2012 (12) TMI 283 - AT - Income Tax

Renewal of approval under section 80G(5) of the Act - power of amendment or deletion or addition to the object clause - Third member decision - Held that - From the judgment of Hon ble Supreme Court in Sri Agastyar Trust Versus Commissioner of Income-Tax 1998 (2) TMI 7 - SUPREME COURT , it is clear that when the founders of the trust have no power to alter or vary the terms of the 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 trust deed does not bestow such power on him. In the instant case, founders or trustees had altered the object clause, without any power available to them to alter the same as per the original trust deed. - such amendment carried out by the trustees or founders is non est and invalid. For the sake of argument if it is accepted that the trustees or settlers had power to amend or alter the original Trust Deed even then on the strength of Corrigendum and supplementary deed mentioned hereinabove, the trust is not eligible for renewal of approval u/s 80G of the Act. The immovable property, as comprised in the 1st Schedule to the said Trust Deed remains untouched. The income from the said Trust property is to be applied first, in the maintenance and repair of temple property, as also to be spent for the worship of the said Deity and in the defraying of the usual expenses of holding festivals of the said deity, remains intact. Similarly, the construction of the temple and worship of the said Deity and adoration of the said Deity is still an integral part of unauthorisidely amended Trust Deed. Further, holding of periodical festivals of the Deity and offering daily worship, are still the organic part of the said Deed. These objects are purely religious in nature, inextricably linked to the Hindu religious community and its Deity Laxmi Narayan . Even the unauthorized amended Trust Deed/so called supplementary Trust Deed contravenes the provisions of section 80G(5)(iii) read with Explanation 3 of the Act, being expressed to be for the benefit of a particular religious community i.e. Hindu. Trust is not entitled to renewal of approval u/s 80G(5) of the Act. - Decided against the assessee.

Summary

Issues Involved:
1. Whether the settlers or trustees are competent to amend the original trust deed when no such power is provided.
2. Whether the assessee-trust is entitled to approval under section 80G(5) of the Income-tax Act, 1961, based on the original and amended trust deed.
3. Whether the CIT can overlook the binding precedent of the ITAT's previous order in assessee's own case.
4. Whether the CIT can refuse approval of renewal of exemption under section 80G(5) on the ground of the trust being established for a particular religious community.

Detailed Analysis:

1. Competence to Amend the Trust Deed:
The primary issue was whether the trustees or settlers had the authority to amend the original trust deed, particularly when the original deed did not provide such power. The CIT and the dissenting Accountant Member (AM) held that the trustees did not have the power to amend the trust deed without following the prescribed legal procedures under section 92 of the Civil Procedure Code, 1908, and section 26 of the Specific Relief Act, 1963. The corrigendum dated 1-8-2008 and the supplementary deed were considered non est and merely scrap of paper because the original trust deed did not confer any power to alter its provisions. The Hon'ble Supreme Court's decision in Sri Agasthyar Trust v. CIT [1999] 236 ITR 23 supported this view, holding that trustees cannot alter the objects of a trust without explicit authority in the trust deed.

2. Entitlement to Approval under Section 80G(5):
The original trust deed dated 20-12-1993 was scrutinized, revealing that the trust was established for the construction of a temple and worship of a deity, which is for the benefit of a particular religious community (Hindu). This contravenes section 80G(5)(iii) and Explanation 3, which exclude purposes that are wholly or substantially religious in nature. The Hon'ble Supreme Court's decision in Upper Ganges Sugar Mills Ltd. v. CIT [1997] 227 ITR 578 affirmed that if any object of a trust is religious, the entire trust falls outside the scope of section 80G. The Third Member agreed with the AM that even after the purported amendments, the trust remained substantially religious and thus ineligible for approval under section 80G.

3. Binding Precedent of ITAT's Previous Order:
The Judicial Member (JM) argued that the CIT should have followed the ITAT's previous order dated 19-12-2008, which remanded the matter for fresh consideration, including the corrigendum. The JM held that the CIT violated judicial discipline by not adhering to this precedent. However, the Third Member clarified that the Tribunal had only directed the CIT to consider the corrigendum and decide afresh, not to grant approval. Therefore, the CIT's decision to reject the corrigendum as an afterthought was within legal bounds.

4. Refusal of Renewal Based on Religious Purpose:
The CIT's refusal to renew the approval under section 80G was based on the trust's religious nature. The CIT observed that the trust's primary object was the construction and maintenance of a Hindu temple, which is a religious activity. The Third Member upheld this view, agreeing that the trust's activities were substantially religious, thus disqualifying it from section 80G benefits. The Hon'ble Supreme Court's decision in Upper Ganges Sugar Mills Ltd. further supported this stance, emphasizing that any religious object within a trust disqualifies it from section 80G benefits.

Conclusion:
In conformity with the majority view, the order of the CIT-I, Amritsar, was upheld, and the trust was not entitled to renewal of approval under section 80G(5) of the Act. Consequently, the appeal of the assessee was dismissed.