Income Tax Appellate Tribunal - Chandigarh
Aman Shiv Mandir Trust vs Cit on 5 October, 2005
Equivalent citations: [2006]5SOT788(CHD)
ORDER
M.A. Bakshi, V.P. The appeal of the assessee is directed against the order dated 22-6-2000 of the Commissioner of Income-tax, Chandigarh by virtue of which application for registration of the assessee trust under section 12A and exemption under section 80G of the Income Ttax Act, 1961 has been rejected.
2. Following revised grounds of appeal were filed on 23-12-2004:
"1. That the orders of the Commissioner of Income Tax are contrary to law and the facts of the appellant's case as far as it relates to denial of registration of trust under section 12(A) of the Income Tax Act, 1961.
2. That the orders of the Commissioner of Income Tax are contrary to law and the facts of the appellant's case as far as it relates to rejecting the application of the assessee for condoning delay for late filing of the application for registration of trust under section 12A."
Subsequently, the assessee has filed an application for admission of additional ground of appeal which reads as under:
"That the orders of the learned Commissioner of Income Tax, Chandigarh are contrary to law and the facts of the appellant's case, as far as it relates to rejecting the application of the trust for exemption under section 80G."
We have heard the parties and perused the records.
3. The learned Counsel for the assessee contended before us that the CIT has passed a consolidated order in regard, to registration of the trust under section 12A and exemption under section 8OG of the Income Tax Act, 1961. In the appeal filed, the assessee inadvertently omitted to raise a ground relating to rejection of exemption under section 80G. It was contended that the additional ground raised by the assessee is purely legal in nature and does not require investigation of facts. Since the omission to raise the ground was inadvertent, it was contended that the additional ground of appeal may be entertained.
4. The Id. D.R., on the other hand, opposed the request of the assessee. It was contended that since the assessee had intentionally omitted to contest the order of the CIT relating to exemption under section 80G, the additional ground of appeal may not be entertained, especially when assessee has not given any valid reasons for its omission.
5. On merits, the Id. Counsel for the assessee contended that Shri J.S. Tanwar had created a trust vide trust deed dated 6-6-1994 with the sole object of constructing and managing temples, shrines, places of worship and spiritual discourses. Assessee had applied to the U.T. Administration for allotment of land for the construction of temple in the prescribed form on 20-6-1994 along with demand draft of Rs. 25,000. However, the request for allotment of land was declined by the Administration vide their letter dated 29-11-1994. The management of the trust subsequently kept on pursuing the Administration for allotment of land. The assessee was informed vide letter dated 5-9-1997 that as per the guidelines formulated by the Chandigarh Administration, the trust should be in existence for five years before any application for allotment of land could be considered. That after completing five years the trust approached the Chandigarh Administration vide letter dated 16-8-1999 for allotment of land to the trust but so far the land has not been allotted to the assessee. At the same time, application of the assessee has not been rejected. The assessee had applied for registration of the trust on 21-12-1999. It also filed returns for assessment years 1997-98, 1998-99 and 1999-2000 on the same date. The CIT vide order dated 2276-2000 has rejected the application of the assessee for registration of the trust under section 12A and as also exemption under section 80G of the Act. The Commissioner (Appeals) has also not condoned the delay in filing of the application for registration under section 12A. It was further contended that the assessee had received donations for the corpus of the trust which had been kept in the fixed deposits and interest therein is also accumulated to be utilized for the objects of the trust. It was contended that the CIT was not justified in refusing to condone the delay in furnishing the application for registration. He was also not justified in refusing to grant registration to the trust. It was further contended that the CIT has ignored the facts and circumstances of the case insofar as the assessee had been carrying on the activities for furtherance of the objects of the trust from time to time. Reliance was placed on the decisions of ITAT, Chandigarh Bench in ITA No. 158/Chd./03 and ITA No. 110/Chd./04 in support of the contention that the delay in furnishing of the application is requested to be condoned.
