Income Tax Appellate Tribunal - Amritsar
Acharya Shri Tulsi Kalyan Kendra, ... vs Commissioner Of Income Tax ... on 28 January, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA No.335 (Asr)/2017
Assessment Year:2017-18
M/s Acharya Shri Tulsi Kalyan Vs. CIT (Exemptions),
Kendra (Regd.) Chandigarh
300, Chauri Sarak,
Ludhiana
[PAN:AACTA 0299B]
(Appellant) (Respondent)
Appellant by : Sh. Jaswinder Singh (Ld. CA)
Respondent by: Sh. Alok Kumar (Ld. DR)
Date of hearing: 16.01.2019
Date of pronouncement: 28.01.2019
ORDER
PER N.K.CHOUDHRY, JM:
This appeal has been preferred by the Assessee/Trust (hereinafter called as the Appellant) against the order dated 28.04.2017, impugned herein, passed by the Ld. CIT (Exemptions), Chandigarh, u/s 12AA(1)(b)(ii) of the I.T. Act, 1961 (hereinafter called as 'the Act').
2. The Appellant has raised the following grounds of appeal.
"1. That the order of the Ld. Commissioner of Income Tax (Exemptions), Chandigarh is illegal erroneous, perverse and thus uncalled for.
2. That the Ld. CIT(E) is not justified in denying the exemption on the ground that it has not been applied for earlier.
3. That Ld. CIT(E) is not justified in drawing a wrong conclusion that the exemption is being asked only for the reason to cover the Bank Interest portion from the tax net when the said interest which is received/accrued is being utilized for the attainment of the objectives of the trust and the Ld. CIT(E) has not disputed on any of the activities undertaken by the trust.2 ITA No.335 (Asr)/2017
M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E)
4. That the Ld. CIT(E) has ignored the fact that the original Trust Deed was also registered by the Sub-Registrar, Ludhiana and the same has not been disputed, but has questioned the authority of the Registering Officer in supplementary Trust Deed which is same as in original Trust Deed."
3. The brief facts of the case are that the Appellant is an ongoing entity and is in operation since 18.09.1979 duly registered under Society Registration Act and had filed an application on dated 14.10.2016 for registration u/s 12A of the Income Tax Act, 1961 (hereinafter called as the 'Act') before the Ld. CIT(E), Chandigarh, which was taken into consideration and opportunity of hearing was given to the Appellant on 17.04.2017, however, the same was not availed and sought adjournment, thereafter, the case was again re-fixed on 24.04.2017. The Ld. CIT(E) sought certain clarification/ documents from the Appellant as mentioned in para no.4 of the impugned order, in response to which the Appellant vide its reply dated 25.04.2017 replied the queries by clarifying the issues raised as well as by submitting the relevant documents thereto. After consideration of the reply, the Ld. CIT(E) rejected the application u/s 12AA of the Appellant. Dissatisfied, the Appellant preferred this appeal.
4. We have heard the parties at length and perused the material available on record. As per trust deed, the aims and objects of the Appellant/Society are as under:
"The aims and objects of the trust is that the Trust fund shall be held by the Trustees upon the Trust to apply the same or any portion thereof without any discrimination of caste creed and religion, sex or any other thing for all or any of the following purposes:
a) To establish, acquire/run and/or aid schools, colleges, libraries, Reading Rooms, Hostels, Boarding Houses, Laboratories, Research Institutions Music and Culture 3 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) Institutions, Adult Education Centers, Institutions for the Blind and deaf and dumb, Technical and other Institutions in any place or places in the Indian Union for the use of the students, scholars and the staff as well as generally for the spread of knowledge amongst the public and also to give contributions or donations to them in cash and/or land from time to time.
b) To establish, maintain and/or given scholarships and other kinds of aid to deserving students and scholars, including supply of books, stipends, medals and other incentives for study and to provide board and residence for them.
c) To establish, acquire, run and/or aid kinder gardens, Balamandirs, Gymnasium Physical and cultural homes, Yoga Kendra and other like institutions for the improvement of health of students and generally to maintain institutions for the physical advancement of the public.
d) To establish, acquire, maintain and/or grant aid to hosp8itals, medical schools, medicals colleges, Nursing Institutions, Sanitariums, Travelling dispensaries, poor care clinic or such other similar institutions for the use and benefit of the public.
