Income Tax Appellate Tribunal - Delhi
Senior Charitable Trust, vs Assessee on 29 December, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'I' ; NEW DELHI
BEFORE SHRI C.L. SETHI, JM AND SHRI A.K. GARODIA, AM
I.T.A. No.1168/Del of 2007
Assessment Year: -
Savior Charitable Trust, Commissioner of Income-tax,
Railway Road, Mohinder Garh, vs Rohtak.
Haryana.
Appellant Respondent
Appellant by: Shri Gautam Jain
Respondent by: Shri Sambit Tripathi
ORDER
PER C.L. SETHI, JM
The assessee is in appeal against the order u/s 12AA of the Income- tax Act, 1961 (the Act) dated 29.12.2006 passed by the CIT, Rohtak refusing the registration to the trust.
2. The various grounds of appeal raised by the assessee revolve around the action of CIT in refusing to grant registration of the charitable trust u/s 12A of the Act to the assessee.
3. The assessee trust submitted an application u/s 12A in form No.10A for registration u/s 12AA of the Act in the Office of Commissioner of Income-tax, on 20.6.2006. The learned CIT discussed the matter with Shri 2 Krishan Kumar trustee and Shri Manoj Kumar accountant of the assessee trust on 4.12.2006 and 14.12.2006. The CIT has observed in his order that the objects of the trust as per clause 5(i) to 5(xxvi) had prima facie grand and philanthropic one, yet the administration of the trust had been left virtually to a single person i.e. Chairman. He further observed that Smt. Krishana Devi, wife of Shri Bahadur Singh is the settler of the trust as well as one of the trustees and the Chairman of the trust. The ld. CIT found that as per clause 20 of the trust deed, the properties of the trust shall vest in the Board of Trustees represented by chairman, and secretary shall be directed and guided by and responsible to the chairman as was provided in clause 21 of the trust deed. The learned CIT made reference to clause 13,14 and 18 with regard to the appointment of honorary secretary, an outsider as a whole time secretary on payment and honorary treasurer. He also made a reference to clause 18 stipulating that appointment of secretary as well as treasurer are not obligatory but optional as he found that the phrase "may be appointed" is used in clause 13,14 & 18 of the trust deed. He made a reference to clause 16 regarding operation of the bank account by any of the members of the board of trustees jointly and severally and as per resolution taken by Board of trustees, bank operation will be made with signatures of any of the two trustees. He, therefore, drawn an inference that the chairperson herself or 3 with the help of secretary, who was to work under her direction and guidance, can operate the bank account as per her whims and wishes. He, therefore, stated that in the light of these wide and uninhibited powers conferred upon a chairperson, it is indicative that the present trust is a case of private discretionary trust and not of a trust for general public utility. The learned CIT also made a reference about the property of the trust and the various assets reflected in the balance sheet as on 31.3.2006. He further mentioned that the amount claimed to be donation towards corpus cannot be accepted because the counterfoils of the receipts issued to the donors did not contain any specific directions to use the money for corpus donation and hence, the assessee has not adduced any proof that the respective donors have made the donations with specific directions towards corpus. The ld. CIT further made the observation that the trust has made huge investment in construction of its building in violation of Section 13(1)(d)(i) without specific directions from the donors, and, thus, donations received were not utilized for charitable purposes.
4. The learned CIT also made a reference to the resolution-dated 15.1.2005 in respect of which, he has made the following comments:
"As per resolution dated 15.1.2005, the trust should provide one room to the person who has no kith or kin, neither any means for his support, nor any shelter to live in and bathroom/toilet/to 4 the old poor and helpless. Photographs submitted in this regard dhow that a room was presented to one Shri Umed Singh of Kanina (Mohindergarh) and got constructed a toilet, bathroom for Mrs. Sewa Devi, but no such expenses appear in the Income & Expenditure A/c or receipt and payment account, nor is there any indication as to if any asset (one room) was transferred in the name of Shri Umed Singh. This has created doubt about the activities of the trust."
