2018 (2) TMI 1159 - HC - Income Tax

Registration u/s. 12AA denied - Respondent did not have a registered trust deed - Held that - From the materials on record, it can be seen that the Tribunal had gone through the registration details of the respondent trust contained in the order of Wakf Board and was satisfied that full details of the functions of the trust were available which would establish the existence of the trust, its registration by the Gujarat State Wakf Board which also contained details of objects of the trust, manner of appointment of Mutawalli etc. Rule 17A nowhere envisages the existence of a trust deed or its registration. The factum of existence of trust can also be established by producing documents evidencing the creation of the trust. This is precisely what has been done in the present case. The order passed by Wakf board dated 20.11.1999 recognises various Daudi Vora trust and in case of present assessee also enlisted the objects of the trust, who would be the managers of the trust and how such managers would be appointed or removed. - Decided against revenue

Summary

Issues:
1. Interpretation of Rule 17A of the Income Tax Rules 1962 regarding the requirement of a registered trust deed for registration under section 12AA of the Income Tax Act.
2. Consideration of documents submitted by a trust for registration under section 12AA in absence of a registered trust deed.

Analysis:
1. The main issue in this case was the interpretation of Rule 17A of the Income Tax Rules 1962 concerning the necessity of a registered trust deed for registration under section 12AA of the Income Tax Act. The department challenged the Tribunal's decision to allow the appeal of the assessee, arguing that the trust did not submit a registered trust deed as required by Rule 17A. The Tribunal considered the nature of the trust, based on religious tenets under the Quran, and its registration with the Gujarat State Wakf Board under the Bombay Public Trust Act, 1950. The Tribunal concluded that no separate trust deed was required based on the details provided by the Wakf Board, certifying the trust's object, appointment of managers, and other relevant information.

2. The documents submitted by the trust for registration under section 12AA were crucial in this case. Initially, the Principal Commissioner rejected the application citing the absence of a registered trust deed. The Income Tax Appellate Tribunal remanded the proceedings for reconsideration, and upon further rejection by the Commissioner, the matter reached the Tribunal again. The Tribunal analyzed the registration details provided by the Wakf Board, which included information on the trust's object, appointment of managers, and other relevant details. The Tribunal found that these documents sufficiently established the existence of the trust and its registration by the Gujarat State Wakf Board, thereby justifying the decision to allow the appeal of the assessee.

3. The legal arguments presented by both sides focused on the interpretation of Rule 17A and the requirement of a registered trust deed. The Revenue contended that the trust failed to produce a registered trust deed, breaching Rule 17A. In contrast, the respondent's counsel argued that Rule 17A did not mandate the production of a registered trust deed. The counsel relied on a judgment of the Madhya Pradesh High Court, emphasizing that the existence of a trust can be proven through documents evidencing its creation, as was the case with the trust registered with the Gujarat State Wakf Board. The Tribunal concurred with this interpretation, highlighting that the rule does not explicitly require a trust deed but allows for the establishment of a trust through other evidential documents.

4. Drawing parallels with a previous judgment of the Madhya Pradesh High Court, the Tribunal underscored the importance of evidential documents in establishing the existence of a trust, especially when the trust is not created under a formal instrument. The Madhya Pradesh High Court decision emphasized the necessity of producing constructive and evidential documents to prove the creation of a trust, even in the absence of a formal trust deed. Ultimately, the Tribunal dismissed the tax appeal, upholding the decision to allow the appeal of the assessee based on the documents submitted and the trust's registration with the Gujarat State Wakf Board.