e) To establish, to maintain, run and/or to grant aid and/or help to maternity homes and child welfare centers, orphanages and widows homes and Nari Kalyan Samitis.
f) To establish or promote the establishment of and/or render aid to Dharamsalas, Auditoriums, Prayer Homes, Musafarkhanas, Pravachan places and such other institutions which may be necessary and useful for the public.
g) To grant aid for the construction, repair and maintenance of wells for the issue of the public.
h) To construct public roads, parks and gardesn and/or maintain and/or grant aid for the construction or maintenance of or repair of the same for the use of the public.
i) To help the people during natural calamites such as floods, famine, earthquake, fire, pestilence and other such occasions by opending of free kitchens, cheap canteens and by giving gifts and/or donations to the suffered people or institutions or any other monetary help in cash or in any other kind.4 ITA No.335 (Asr)/2017
M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E)
j) To provide grants or money, food, medical books, agriculturist supplies and implements or otherwise to or for the benefit of persons or organizations who are either suffering or are pledged to fight hunger and disease.
k) To purchases, store and maintain articles of furniture and utensils of general public utility and lend the same to the needy persons at the time of marriage and/or any other occasion.
l) To grant aid to poor persons.
m) To help or grant aid for such public charitable objects as the trustees in their discretion may think proper.
n) To do all other acts, deeds and things as may be necessary or deemed expedient to carry out all or any of the objects aforesaid.
o) To donate or contribute to public charitable trusts, Institutions or organizations for charitable purposes as define in Section 2(15) of the Income-tax Act, 1961 or any statutory modification on or re-enactment thereof for the time being in force provided that he same is covered under the objects of these presents."
4.1. It was submitted by the Ld. AR of the Appellant that the trust was registered in the office of the Sub-Registrar, Ludhiana in the year 1979 and thereafter, purchased a small piece of land by donations collected from its member at that time and much activity was not carried due to paucity of funds. The property was sold in the year 1995 and another piece of land was bought out of the sale proceeds of the said property. Thereafter, the said land was also sold in the year 2007 for Rs.3,99,00,000/- (Rupees Three Crores Ninty Nine Lakhs only) against which the trust had paid due income tax against capital gains so received. Out of its sale proceeds, the trust invested major part of money, in buying another piece of land on which it constructed building which is now called as 'Bhawan'. The Appellant also invested some of the amount in FDRs with the view that by interest it can carry out its objectives, whenever there will be shortfall of funds, in order to attain the objectives of the trust. The 'Bhawan' 5 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) consists of Halls and Rooms which are being used for carrying out religious and charitable activities since its inceptions. The Hall made by the trust is being used for delivering sermons by the saints and also given on rent to general public on daily basis at very nominal charges for holding public gatherings. The rooms made by the society (Dharamshala) are given to the persons, who come to hear sermons or for their personal or business trip on rent on daily basis at nominal rates and there is no permanent tenant. It was also submitted that the Appellant is also managing the homeopathy dispensary for welfare of the general public and holding blood donation camps to facilitate and help various hospitals, Yoga classes and various health care camps for general public.
4.2 The Ld. CIT(E) while declining the application of the appellant observed that that after the sale of land, the Appellant claims to have invested the money into building and running Dharmshala on rent which is Rs.750/- per A.C Room. The Appellant has also booked its building for marriage and other functions, which are not covered under charitable purpose u/s 2(15) of the IT Act. Further financial statements do not confirm to the stated ostensible activities as claimed by the Appellant as the same is not supported by any evidence.
We have perused the material placed on record inter alia the receipt of the Hall and Rooms booked by the Appellant, from which it clearly reflects that the Appellant is charging very nominal charges such as 11,000/- for one programme in Hall and Rs.750/- for per room per day . From clause-'f' of objects of the trust deed, it reflects that trust is formed to establish or promote the establishment of and/or render aid to Dharamshala, Auditoriums, Prayer Homes, Musafarkhanas, Pravachan places 6 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) and such other institutions which may be necessary and useful for the public. Further from clause-'d' of the objects, it reflects that the trust has been established to acquire, maintain and/or grant aid to hospitals, medical schools, Medicals Colleges, Nursing Institutions, Sanitariums, Travelling dispensaries, poor care clinic or such other similar institutions for the use and benefit of the public. From the objects it is clear that the trust has been formed for various objects inter-alia to establish Dharmshala etc. and to establish, acquire, maintain and/or grant aid hospitals, poor care clinic etc. which covers the running Dharmshala which is called as 'Bhawan'. Even from the photo graphs attached with the (PB pages 110 to 116) it clearly reflects that the assessee is carrying social, spiritual and charitable activities by operating homeopathy dispensary and organizing camp for blood donation and sermons etc., hence we are not in agreement with the Ld. CIT(E) that there is no way the genuineness of the activities of the trust can be corroborated with the stated aims and objects.