5. The learned CIT also made following observations for coming to a conclusion that the assessee is not entitled to grant of registration u/s 12A of the Act:
(i) In the case of a trust, there must be certainty about the beneficiaries. In the present case, 'the poor' the 'destitute' 'needy', 'deserving', 'old and infirm' have not been defined nor the beneficiaries to be covered under scholarships, schools, hospitals, vocational institutes, boarding houses, welfare centers, convalescent homes, sanatoriums and auditoriums. In absence of the clear definition, the apprehension of the misuse of discretionary clauses e.g. "carrying out the objects of the trust .... in terms and conditions as the trustees deem fit and proper" increases.
(ii) In respect of Mithoo Ram Chopra, the counterfoil of the receipt issued shows that a sum of Rs.51,000/- was received from the donor; but the ledger shows that only a sum of Rs.40,000/- have been accounted for. The 5 counterfoils of the receipts issued to the 87 donors as given in the list referred to above reveal that the most of the donation is in cash and no PAN or other detail of the donors are mentioned in the receipts issued to them.
This reveals that the books of the trust are not properly maintained and that the statement of accounts does not reflect the true state of affairs of the trust.
(iii) The trust has received donation in kind i.e. a plot of land, but its area, situation, location, measurement and value has not been mentioned anywhere nor was given detailed address of the donor, which was necessary for the sake of the transparency of the activities of the trust as to the sale of properties in future and for the possibility of the donors being included in the list of persons specified u/s 13(3) of the I.T. Act.
(iv) The provisions of sub clause (b) of clause 16 of the trust deed are misleading ones whereby the trustees get discretion to hold any receipt of money, assets, gifts/donation as "capital fund" whereas as per law only the donations towards corpus should be retained as capital fund.
(v) As per sub clause (q) of clause 16 and clause 26 of the trust deed, the trustees have been given powers to frame bye laws, subsidiary rules and regulations and to add, delete or amend the same which is against the settled law of the cases of the trust. A trust once formed cannot be altered by any one including the settler except for genuine mistakes and that too with the 6 prior approval of the jurisdictional high court. The trustees are only to implement the trust but not to make modifications.
6. Being aggrieved, the assessee has preferred this appeal before us.
7. The learned counsel for the assessee has submitted that the assessee trust was formed as a charitable trust under a deed of trust with the object of running/starting schools, asylum orphanages, widow homes, providing help including medical aid, food to poor, needy persons etc. He also pointed out that clause 8 of the trust deed specifically provides that the funds and income of the trust shall be solely utilized towards the objects of the trust, and no portion of it shall be utilized for payment to trustees, and even at the time of dissolution, no sum shall be distributed to trustees but shall be transferred to another charitable trust. In this background, the learned counsel for the assessee submitted that an application in form no.10A was filed by the assessee for registration of the trust u/s 12A of the Act, which was also accompanied by an application for condonation of delay in accordance with the proviso to Section 12A(1)(a) of the Act. It was pointed out that application for condonation of delay was filed because of the fact that the application for registration was filed on 20.6.2006, which is, after one year from the formation of the trust on 26.8.2004. The assessee, therefore, sought registration w.e.f. 26.8.2004. The learned counsel for the assessee further 7 submitted that all the documents and reports were duly submitted and furnished to the department to show and establish that all the conditions requisite for grant of registration are satisfied in the present case. He further pointed out a report given by the AO i.e. Asstt. Commissioner of Income- tax, Rewari to the CIT where the ACIT has stated that the assessee trust has been formed as a charitable trust and it is duly registered with sub Registrar and it has been engaged for last two years and in fact, it has utilized its receipts for object of the trust, namely, running of school, helping poor and needy people etc. The ACIT also reported that the trust has duly maintained all necessary books of accounts. He further pointed out that this report was forwarded by Addl. CIT to CIT with the observation that as the activity of the assessee trust is of charitable nature, and as per aims and objects of the trust, the registration was recommended. In support of the assessee's claim, the assessee has invited our attention to the provisions contained in Section 2(15) of the Act and certain decisions of the Tribunal as well of various High Courts. The learned counsel for the assessee has invited our attention to the Explanation given in the written synopsis with regard to certain observations and objections raised by CIT in his order, and in that respect, it was submitted that various observations and objections while rejecting the 8 assessee's application for registration made by the CIT are un-founded and based on no material.
8. The learned DR, on the other hand, reiterated the various reasons and basis on which the learned CIT has refused the registration sought for u/s 12A of the Act by the assessee.
