scribe of the document. Still out
of it, trustees are getting Rs. 68 Lakhs. That if this later agreement of
2009 for sale of this property is not permitted then there may be
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unnecessarily multiplicity of the litigation which may not be in the
interest of the trust.
12. It is submitted that the trustees have been authorised to execute
the sale deed even beyond the stipulated time by the order dated 19-7-
1991, that there would be no question of ex post facto sanction to the
Deed of Conveyance executed in 1991 because the sanction is already
accorded in 1982. That infact time is generally not essence of the
contract in cases of immovable property and therefore, condition of
time as imposed in the sanction order would not necessarily affect the
right of the purchaser because such condition itself is contemplated
under the Act,
13. I have carefully taken into consideration the record of the case
and the said submission^;' the following points arise for my
consideration.
POINTS FINDINGS
i. Is" the application maintainable
as the trust property is sold by the Deed In the negative.
of Conveyance dated 9-12-1989?
ii. Is the sanction order dt. 31-7-1982
obtained by the trustees by practicing fraud In the negative.
upon the Charity Commissioner?
iii. Can the trustees be permitted to sell the
land S.No. 55/3 admeasuring 0.12.1 H.R.P, In the affirmative
at the consideration of Rs. 68,00,000/- as per
the agreement dated 21-04-2009?
iv. Can the sanction order be rectified in In the affirmative.
the description of lands in the original sanction
order in terms of prayers clause (b) in
the M.A. No. 29/2010?
REASONS
As to Point No. (i) : -
14. At the outset before?' beginning to record the reasons of
recording the said findings, Section 36(2) is reproduced for
ready reference
"36(2) The Charity Commissioner may revoke the sanction given under
clause (a) or clause (b) of subsection (1) or, the ground that such
sanction was obtained by fraud or misrepresentation made to him or
by concealing from the Charity Commissioner, facts material for the
purpose of giving sanction; and direct the trustee to take such steps
within a period of one hundred and eighty days from the date of
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revocation (or such further period not exceeding in the aggregate one
year as the Charity Commissioner may from time to time determine) as
may be specified in the direction for the recovery of the property."
15. The words emphasised make it clear that the fraud or
misrepresentation or concealment of the fact from the
Charity Commissioner must be of the material facts for the purpose of
giving Obviously, such fact should have happen before the Charity
Commissioner passes the order and cannot be a subsequent fact. If any
fraud or illegality is committed during execution' of the sanction order
by the trustees or the persons collecting the amount on behalf of the
trust or the purchaser in the process of executing the Deed of
Conveyance then remedy may lie under any other provisions of the Act
or law before any other competent authority, but certainly not under
Section 36(2) of the Act because once the sanction order is executed
and the trust property is conveyed to any other person, it does not
remain the trust property. I found support to this proposition from the
rulings, viz., 2006(1) Bom.C.R. Page 133 (Stella A. Machado and others
v/s. A.H. Vadia Charity Trust and others), A.I.R. 1991 Bom. Page 220
(Mrs. Fatmabai B. Bachooali v/s. State of Maharashtra and others),
1989 Mh.L.J. Page 269 (Mahadeo Deosthan Wadali & others v/s Jt.
Charity Commissioner & others), (1994) 96 Bom.L.R. Page 714 (Dr.
Sam Sarosh Bhacca and others v/s P.V.Kakadc, Jt. Charity
Commissioner), A.I.R. 2006 Gujarat Page 78 (Raghavjibhai
Narjinhbhai Patel and others v/s Amroli Anjuman Fund through
Trustee and others) and 2005 B.C.I. Page 107 (Motilal Girdharilal
Shuana & others v/s. Dattatray Bandu Jagtap and others).
16 The learned counsel for the applicant vehemently argued in light .
of the principles laid down by the Supreme Court in the cases -(1994)
1 Supreme Court Cases Page 1 (SiP..Chengalvarya Naidu (Deed)
b- Lrs. v/s Jagannath (Dead) by Lrs. and others, and (1996) 3 Supreme
Court Cases Page 310 (Gowrishankar and another v/s Joshi Atoba
Shankar Family Trust and others) that when a fraud is
committed, it is the duty of the Authority upon which it is practised to
take a serious cognizance of it and vitiate the same. The principles laid
down in these case laws explain the meaning of fraud and its effects,
there cannot be no doubt in the proposition that-if a fraud is
established, the order passed by the Authority which is outcome of
such fraud would be a nullity. With respect to the learned counsel, I
am of the view that these case laws would not be of much help to me
for deciding the controversy. This Authority has a limited jurisdiction
exercisable within the scope of Section 3 5(2) of the Act. Here, the
issue is whether any fraud is committed and whether the order can be
revoked after the Deed of Conveyance is executed as per the sanction
order.
