2011 (11) TMI 385 - HC - Income Tax

Registration as Trust - Application turned down as original deed did not contain any provision for amendment of the deed - Held That - Order of CIT and Tribunal set aside, case remanded back for fresh perusal.

Issues Involved:
1. Registration of a trust under Section 12AA of the Income Tax Act.
2. Validity of amending a trust deed.
3. Applicability of Trust Act to Public Charitable Trusts.
4. Entitlement to claim exemption under Sections 11 and 10(23)(c) of the Income Tax Act.
5. Remand of the case for reconsideration by the Commissioner.

Issue 1: Registration of a trust under Section 12AA of the Income Tax Act:
The case involved an appeal against the Tribunal's order confirming the CIT (Appeals) decision to deny registration to the appellant's trust under Section 12AA of the Income Tax Act. The appellant, a public charitable trust with educational objectives, sought registration under Section 12AA. The application was initially withdrawn and later amended to specifically include running a Dental College as a main object. The Commissioner rejected the application citing unauthorized amendment under the original deed. The High Court noted that only the amended trust deed was considered for registration, leading to the denial. However, the Court allowed the appeal, remanding the case to the Commissioner for reconsideration after granting the appellant time to obtain orders from a civil court regarding the amendment's validity.

Issue 2: Validity of amending a trust deed:
The primary contention was the unauthorized amendment made to the trust deed, which led to the rejection of the registration application under Section 12AA. The Court acknowledged the technical omission and allowed the appellant the opportunity to seek validation of the amendment from a civil court. The Court emphasized that the Trust Act provisions would apply, but the appellant could pursue a Scheme Suit under Section 92 of the C.P.C. and Section 26 of the Specific Relief Act, 1963, to rectify the amendment before the civil court. The Court did not delve into the merits of the case but focused on granting the appellant a chance to address the amendment issue through the appropriate legal process.

Issue 3: Applicability of Trust Act to Public Charitable Trusts:
A key argument raised was whether the Trust Act applied to Public Charitable Trusts. The appellant's counsel contended that the Trust Act did not apply to such trusts. However, the Court did not provide a definitive ruling on this issue but allowed the appellant the opportunity to seek validation of the amendment through a civil court process, indicating that the Trust Act's applicability was not a decisive factor in the immediate context.

Issue 4: Entitlement to claim exemption under Sections 11 and 10(23)(c) of the Income Tax Act:
The Court recognized that the appellant's objects were charitable in nature, potentially enabling exemption claims under Sections 11 and 10(23)(c) of the Income Tax Act. Educational institutions, including the appellant's intended Dental College, were entitled to separate exemptions on income earned. The Court did not delve deeply into this issue but acknowledged the potential for exemption claims based on the charitable nature of the appellant's objectives.

Issue 5: Remand of the case for reconsideration by the Commissioner:
The High Court set aside the Tribunal and Commissioner's orders, remanding the case to the Commissioner for reconsideration. The appellant was granted four months to obtain orders from a civil court regarding the amendment's validity. The Court clarified that the appellant could not claim exemption based on the four-month period granted for seeking civil court orders, emphasizing that the time granted was solely for the procedural aspect of addressing the amendment issue.

This detailed analysis outlines the various legal issues addressed in the judgment, emphasizing the Court's decision to allow the appellant an opportunity to rectify the amendment issue through the civil court process while remanding the case for reconsideration by the Commissioner.

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