Income Tax Appellate Tribunal - Chennai
Ravi Rajasimhan Charitable Trust, ... vs Assessee on 6 February, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI V. DURGA RAO, JUDICIAL MEMBER
I.T.A. No. 19/Mds/2013
M/s Ravi Rajasimhan Charitable
Trust, The Director of Income Tax
9, II Cross Street, Elango Nagar, v. (Exemptions),
Virugambakkam, Chennai - 600 034.
Chennai - 600 092.
PAN : AABTR 9753 L
(Appellant) (Respondent)
Appellant by : Shri N. Devanathan, Advocate
Respondent by : Dr. S. Moharana, CIT-DR
Date of Hearing : 06.02.2013
Date of Pronouncement : 06.02.2013
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal, assessee assails an order dated 26.11.2012 of Director of Income Tax (Exemptions), Chennai, denying it a registration sought under Section 12AA of Income-tax Act, 1961 (in short 'the Act').
2 I.T.A. No. 19/Mds/13
2. Facts apropos are that assessee-Trust, constituted by a Trust deed dated 2nd April, 2012, had filed an application in Form 10A on 28.5.2012. Details were sought by the DIT(E). Assessee appeared before the DIT(E) through its representative and furnished such details. Ld. DIT(E) came to a finding that assessee had not done any charitable activities and, therefore, genuineness could not be ascertained. Further, according to him, one of the clauses of the Trust deed enabled provision of benefit to the trustees, which was not permissible under Section 13 of the Act. In this view of the matter, he denied the registration sought by the assessee.
3. Now before us, learned A.R., strongly assailing the order of DIT(E), submitted that by virtue of decision of Hon'ble Karnataka High Court in the case of DIT(E) v. Meenakshi Amma Endowment Trust (2011) 50 DTR (Kar) 243, rendering of an account of activities was not relevant while deciding the genuineness of a Trust. Further, according to him, the clause which enabled the trustees to provide reasonable remuneration, did not go against Section 13 of the Act.
4. Per contra, learned D.R. supported the order of ld. DIT(E). 3 I.T.A. No. 19/Mds/13
5. We have perused the orders and heard the rival submissions. Assessee Trust was created on 2nd April, 2012 only. It had applied for registration on 28.5.2012. So, it was only existing for a short period as on the date of application for registration. In our opinion, when the Trust was just formed, one cannot expect it to carry on significant charitable activities. For this reason alone, an authority should not come to a conclusion that the Trust was not intending to do any charitable activity. As held by Hon'ble Karnataka High Court in the case of Meenakshi Amma Endowment Trust (supra), in such a situation, objects alone are to be taken into consideration. Activities could be considered only if registration was sought long after the formation of the Trust. Therefore, in our opinion, this was not an appropriate reason for denying registration sought by the assessee.
6. Coming to the aspect of benefit to the trustees, relevant clause 25(e), as mentioned by the DIT(E) in his order, is reproduced hereunder:-
"25(e): The funds of the trust shall be utilized only towards the objects of the trust and no part of the income or funds the trust shall be lent to or allowed, for the benefit of the Trustee or Trustees except for payment of any reasonable remuneration for any services rendered to the Trust."4 I.T.A. No. 19/Mds/13
Section 13(2)(c) of the Act, which is relevant in this regard, is reproduced hereunder:-
"13(2)(c): if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services."
As per the above sub-clause, salary and allowance paid for services, if it is in excess of what is reasonable, has to be considered as an application of Trust funds for the benefit of interested persons. Here, clause 25(e) of the Trust deed specifically mentions that payments to the trustees should be limited to reasonable remuneration for the services rendered by them. In our opinion, this clause will not attract the rigours of Section 13(2)(c) of the Act. This was not a proper reason for denying registration sought by the Trust.
7. We, therefore, quash the order of DIT(E) and direct him to grant the assessee registration sought for.
8. In the result, appeal filed by the assessee is allowed. 5 I.T.A. No. 19/Mds/13 Order was pronounced in the Court on Wednesday, the 6th of February, 2013, at Chennai.
sd/- sd/-
(V.Durga Rao) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 6th February, 2013.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) DIT(E), Chennai
(4) D.R.
(5) Guard file