6. The learned Counsel further contended that assessee had not spent funds received by way of donations as the same were for the purposes of corpus of the trust. Referring to the finding of the Commissioner (Appeals) about the wrong furnishing of Form No. 15H, it was contended that the said Form was filed under a bona fide belief that income of the assessee was not liable to tax. The learned Counsel also pointed out to the evidence placed in the paper book to support the claim of the assessee that activities were carried out by the assessee-trust from time to time for the furtherance of the objects of the trust. The Id. Counsel also pointed out that before the creation of the trust, assessee had constructed a temple in section 45 which was demolished and the matter was in the court of law. It was further contended that it was not open to the CIT to enquire into the application of the income of the assessee-trust for the purpose of registration. Therefore, the ground taken by the CIT for rejection of the application that assessee did not apply the income for the objects of the trust is not justified. In support of the said contention, reliance was placed on the following decisions :
(i) St. Don Bosco Educational Society v. CIT (2004) 90 ITD 477 (Lucknow);
(ii) Ashutosh Dawar Trust v. Director of Income-tax, Exemption (2002) 82 ITD 5931 (Del);
(iii) Auro, Food Ltd. v. CIT(1999) 239 ITR 548 (Mad); and
(iv) Malli Ram Charitable Trust v. CIT(2003) 260 ITR 118 (AT) (Asr).
It was accordingly pleaded that assessee-trust may be granted registration from the date of its creation and in the alternative from the Ist day of the financial year in which the application was filed. It was further pleaded that exemption under section 80G may also be granted.
7. The learned Departmental Representative, on the other hand, contended that with effect from 1-4-1997, section 12A has been amended so as to empower the Chief Commissioner or Commissioner of Income-tax to make inquiries as may be deemed necessary in order to verify the genuineness of the activities of the trust or the institution. Therefore, the decisions that no inquiry is required to be made for the purposes of grant of registration under section 12A are no longer applicable with effect from 1-4-1997. It was pointed out that in this case it is necessary to consider the background of the proceedings for the purpose of determination of the issue relating to the registration of the trust. It was pointed out that huge deposits in the bank account had been found in the name of the family members of Shri J.S. Tanwar. An application had been filed before the Settlement Commission in the case of Shri J.S. Tanwar Prop. M/s. Aman Securities & Detectives, Chandigarh and some income offered for taxation. Inviting our attention to the observations of the Settlement Commission in para 14 of its order page 8 of the supplementary paper book, it was pointed out that the Settlement Commission was conscious of the fact that the credits in the bank account in the name of Aman Shiv Mandir Trust had been taxed in the status of assessing officer at maximum marginal rate and that the income relating to the Departmental Representatives and interest thereon was not taxed in the hands of Shri J.S. Tanwar on the ground that it would amount to double taxation. The learned Departmental Representative also objected to several papers in the paper book which have been introduced as additional evidence without any application for the admission of the same much less giving adequate reasons for not furnishing such evidence before the revenue authorities. It was further pointed out that the assessee had furnished wrong declaration in Form No. 15H and ultimately Shri J.S. Tanwar had filed a petition before the Settlement Commission. It was further contended that the assessee had applied for registration of the trust only after investigation and detection of Departmental Representatives by the Income-tax department. It was further contended that the assessee had not carried on any activity in furtherance of the objects of the trust and had also not established the source of receipts/ donations claimed to have been received for the corpus of the trust. Responding to the decisions cited on behalf of the assessee-trust about the condonation of delay and grant of registration in some other cases, it was pointed out that in such cases no speaking order had been passed by the CIT and no investigation had been conducted before rejection of the applications. On the other hand, in this case, the CIT has given detailed reasons on the basis of investigation carried out by the department and, therefore, the said decisions are inapplicable to the facts of this case. Moreover, the law has been amended to enable the CIT to make inquiries before registration. Reliance was placed on the decision of Kerala High Court in the case of Sell Employers Service Society v. CIT (2001) 247 ITR 181, in support of the contention that the CIT is entitled to enquire about the genuineness of the objects of the trust before the grant of registration. Reliance was also placed on the decision of Madras High Court in the case of CIT v. T.N.K. & V Educational Trust (1998) 233 ITR 182 (Mad). The learned Departmental Representative further contended that even on merits, the assessee is not entitled to exemption under section 80G as no genuine trust has been found to exist.