4.3 It is trite to say that at the time of registration u/s 12AA, the Ld. CIT(E) has to consider the twin requirement (i) objects of the assessee society (ii) genuineness of its activity. Nowhere in the order, the Ld. CIT(E) has neither pointed out any defect in the objects of the society and/or activities of the applicant society nor doubted the genuineness of the activities specifically, therefore we are of the considered view that the Appellant is carrying its activities in accordance to its objects specified in the trust deed and for charitable purposes.
4.4 The another ground of rejection of the registration was that complete inactivity till the sale of land and the associated gains from the sale are clear pointers that the activities (rather 7 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) zero activities) are not in sync with the stated objects. Further there is a gap of 10 years after the year 2007-08 which is also not explained what to speak of gap since 1979 and the complete lack of activities in the past do not enthusiasm any confidence in the charitable activity of the applicant. It was clearly demonstrated by the Appellant that before to establishing the 'Bhawan' the Appellant has not carried out any activity due to paucity of funds, which in our considered view seems to be logical reason for not carrying out any activity previously, hence this ground of rejection can not sustain.
4.5 The main reason for rejection of the application was that amendment of trust deed on 27.03.2014 incorporating dissolution clause and at the same time introduction of new trustees. The changes in the trust deeds also do not have sanction of the competent court which invariably is the High Court wielding jurisdiction. Till such amendments are accepted by the competent Court the documents submitted to project that dissolution clause has been introduced, the same are not legally tenable. Further, the Ld. CIT(E) has observed that it is seen that a supplementary trust deed has been submitted to the Sub- Registrar, Ludhiana. Whether the same has been registered and whether the Sub-Registrar is competent to do the same in the case of public charitable trust, has not be evidenced. It is also confounding that eight trustees have been newly introduced in one go. The reasons espoused that it was to replace those who had died clearly are pointers towards a planning at this (despite its creation in 1979) to seek exemption.
8 ITA No.335 (Asr)/2017M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) 4.6 Specific query was raised to the Ld. A.R., qua registration of the dissolution clause, introduction of new trustees and registration of supplementary trust deed, who although submitted some material downloaded from the internet but could not specify exact position, however Ld. DR Sh. Alok Kumar with all fairness, assisted the Court.
4.7 In this case, some of the trustees died and in place of them, new trustees have been appointed by executing supplementary trust deed on dated 27-03-2014, which was got registered (vide registration no 2931, Register no. 1, Book no 0, Page no. 0) on dated 28-05-2014 in the office of the Sub Registrar (East) Ludhiana.
4.8 The first question arises as to whether the new trustees can be appointed. Section 73 and 74 of Indian Trusts Act 1882, enumerated the discharge of trustee(s) and appointment of new trustee(s). For ready reference provision are reproduced herein below:-
73. Appointment of new trustees on death, etc.--
Whenever any person appointed a trustee disclaims, or any trustee, either original or substituted, dies, or is for a continuous period of six months, absent from 1[India] or leaves 1[India] for the purpose of residing abroad, or is declared an insolvent, or desires to be discharged from the trust, or refuses or becomes, in the opinion of a principal Civil Court of original jurisdiction, unfit or personally incapable to act in the trust, or accepts an inconsistent trust, a new trustee may be appointed in his place by--
(a) the person nominated for that purpose by the instrument of trust (if any), or
(b) if there be no such person, or no such person able and willing to act, the author of the trust if he be alive and competent to contract, or the surviving or continuing trustees or trustee for the time being, or legal representative of the last surviving and continuing trustee, or (with the consent of the Court) the retiring trustees, if they all retire simultaneously, or (with the like consent) the last retiring trustee. Every such appointment shall be by writing under the hand of the person making it. On an appointment of a new trustee, the number of trustees may be increased. The Official Trustee may, with his consent and by the order of the Court, be appointed under this section, in any case in 9 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) which only one trustee is to be appointed and such trustee is to be the sole trustee. The provisions of this section relative to a trustee who is dead include the case of a person nominated trustee in a will, but dying before the testator, and those relative to a continuing trustee include a refusing or retiring trustee if willing to act in the execution of the power.