9. We have heard both the parties and have carefully gone through the orders of the authorities below. In this case, it is not in dispute that the assessee trust filed in form No.10A, an application for registration of trust u/s 12A of the Act. In the light of the objects of the trust, as stated in the deed of trust, it is seen that the assessee trust has been formed with the object of running/supporting schools, asylums orphanage, widow homes, providing help including medical aid, food to poor and need persons etc., and therefore, in the light of the definition of "charitable purpose" defined in section 2(15) of the Act, the object of the trust is of charitable in nature. In the trust deed, it has been specifically provided that the funds and income of the trust shall be solely utilized towards the object of the trust and no portion of it shall be utilized for payment to trustees. It is also provided therein that at the time of dissolution, no fund shall be distributed to trustees but shall be transferred to another charitable trust. The assessee's application along with necssary documents were forwarded to the AO, who has submitted a report 9 about the object of the trust being of a charitable in nature, and with the finding that the assessee trust has utilized its receipts for object of the trust and has duly maintained all necessary books of accounts. The report of the AO was placed before Addl. CIT, who has recommended the registration to be granted to the assessee trust as he found that the activity of the assessee trust was of charitable nature. There was no adverse report against the genuineness of the activities of the assessee trust pointed out either by the AO or by Addl. CIT. The conditions for granting registration of trust u/s 12A are, therefore, satisfied in so far as the report of the AO as well as of Addl. CIT is concerned.
10. Section 12A prescribes conditions for registration of trust. A reading of the provisions of Section 12AA makes it clear that in order to grant registration to any trust, the CIT has to satisfy himself about the genuineness of the activities of the trust or institution or also about the objects of the trust or the institution. In order to satisfy himself about the genuineness of the activities of the trust, CIT can call for such documents or information from the trust as he thinks necessary and he is also empowered to make such enquiries, as he may deem necessary in this behalf. The objects of the trust can be seen from the byelaws or the deed of the trust, and unless the objects of the trust apparently make out that they are not in consonance with the 10 public policy or that they are not the objects of any charitable purpose, registration cannot be refused on this ground. In the instant case, the learned CIT has himself made an observation that the object of the trust as per clause 5(i) to 5(xxvi) are prima facie grand and philanthropic one. He has merely objected to the administration of the trust being left virtually to a single person i.e. Smt. Krishna Devi, wife of Shri Bahadur Singh, Chairman of the trust. The suspicion created in the mind of the CIT as to the role and function played by Smt. Krishna Devi is, in our considered opinion, cannot be a justified reason to say that the genuineness of the activities of the trust are in doubt. Merely because it has been provided in the trust deed that the secretary shall be directed and guided by and responsible to the Chairman, and he is at the same time co-signatory to the banking transactions that by itself, cannot be a ground to disbelieve the genuineness of the activities of the trust unless any material or evidence has been brought on record to show that the chairman has acted arbitrarily with an intent to derive certain unwarranted benefit or gain to her. In this case, the learned CIT has not brought out any material on record that any decision or resolution taken by the Board of the trustees was exclusively for the benefit of the chairperson or secretary or any of the trustees. In the present case, all the activities carried out by the Board of trustees are in accordance with the objects of the trust 11 and, according to the byelaws provided for that purpose. Mere because certain inferences on suspicion has been derived by the CIT to create a suspicion in his mind about the genuineness of the activities of the trust and the role played by the Board of trustees, it cannot be a basis to reject the assessee's application for registration made u/s 12A of the Act particularly in view of the fact that the AO as well as Addl. CIT has recommended the registration to be granted to the assessee trust after being satisfied with the charitable objects of the assessee and genuineness of its activities.
11. In support of the charitable activities being carried out by the assessee trust, the assessee has submitted various evidences before us, which are described below:
(i) Letter from District authorities certifying various charitable activities carried out by the assessee trust;
(ii) Photographs of various charitable activities carried out by the assessee trust from time to time in respect of education for children, hygiene and health, food and shelter for the poor, schools and certain families were adopted;
(iii) Medical bills in the course of providing medical aid to poor people.