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17. The principles which have been laid down in the various rulings
referred by me above demonstrate the scope of Section 36(2), that
when the sale deed is executed in light of the sanction order then it
would not be proper to revoke the sanction because the moment sale
deed is executed, the property loses the character as of trust property.
The judgments of the Division Bench of the Hon'ble Bombay High
Court on this issue in Motilal's case (2005 B.C.II^a'ge 107) and Stella's
case (2006(1) Bom. C. R. Page 133) have a similar view and the
Lordships have referred earlier judgments in the 'orders in cases of
Mahadeo and Fatmabai. The observations laid ..Sown in case of
Mahadeo have been reproduced by the Lordships in the case of
Motilal and the same I would like to quote -
"That the sanction should not have spent itself, at the time of its
revocation, is evident from the provision made in section 36(3) which
provides that no sanction shall be revoked unless the person, in whose
favour such sanction has been made, has been given a reasonable
opportunity to show cause why the sanction should not be revoked. This
person is necessarily a person who obtained sanction and in whose
favour the trust property vests. It is he who has to be granted a
reasonable opportunity before revoking the sanction and taking
appropriate action.
The power of revocation has to be exercised before the sanction has been
acted upon by that person. The reason is not far to seek. In the first place,
if pursuant to the sanction, a sale deed is executed, the property would be
divested of the character as a trust property and interest would be created
in the purchaser who may not get an opportunity to show why the
sanction should not be revoked. A property may change hands several
times and if a sanction granted in respect of a trust property could be
revoked at any time even after successive sale deeds and even after it
changes its character as the trust property, a chaotic condition is like to
be created. A sanction, therefore, has to be granted to alienate the trust
property and has to be revoked only for the trust property i.e. while the
property-, retains the character as the trust property and not after the
public trust is divested of that property and interest in the said property is
created persons other than trustees. Rule of natural justice otherwise
would be followed only in its branch. Once the interest of third party is
created, the purpose of the sanction is fulfilled and the Joint Charity
Commissioner, thereafter, cannot himself declare the sale deed as void
Kriot in a position to set aside the sale deed. Revoking of sanction
granted long back therefore, would be of no avail, after its devastation.
The power of revocation therefore, in the interest of harmony, has to be
exercised only when the sanction remains alive and does not get itself
merged in the sale deed. We, therefore, find that the power granted to the
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Joint Charity Commissioner to revoke a sanction granted under Section
36(1) of the Act, after the sanction merges itself into a sale deed and the
property loses the character as that of a trust property. Such a power of
revocation has to be exercised only qua the property of the trust and not
alter the sale deed, for the simple reason that when a sale deed is executed,
the trust is then divested of that property and interest of third parties
intervene. The property no longer then remains a trust property and the
Joint Charity Commissioner loses jurisdiction over that properly. The
petition has, therefore, to be allowed on this ground itself?"
18. It may be that certain facts affecting the legality of transaction are
suppressed then also their cognizance, can be taken to revoke the
sanction order before the property is actually transferred and not after
it is transferred and has lost status as a trust property. It may be that
the Deed of Conveyance is .executed after the expiration of the
stipulated period during which the sale deed was to be executed. Yet
the Deed of Conveyance cannot be declared void by this authority as it
is a fact subsequent to the passing of sanction order and therefore, as
observed above, it will not affect the sanctity of the sanction order. It
cannot be forgotten that by the order dated 9-7-1991, the time limit for
executing the Deed of Conveyance was extended. It is true that while
getting this extension order the fact that the Deed of Conveyance is
already executed was not brought to the notice of the Charity
Commissioner. Yet such act of trustees would not necessarily affect the
sanction order. In this context, I found substance in the submission of
the learned counsel for the opponents that there is no provision in the
Act of imposing condition of a particular time limit for execution of the
Deed of Conveyance and that the sanction order merely permits the
trustees to transfer the property subject to the other provisions in the
relevant Acts, The submission of the learned counsel that in cases of
transfer of immovable properties even if a time limit is prescribed in
the deed of agreement between the parties, it cannot be made an
essence of the contract so as to frustrate it after expiration of that time
limit.
19. Be that as it may, this Authority is conferred very limited
jurisdiction by Section 36 of the Act to grant permission to transfer the
property to the trust, if the same is in the interest of the trust and it
cannot go into the complicated questions of civil rights and title of the
parties. More particularly in the case where the trust property is
transferred to a purchaser, the Charity Commissioner cannot go into
the question of legality or validity of Deed of Conveyance or the
manner in which it is executed. Then it becomes the prerogative of the
civil court or any other competent court but not the Charity
Commissioner's Office. "With this perspective, I find that the
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application under Section 36(2) is not maintainable and therefore,
finding on point No. (i) is accordingly recorded in the negative.