8. In counter reply, the Id. Counsel for the assessee contended that assessee having settled the dispute relating to Departmental Representatives with the Settlement Commission, the genuineness of the funds cannot be gone into. It was also contended that the decision of the Kerala High Court in the case of Self Employers Service Society (supra) is in fact in f avour of the assessee insofar as the totality of the facts and circumstances of a case are to be taken into consideration and in the present case no funds have been misappropriated. It was accordingly pleaded that the appeal of the assessee may be allowed.
9. We have given our careful consideration to the rival contentions. We shall first deal with the refusal of registration under section 12A. Before we proceed to deal with the facts of this case, we consider it necessary to point out that up to 31-3-1997, there was no specific provision for processing of an application for registration made under section 12A. Finance (No. 2) Act, 1996 (33 of 1996) inserted section 12AA with effect from 1-4-1997 which lays down the procedure to be followed for grant or refusal of registration. The said section reads as under:
"12AA. (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution;
and a copy of such order shall be sent to the applicant;
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1-6-1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.) (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was rec&ived under clause (a) of section 12A.
(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registra tion of such trust or institution:
Provided that no order tinder this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard."
A perusal of section 12AA quoted above does not leave any room for doubt that with effect from 1-4-1997 the CIT has been specifically empowered to call for documents or information to satisfy himself about the genuineness of the activities of the trust/ institution and that before grant of registration the CIT has to be satisfied about the objects of the trust/institution and the genuineness of its activities. Therefore, the cited decisions prior to 1-4-1997 are inapplicable with effect from 1-4-1997. Moreover, if there is any decision to the contrary to the provisions of the Act, there is no doubt that such decisions would not be applicable in preference to the statutory provisions of the Act, if such provisions have not been considered in arriving such decision. On the basis of the amended law with effect from 1-4-1997, it is evident that the CIT is empowered to make inquiry about the genuineness of the trust as well as the activities carried on for furtherance of objects of the trust. Therefore, the objection on behalf of the assessee that such inquiries were not called for is not well-founded.
10. The next question that arises for our consideration is as to whether on the facts and in the circumstances of this case, the CIT was justified in refusing to grant registration to the trust. The CIT has given detailed reasons for his denial of registration. The factors that have been highlighted by the CIT in refusing to register the trust are summarized as under:
(i) That the assessee has filed the application for registration late by 4 years and 6 months.
(ii) That assessee has not furnished any evidence to establish that any activity for furtherance of the objects of the trust had been carried out from the date of the creation of the trust.
(iii) That no expenditure of whatsoever nature has been spent by the trust for the objects of the trust right from its creation to the decision of the CIT.
(iv) That the assessee had deposited Rs. 76,40,788 and earned huge interest on these deposits; the assessee-trust had filed Form No. 15H with the bank certifying that no tax was payable by it to avoid deduction of tax at source and, therefore, the assessee had given a false declaration.
(v) That there was no proof that the amount collected by the assessee was from voluntary contributions that too for the corpus of the trust.
(vi) That the assessee, it appears, had made application for registration as a charitable institution only when the Income Tax Officer had started inquiries about the registration of the trust under section 12A after discovering the declaration filed in Form No. 15H.
(vii) That the Income-tax department has detected huge deposits in the name of the main trustee and the latter had gone to the Settlement Commission.
(viii) That 75 per cent of the income of the trust was not utilized for charitable purposes in India.
(ix) That assessee had taxable income and the same had not been utilized for any charitable purposes.
