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On an examination of the financial statements the CIT(E) found that no charitable activity had been undertaken by the Trust though during 2019-20 an amount of Rs. 1,00,000/- had been shown as a donation.

5. The CIT(E) observed that the details submitted by the Trust revealed that Smt. Santosh Bakshi (the Settlor) and her husband Late Vishwa Nath Bakshi owned the property located at 6/22, Shanti Niketan, New Delhi. Her husband passed away on 29.05.1996, where after Smt. Santosh Bakshi became the sole owner of that property. On 18.11.2010 Smt. Santosh Bakshi had executed the WILL which assigned the said property to the Trust after her death but with the further condition that during the lifetime of her brother Sh. Sudershan Kumar Malik, who was then residing with her in the said property, that he would continue to live in that property till his demise. Subsequently, Smt. Santosh Bakshi on 03.01.2012 created the Trust as Settlor to which she appointed Sh. Sharad Malik as the sole Trustee. The Settlor was directed to donate the Shanti Niketan property to the said Trust. It was provided that the proceeds from the sale of the said property were to be used for the purpose of realising the objectives of the Trust. The Settlor, Smt. Santosh Bakshi passed away on 22.12.2012.

6. In the background of the facts and material as cited above, the CIT(E) opined that as per the Trust Deed the property was to become the Trust property on the demise of the Settlor. On the other hand, as per the WILL (which had been executed prior to the Trust Deed) the property of the Trust, on the demise of the Settlor, would be utilised by her brother Sh. Sudershan Kumar Malik, who is the uncle of the Trustee, during his lifetime. The above condition made the Trust as one for private purpose and not for public charitable purposes which was a precondition for the grant of registration u/s 12A of the Act. The Ld. CIT(E) further observed that the utilization of the said property by Sh. Sudershan Kumar Malik, was in violation of Section 13(1)(c) r/w Section 13(3) of the Act.

7. In the aforementioned background the Ld. CIT(E) held that the Trust did not satisfy the conditions for grant of registration u/s 12A of the Act as the Trust property had not been utilized for public charitable purposes and it was in violation of Section 13 of the Act. In this way the Trust did not qualify for registration u/s 12AA of the Act and so its application for grant of registration u/s 12A had to be rejected.

8. The Ld. Counsel for the Appellant Trust submitted that the rejection of the application for registration as filed by the Trust had been wrongly refused on a complete misunderstanding of the sequence of the events leading to the formation of the Trust and the induction of funds into the Trust on the sale of the house Shanti Niketan property. Ld. Counsel submitted that the desire to form a Trust came to the Settlor of the Trust Smt. Santosh Bakshi through the WILL executed by her on 18.11.2010 which declared that she was the sole owner and in possession of the property bearing No. 6/22, Shanti Niketan, New Delhi to which she appointed Sh. Sharad Malik, son of her late brother Sh. Satish Chander Malik to be the Executor and Trustee. She declared that she had vested in the Executor of the WILL with the property at Shanti Niketan to hold it upon Trust, to sell the same, with the power in his absolute discretion to postpone the sale so long as he thought fit, without his being liable for any loss. She further added that the Trustee would not sell the said property during the lifetime of her brother, Sh. Sudershan Kumar Malik, who at the relevant time was living with her in that property. She further provided that the Trustee Sh. Sharad Malik would hold the proceeds of sale of the property which amount with the concurrence of the other close relatives of the family, would be used for the spread of knowledge and education through disbursals to appropriate charities, educational institutions or individuals as they deemed fit and proper. Ld. Counsel has placed a copy of WILL on record.

20. The property at Shanti Niketan originally belonged to the Settlor Smt. Santosh Bakshi. In terms of her WILL dated 18.11.2010, Smt. Bakshi had provided for the aforesaid property, in which she resided, to devolve on the Trust after the demise of her brother. The Trust itself had been formed with Rs. 10,000/- by her as corpus. That was the sole investiture to the Trust. The property at Shanti Niketan was not the property with which the Trust was created. The devolution of that property to the Trust was reserved by the Settlor of the Trust for a later occasion. That was to arise after the occurrence of two incidents. The first was the passing away of her brother Sh. Sudershan Kumar Malik who had been given a life time right of residence in it and the second condition Trustee should sell the property. In effect therefore, the property at Shanti Niketan came to be reposed in the Trust only after receipt of its sale consideration. Till the time Sh. Sudershan Kumar Malik was staying in the property, the property had not been bequeathed to the Trust. Consequently there was no exploitation of Trust property for private use by anyone connected with the Trust so as to attract any sort of disqualification.