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3. That having regard to the facts and circumstances of the case, Ld. CIT has erred in law and on facts in
2 ITA NOs.3536 & 3537/Del/2008 passing the order u/s 12AA (1) (b) (ii) and not granting registration u/s 12AA without giving adequate opportunity of being heard."
2. The relevant facts are that the appellant a trust had filed application for registration u/s 12A(1)(a) of the Act on 28.04.2008 before the Ld. CIT. Several queries were issued time to time by the office of the Ld.CIT and keeping in view the objections raised by Ld. CIT the trust deed were amended. The Ld. CIT was not satisfied with the explanation of the appellant and has rejected the application for registration mainly on the basis that the object of the trust was not charitable and secondly the original trust deed cannot be supplemented.
7. Considering the above submissions and having gone through the decisions relied upon we are of the considered view that as per the several decisions of different forums the Ld. CIT at the stage of granting registration u/s 12 A of the Act is to verify as to whether the objects of the applicant are charitable in nature. In the case of Reliable Educational Alliance Society Vs. CIT (Supra) the Delhi Bench of the Tribunal has held that the Ld. CIT was only required to satisfy himself about the objects of the trust and the genuineness of its activities while granting registration u/s 12 A to a charitable trust. In the case of Director of IT Vs. Garden City Educational Trust (Supra) the Hon'ble Karnataka High Court has been pleased to hold that imparting of education being the main object of the assessee trust, it has to be accepted that assessee exist for a charitable purpose and therefore, it is entitled to registration u/s 12 A. It has been further held that manner of application of funds and allowability of benefit of exemption under Sections 11-12 are matters which are to be examined by the AO at the time of assessment and not by the CIT. Likewise the Hon'ble Allahabad High Court in the case of CIT Vs. Red Rose School 6 ITA NOs.3536 & 3537/Del/2008 (Supra) has been pleased to hold that that Section 12 AA does not speak anywhere that the CIT, while considering the application for registration, was also to see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. It has been held that the CIT was not justified in refusing registration u/s 12 AA to assessee Educational Society and Tribunal was justified in granting the same. The Amritsar Bench of the Tribunal in the case of Dream Land Educational Trust Vs. CIT (Supra) on the scope of inquiry by the CIT for granting registration u/s 12 A has held that the CIT having found no fault with objects of the trust and genuineness of its activities, was not justified in refusing registration u/s 12 A on extraneous considerations. Thus it is clear that at the stage of granting registration on the application of registration by trust, the Ld. CIT has to verify the objects of the trust as to whether it is charitable and the genuineness of its activities. He is not required to refuse registration u/s 12 A on extraneous considerations. Now we have to examine the order impugned as to whether the Ld. CIT was justified in coming to the conclusion that objects of the trust were not charitable. Having gone through the order impugned we find that the Ld. CIT has given his finding on the 7 ITA NOs.3536 & 3537/Del/2008 eligibility of the required registration in Para no. 6 to 17 of the first appellate order. The Ld. CIT has referred several objects of the trust and after noting his discussion on the same has held that these are not for charitable purpose. The Ld. CIT has referred object nos. 4
(i) Sakti Charities Vs. CIT (1994) 149 ITR 624 (Mad).
(ii) Thanthi Trust Vs. ITO 91 ITR 261 (Mad).Shri Agasthyar Trust Vs. CIT (1999) 236 ITR 23 (SC).
11 ITA NOs.3536 & 3537/Del/2008
10. The contention of the Ld. AR remained that the above cited decisions having distinguishable facts are not relevant in the present case. On the issue as to whether trust deed can be modified or not he placed reliance on the following decisions of Hon'ble Rajasthan High Court in the case of Laxmi Narain Lath Trust Vs. CIT (Supra). Having gone through the above cited decisions relied upon by the Ld. CIT and the Ld. AR, we find that in the case of Laxmi Narain Lath Trust Vs. CIT (Supra) the Hon'ble Rajasthan High Court has been pleased to hold that for modification of original trust deed by supplementary deed having the fact of altering an object of non-charitable nature into a charitable one, consent of beneficiaries is not required in the case of a public charitable trust, this is because beneficiaries in a public trust are generally indeterminate. It was held further that the Settlor felt that in one of the original object clauses true intention was not being reflected hence modification to this effect to clarify his intention by the supplementary deed is permissible. The exemption u/s 11 of the Act was allowed. In the present case both the supplementary trust deeds are duly registered by the Sub-registrar, Faridabad and there is no reason to doubt the explanation of the appellant that modifications were made in the original trust deed to make the objects of the trust 12 ITA NOs.3536 & 3537/Del/2008 more clear. It is not the case of the revenue that in the supplementary trust deed some non-charitable objects have been introduced. In absence of such observation by the revenue we do not find reason to doubt the validity of the supplementary trust deed executed on 22nd Sep. 2008 which is the finally amended trust deed. The Ld. CIT has not specified as to how the supplementary trust deed dated 22.9.2008 is not in accordance with law. The finding of Ld. CIT in this regard is thus not justified. The decisions relied upon by the Ld. CIT to justify his action in refusing the validity of supplementary trust deed are also having distinguishable facts, hence they are not helpful to the revenue. In the case of Sakti Charity Vs. CIT (Supra) the assessee trust having charitable objects was also having objects of promoting welfare of employees of a company which was not a charitable purpose. The trustees were having discretion to spend on any object. The trust executed rectification deed for removal of the certain clauses from the objects. The tribunal held that rectification deed was not valid since trustees had no power to revoke or modify any of the objects of the trust originally constituted. It was further held that even the founder is not competent to delete any object though some other charitable object can be added without detriment to the original objects. The 13 ITA NOs.3536 & 3537/Del/2008 Hon'ble Madras High Court has approved the decision of the Tribunal. In the present case the appellant was not having any non- charitable objects in the original trust deed and alteration/modification were introduced only to make the objects of the trust more clear. Thus facts of the cited decision are different.
11. Likewise in the case of Shri Agasthyar Trust Vs. CIT (Supra) Trust was established under a partnership deed. Trustee made amendment of object clause. In a suit filed by one of the partner, the Hon'ble High Court held the trust to be irrevocable. All objects of the trust as originally established were of charitable nature. It was held that neither the trustee nor the founder could change the objects as set out in the partnership deed when the founders of the trustee have no power to alter or vary the terms of a trust, a trustee appointed to manage the properties of the trust for securing its object, can under no circumstances be regarded as having such a power especially when the original deed did not bestow such power on him. It was held that document executed by the trustee subsequently which in effect changed the objects of the trust radically was having no authority and therefore was nonest. Thus we see that facts of this case of the 14 ITA NOs.3536 & 3537/Del/2008 Hon'ble Supreme Court are different from the facts of the present appellant.