(x) That no ingredients are made out for the assessee to be a charitable trust.
11. In our considered view, the delay in filing of the application for registration by itself may not be a ground for refusal of registration to the trust. So, however, when all the other aspects in this case are taken into consideration, the delay in filing of the application is also relevant for considering the genuineness of the claim of the assessee that a trust had been created for public charitable purposes.
12. It is not disputed before us that the Income-tax department had detected huge deposits in the bank accounts of Tanwar family members. The deposits were also found in the name of the assessee-trust. A declaration in Form No. 15H also was found to have been furnished to the bank that to the effect that its income was not liable to tax. It is important to note that neither at the time of furnishing of the declaration in Form No. 15H nor at the time of detection of huge bank deposits the assessee had filed an application for registration of the trust. Admittedly, a trust deed had been executed sometime in 1994. So, however, not a single penny has been spent for the furtherance of the objects of the trust up to the date of order by the CIT. An attempt was made to establish that some of the activities had been carried on by the trust. So, however, firstly no credible evidence had been led to establish that such activities had been carried on by the assessee and secondly, it is not disputed that not a single penny has been spent by the trust for carrying on even such activities as claimed. No evidence has been furnished before the authorities about receipt of huge donations much less evidence to establish that such donations were for the corpus of the trust. As per the trust deed, a sum of Rs. 51,000 was transferred to the trustees for furtherance of the objects of the trust. So, however, the bank deposits in the name of the trust have accumulated to more than Rs. 75 lakhs and huge income is earned on such deposits. The trust has been created in June, 1994 and even after expiry of more than a decade the assessee has neither purchased the land for construction of temple nor has spent any amount for the objects of the trust. The contention that the U.T. Administration failed to allot land and, therefore, the money could not be spent does not appeal to commonsense insofar as there was no restriction on the assessee to acquire land, especially when it had accumulated huge amount of money. A trust with the accumulation of nearly a crore of rupees not spending a penny during the period of ten years, in our considered view, is a prominent factor that amply demonstrates that the trust is not a genuine trust. It is also noteworthy from the assessment orders placed on record by the learned Departmental Representative as well as by the assessee's representative that assessment have already been made in the name of the trust assessing the deposits in the status of an assessing officer. The assessing officer while framing assessment for assessment year 1995-96 has even observed that the assessee has in fact created a private family trust. In the assessment proceedings of the assessee-trust the assessing officer has made detailed inquiry from some of the trustees and recorded a finding that they had denied of any knowledge of the trust. Though this finding of the assessing officer was not available to the Commissioner (Appeals) yet it supports the view taken by him about the genuineness of the trust.
13. It would be relevant to refer to the decision of Hon'ble Kerala High Court in the case of Sell Employers Service Society (supra). In this case Their Lordships held as under:
"Held, that a reference to the bye-laws of the society would show that though several charitable activities were included in the objects of the society, the society was not able to do any of the charitable activities during the first year of its functioning. The proposal to start a technical educational institution itself was taken only on 14-6-1999, after the rejection of the application by the Commissioner. Since the society had not done any charitable work and the activities which it had carried on were only for the purpose of generating income for its members, the rejection of the application was justified. The relief granted by the single Judge was appropriate."
In the present case also, the assessee even after the expiry of more than a decade has not been able to spend even a penny for furtherance of the objects of the trust. The above decision of the Hon'ble Kerala High Court thus supports the view taken by the CIT that assessee is not entitled to registration under section 12A of the Income Tax Act, 1961.
14. Taking the totality of facts and circumstances of this case into consideration, we are of the considered view that the CIT was justified in denying the benefit of registration to the assessee-trust as the same has not been established to have been genuinely created for meeting the objects of a charitable institution. Since the assessee has not been found entitled to registration under section 12A as public charitable trust, the denial of exemption under section 80G is consequential. We accordingly find no merit in the appeal of the assessee.
15. In the result, the appeal is dismissed.