74. Appointment by Court.--
Wherever any such vacancy or disqualification occurs and it is found impracticable to appoint a new trustee under section 73, the beneficiary may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for the appointment of a trustee or a new trustee, and the Court may appoint a trustee or a new trustee accordingly. Rule for selecting new trustees.--In appointing new trustees, the Court shall have regard
(a) to the wishes of the author of the trust as expressed in, or to be inferred from, the instrument of trust;
(b) to the wishes of the person, if any empowered to appoint new trustees;
(c) to the question whether the appointment will promote or impede the execution of the trust; and
(d) where there are more beneficiaries than one, to the interests of all such beneficiaries.
4.9 According to section 73 of the Indian Trusts Act, any person appointed a trustee disclaims, or any trustee, either original or substituted, dies, or is for a continuous period of six months, absent from [India] or leaves [India] for the purpose of residing abroad, or is declared an insolvent, or desires to be discharged from the trust, or refuses or becomes, in the opinion of a principal Civil Court of original jurisdiction, unfit or personally incapable to act in the trust, or accepts an inconsistent trust, new trustee can be appointed in his place, firstly by the person nominated for that purpose by the instrument of trust (if any) or secondly if there be no such person, or no such person able and willing to act, the author of the trust if he be alive and competent to contract, or the surviving or continuing trustees or trustee for the time being, or legal representative of the last surviving and continuing trustee, or (with the consent of the Court) the retiring trustees, if they all 10 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) retire simultaneously, or (with the like consent) the last retiring trustee.
Every such appointment shall be by writing under the hand of the person making it. On an appointment of a new trustee, the number of trustees may be increased. The Official Trustee may, with his consent and by the order of the Court, be appointed under this section, in any case in which only one trustee is to be appointed and such trustee is to be the sole trustee. The provisions of this section relative to a trustee who is dead include the case of a person nominated trustee in a will, but dying before the testator, and those relative to a continuing trustee include a refusing or retiring trustee if willing to act in the execution of the power.
4.10 Section 74 prescribe "Wherever any such vacancy or disqualification occurs and it is found impracticable to appoint a new trustee under section 73, the beneficiary may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for the appointment of a trustee or a new trustee, and the Court may appoint a trustee or a new trustee accordingly".
4.11 From the provisions it is clear that whenever any person dies or any other reasons as specified in section 73, new trustee can be appointed in his place, by the person nominated for that purpose by the instrument of trust (if any). Section 74 specify "wherever any such vacancy or disqualification occurs and it is found impracticable to appoint a new trustee under section 73, the beneficiary may, without instituting a suit, apply by petition to a principal Civil Court of original 11 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) jurisdiction for the appointment of a trustee or a new trustee, and the Court may appoint a trustee or a new trustee accordingly".
Here in the instant case new trustees have been appointed in place of erstwhile trustees who have died, by the board of trustees and therefore situation clearly seems to be covered by sub clause (a) of section 73 of the Indian Trusts Act and in our opinion there is no embargo and impediment in appointment of new trustees, except as specified in section 73 of the Act, which otherwise is not applicable to the instant case, hence we are of the considered view that new trustees have been appointed in accordance of law.
4.12 Now coming to second question qua registration of Supplementary Trust Deed dated 27-03-2014. Certain documents are compulsory required to be registered under section of the Indian Registration Act 1908. For the sake of clarity and ready reference the relevant provisions are reproduced herein:
PART III OF REGISTRABLE DOCUMENTS
17. Documents of which registration is compulsory.--
(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866 (20 of 1866), or the Indian Registration Act, 1871 (8 of 1871), or the Indian Registration Act, 1877 (3 of 1877), or this Act came or comes into force, namely:--
(a) Instruments of gift of immovable property;
(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, 12 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;
(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;
(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent; and
(e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property:] Provided that the State Government may, by order published in the Official Gazette, exempt from the operation of this sub-section any leases executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.