With regard to various observations and objects mentioned by the CIT in his order, we are of the considered view that all these points are not relevant at the stage of grant of registration to the assessee trust when the object of the trust and genuineness of the activities of the trust are fully established with regard to the requirement or conditions enumerated in Section 12A of the 12 Act. It is to be mentioned that mere because assessee had made a capital expenditure towards building that by itself, cannot be a ground to say that the assessee has not been carrying any charitable activity inasmuch as the building constructed is for the benefit of the object of the trust. With regard to the discrepancy as to the amount of donation received from Mithooram as pointed out by the learned CIT, we are of the view that this point cannot be a ground to reject the assessee's application for registration but should be left over to the AO to examine the same at the time of the making assessment as to whether the donation was given towards the object of the trust or not, or if there was any manipulation of the income of the trust not solely utilized for charitable purposes, and in that case, exemption to that extent of income may be disallowed while making the assessment in the light of the provisions contained in Section 11 to 13 of the Act. Similar is situation in various other points raised by the CIT. In support of the view we have taken above, reference may be made to a decision of Hon'ble Delhi High Court in the case of Director of Income-tax (Exemption) vs Japan Chambers of Commerce and Industries in India (2009) 308 ITR 76 where the Hon'ble High Court has confirmed the order passed by the Tribunal granting registration to the trust in the light of the fact that the assessee society was formed to promote development of trade and commerce between Indian and 13 Japan and to facilitate economic cooperation between the two countries, and after taking note of the fact that in the event of dissolution of the assessee society, the members were not to receive any of the proceedings thereof. In this case, the Director of Income-tax (Exemption) had granted registration as per the direction given by the Tribunal, who had imposed certain conditions including the condition that the registration itself did not confer any right of exemption upon the assessee society u/s 11,12 and 13, and such exemption from tax would be available only if the AO was satisfied about the genuineness of the activities promised or claimed to be carried out in each financial year relevant to the assessment year and upon all the provisions of law being complied with.
12. In the light of the discussions made above, we, therefore, hold that the conditions for granting registration u/s 12A are satisfied in the present case and, in our opinion, the assessee trust is entitled to get the registration as applied for. We, therefore, set aside the impugned order of the learned CIT, and direct him to grant such registration.
13. Now, we come to the issue as to whether the registration should be granted from the first day of the financial year in which application for registration was submitted or with effect from the creation of the trust, which was created on 26.8.2004.
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17. In this case, it is not in dispute that the application for registration was submitted on 20.6.2006 i.e. prior to first day of June, 2007. Therefore, proviso to Section 12A would apply to the present case. The proviso to Section 12A(1) of the Act provides that where an application for registration is made after the expiry of a period of one year from the date of creation of the trust, the provisions of Section 11& 12 shall apply in relation to the income of the trust from the date of the creation of the trust, if the Commissioner is, for the reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons, or otherwise from the first day of the financial year in which the application is made, if the Commissioner is not so satisfied. We, therefore, have to see as to whether assessee was prevented by sufficient reasons from making the application before the expiry of a period of one year from the date of creation of the trust i.e. within one year from 26.8.2004. In this respect, the assessee has submitted that the trustees were busy in setting up the project, collection of funds and other charitable activities and the matter with regard to making an application for registration u/s 12A had just slipped their mind and the delay was not intentional.
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18. Having regard to the totality of the circumstances, we find that the assessee's application is delayed merely by about 10 months and that delay could be occurred due to trustees being preoccupied with other initial activities towards the object of the trust, and in setting up the project, taking a liberal view, we hold that the assessee trust is to be granted registration from the date of its creation, and not from the first day of April, 2006 i.e. the beginning of the financial year in which application for registration was made i.e. on 20.6.2006.
19. As such we direct the CIT to grant registration to the assessee u/s 12A of the Act with effect from the creation of the trust. The matter whether all the provisions of Sections 11 to 13 are complied with in any particular assessment year, shall be looked into by the AO while framing the assessment of the trust. We order accordingly.
20. In the result, the appeal filed by the assessee trust is allowed in the manner as indicated above.
21. This decision was pronounced in the Open Court on 20th August, 2010.
(A.K. GARODIA) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 20th August, 2010
16
Vijay
Copy to:
1. Appellant.
2. Respondent.
3. CIT, Rohtak.
4. CIT(A)
5. DR Assistant Registrar