As to Point No. (ii) : -
20. As mentioned in para No. 6 above, various grounds of attack have been
made by the applicants to show that the trustees committed fraud upon the
Charity Commissioner in securing the sanction order. I may deal with these
grounds in the same sequence-
i. So far as the value of the property, the contention of the applicants is
that it was at a lower site and it was estimated in light Valuer's Certificate
prepared for tax purpose. The Valuers Certificate as on record of the
sanction proceedings show that it is issued by S. S. Wadkar in light of the
comparable sales transaction. About six comparable sale transactions have
been referred by him of the lands in the area of village Kavesar and village
Borivade. His estimation in light of the factors which are generally taken
into consideration for assessing the value of the property cannot be doubted
now after 35 years, without there being any other clear evidence. The
learned Charity "Commissioner had examined this Valuer's certificate.
Publication was also made for inviting the offers and thus, after
^following a proper procedure, the proposal of sale was considered by
the learned Charity Commissioner. It cannot be therefore said that the
trustees suppressed the real value of the property and mislead the Charity
Commissioner.
ii. The contention of the applicants that the trustees suppressed
the fact that the purchasers are not agriculturists and therefore, the
transfer to non-agriculturists of the agricultural property of the trust
itself is in violation of the Maharashtra Tenancy and Agricultural
Lands Act. Be that as it may, this ground may not be necessarily
sufficient to hold the transaction void or outcome of the fraud
because these provisions in Section 63 and on wards in
Chapter-V of the Maharashtra Tenancy and Agricultural Lands
Act permit the regularization also on payment of charges and even
relaxation of the said condition in certain cases where the land is
put to a particular type of use.
iii. The contention that the Deed 'of Conveyance was executed by the
constituted power of attorney and that one deceased trustee Smt. N.
Doctor was also shown as a party may not also reflect upon the
legality of the sanction order because this is subsequent event,
necessarily cannot be taken into consideration as discussed above.
iv. The ground that the application under Section 36(l)(a) was not
presented in the proper form and no court fee stamp was even
affixed and there was no prayer of authorising the trustees to sell the
trust property are all the procedural aspects. The Charity
Commissioner has the powers to authorise the trustees to sell the
property even if trust deed does not authorise them if he finds that the
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transaction is in the interest of the trust. Accordingly, learned Charity
Commissioner has authorised the trustees to sell the trust property.
v. The contention of the applicants that trust was gifted;2/3 rd of 629
Acres and out of that, only 304 Acres are transferred and there is no
explanation of remaining land would also not affect the legality of the
sanction order. The opponents have; offered explanation that about
104 Acres of land was acquired by Government for Forest and the
remaining land of about 305 Acres was gifted to the Trust. Nobody had
disputed this aspect particularly the owner of the land, the Settler or
his legal heirs. The explanation offered by the
opponents therefore, appears probable.
vi. The ground that the trustees have their adjoining properties to
the trust property which have been sold to the developer alongwith the
trust property will also not necessarily affect the transaction between
the trust and the purchaser, so also the fact that the trustees did not
receive the entire amount of consideration within six months from the
date of sanction order cannot affect it because these are the subsequent
facts.
vii. It may be that the present market price of the property is in
Crores. Yet on these grounds after 30 years, the transaction which has
already been shaped by executing the Deed of Conveyance cannot be
interfered by the Charity Commissioner by invoking his power under
Section 36(2) of the Act as the same may not be necessarily in the
interest of the trust and it would be without jurisdiction also because
the property is already transferred and not a trust property. The
property was sold at Rs.3000 per,, acre. The valuers report
justified it in light of the comparable, sale transactions. For the
reasons aforesaid, I answer the point No. (ii) also in the negative.
As to Point No. (iii) : -
21. The land S.No. 55/3 admeasuring 0.12.1 H.R.P. was included in the
agreement between the trust and the purchasers and this fact is evident
from the copy of the agreement placed on record of the sanction
proceedings. In the submissions made before the then
Charity Commissioner in respect of the application for sanction, this
number 55/3 is mentioned. In the sanction order also, this number
finds place. The sanction order contemplates consideration of Rs. 9
Lakhs for the lands described in the agreement. The relevant portion of
the order reads as under:-
"Sanction is hereby accorded under Section 36(l)(a) of the B.P.T. Act, 1950
to the sale of the immovable property of the above trust bearing ....
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84 pieces of land ...
situated at village Borivade, District Thane in favour of Samarth
Development Corporation for the price of Rs. 9,00,000/- only as per
the terms and conditions agreed in the agreement for sale."