(1A) ............................... (2) ................................
4.13 According to Part IIII, sub clause (b) of Sub section 1 of Section 17 of the Indian Registration Act 1908, other non- testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property are required to be registered compulsorily. The trust is non-testamentary instrument, which also required to be registered under Indian Registration Act. Even there is no provision in Indian Trust Act by which it can be held that trust is required to be registered in accordance with any other law. Therefore in our thoughtful consideration, the 13 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) registration of trust deed or supplementary trust deed is required to be registered under the Indian Registration Act 1908 and for getting registration competent authority is the sub- registrar in accordance with the Indian Registration Act. 1908. Hence, we do not have any hesitation to held that the observation of the Ld. CIT(E) without specifying any provision of law, just mentioning that further, amendment of the trust deed on 27.03.2014 incorporating dissolution clause and at the same time introduction of new trustees are also reiteration of the motive of the applicant to seek registration under this section merely to save on taxes on interest income. The changes in the trust deed also do not have sanction of the competent Court which invariably is the High Court wielding jurisdiction. Till such amendments are accepted by the competent Court the documents submitted to project that dissolution clause has been introduced. However, the apparent reason why its case was dismissed earlier, the same are not legally tenable. It is seen that a supplementary trust deed has been submitted to the sub-registrar, Ludhiana. Whether the same has been registered and whether the Sub-Registrar is competent to do the same in the case of Public Charitable Trust has not been evidenced. The components of the trust deed (till the amendments are accepted by the competent Court) are held to be restrictive and to that extent not enduring to the benefit of the general public, seems to be general remarks without considering the intricacies of the law and therefore the reasons are illogical, hence, we are not inclined to accept this ground of rejection also.
In over all circumstances and cumulative effect, we are inclined to grant the registration to the Appellant trust and hence direct the Ld. CIT(E) to grant the registration u/s 12AA of the Act, however, it is clarified that the Ld. CIT(E) while granting the 14 ITA No.335 (Asr)/2017 M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E) registration, shall be at liberty to endorse the condition, if any, he find to be reasonable in accordance with law.
4.14 At the end, we endorsee that the Department Representative is not merely a representative of the department but he has to act as an independent and impartial officer to assist the court in administration of justice. The Ld. D.R. may prosecute the Revenue's case with earnestness and vigor, indeed he should do so. But, while making strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful adjudication as it is to use every legitimate means to bring about a just one. Further the Ld. DR is not only to defend the case of the Revenue but also entrusted with the responsibility to assist the Court in administration of the justice for proper adjudication of lis in accordance with law. The D R is unique in that he has both powers and duties that other lawyers do not. This does not mean he is any better or worse than other lawyers, but it does result in many misconceptions about the roles of DR in the justice delivery system. The qualities of a good DR is elusive and as impossible to define as those which make a gentleman and those who need to be told would not understand it anyway. Sensitiveness to fair play and sportsmanship is perhaps the best protection against the abuse of power and the tax payer's safety lies in the hands of DR, who tempers zeal with human kindness, who seeks truth and not victims, who serves the law and not factional purposes, and who approaches his task with humility. Hence we appreciate the brainy and erudite boldness of Sh. Alok Kumar, Ld. CIT DR, who fairly, un-hesitatingly and honestly enlightened us qua issue in hand.
15 ITA No.335 (Asr)/2017M/s. Acharya Shri Tulsi Kalyan Kendra vs. CIT(E)
5. In the result, the appeal filed by the assessee society stands allowed.
Order pronounce in the open Court on 28.01.2019 Sd/- Sd/-
(SANJAY ARORA) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:28.01.2019
/PK/ Ps.
Copy of the order forwarded to:
(1) M/s Acharya Shri Tulsi Kalyan Kendra (Regd.) 300, Chauri Sarak, Ludhiana (2) The CIT (Exemption), Chandigarh (3) The SR DR, I.T.A.T., Amritsar True copy By order Filename: Acharya Shri Tulsi Kalyan Kendra- 335-17 Directory: D:\DOCUMENT\NKC Orders 2018 Template: C:\Users\etc parmod\AppData\Roaming\Microsoft\Templates\Normal.dot Title: IN THE INCOME TAX APPELLATE TRIBUNAL Subject:
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