In the Deed of Conveyance, however, the number of this piece of land
S.No. 55/3 is not mentioned and therefore, the trustees have again
entered into an agreement to convey this piece of land also at the
consideration of Rs. 68 Lakhs. Accordingly, the trustees have entered
into an agreement with the purchasers on 21st March, 2009.Trustees
have also got the land valued from the Government Recognised Valuer
and in light of it, it is proposed by the trust that it may be permitted to
either execute a Deed of Conveyance in respect of S.No. 55/3 for
consideration of Rs. 68 Lakhs or the earlier order dated 31-07-1982,
sanction to transfer may be modified.
In the circumstances, question that arises is whether refusing
permission to transfer this piece of land S.No. 55/3 at the
consideration of Rs. 68 Lakhs would be in the interest of the trust or it
is likely to involve the trust into the litigations.
22. As discussed above, this land is a part of the property to be sold by
the Trust to the purchaser and it was agreed between the trustees and
the purchaser to sell trust properties including this piece of land at the
consideration of Rs. 9 Lakhs. As in the Deed of Conveyance, this
property could not be mentioned and perhaps, the parties noted it after
a long time, they have agreed to execute a fresh Deed of Conveyance
at fresh consideration of Rs. 68 Lakhs. The constituted power of
attorney Shri Walawalkar who has intervened this proceeding and
filed his affidavit, has stated in para-10 of his application (Exh. 10)
that collective area of the property which was permitted to be sold was
considered and conveyed to the purchasers. If this piece of land is
already in possession of purchasers, there may not be any propriety in
refusing the proposed sale transaction of piece of land at the
consideration of Rs. 68 Lakhs. Finding on point No. (iii) is therefore
answered in the affirmative.
As to Point No.(iv)
23. It is quite apparent that there is an error in mentioning the area
and survey numbers, there appears erasion also at Serial No. 68 in the
description of S.No. 55/1. Rectification as prayed in the prayers clause
(b) in the Misc. Application No. 29/2010 can therefore, be allowed as
prayed for. The point No. (iv) is therefore answered accordingly.
As to Point No. (V) : -
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24. In a nut shell, for the reasons recorded, I am inclined to reject the
application for revocation of the sanction order. Execution of a Deed
of Conveyance for transferring the land S.No. 55/3 can be allowed at
the consideration of Rs. 68 Lakhs, so also the rectification is allowed
as prayed for. Resultantly, following order is passed-
ORDER
1) Application No. 10/2010 for revocation of the sanction order is hereby rejected.
2) The trustees are permitted to sell the trust property bearing Survey No. 55/3 admeasuring 0.12.1 H.R.P. situated at village Borivade, Taluka and District Thane in favour of New Shree Swami Samartha Borivade Housing Company Pvt. Limited for the consideration of Rs. 68,00,000/- (Rupees Sixty Eight Lakhs only) and on the following terms and conditions:-
i) The sale deed shall be executed within a period of six months from the date of this order.
ii) All expenses including stamp duty, registration charges, etc. shall be borne by the purchaser.
iii)The amount of consideration of Rs. 68,00,000/- (Rupees Sixty Eight Lakhs only) shall be kept intact as a corpus in the form of investment permissible under Section 35(1) of the Maharashtra Public Trusts Act, 1950 and it should not be withdrawn without prior permission of this Authority.
iv)The interest accrued on the investments shall be utilized only for the purpose and objects of the trust.
v) This permission shall be subject to all the relevant laws and rules applicable to the transaction and the property as well.
vi) The trustees are directed to file necessary change report after completion of the sale transaction.
3) Rectification in the description of the lands be made in the original sanction order in terms of prayers clause (b) in 'the Misc.
Application No. 29/2010, The trustees shall make rectification in deed of conveyance accordingly within six months from the date of this order.
24 ITA No.7781/Mum/2011Sola Hakim Medical Research
9. It would be pertinent to note that order of the Charity Commissioner dated 26/05/2017 have been passed much after denying the approval u/s.80G of the Act by the ld. DIT(E). But we find that even on merits, the assessee had made out its case by stating that the Charity Commissioner had duly granted approval for its land sale transaction by duly appreciating the entire facts on record. Hence, the allegations leveled by the ld. DIT(E) for rejecting the grant of approval u/s.80G of the Act, though not relevant for rejecting 80G approval, has been proved to be baseless.
10. In view of the aforesaid findings and respectfully following the various judicial precedents relied upon hereinabove, we hold that the ld. DIT(E) was wrong in denying the grant of approval u/s.80G of the Act in the facts and circumstances of the case. Accordingly, we direct the ld. DIT(E) to grant approval u/s.80G of the Act to the assessee trust from the date of its application.
11. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on this 26/04/2019
Sd/- Sd/-
(AMARJIT SINGH) (M.BALAGANESH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 26/04/2019
Karuna Sr.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. BY ORDER,
सत्यापित प्रतत //True Copy//
(Asstt. Registrar)
ITAT, Mumbai