2001 (3) TMI 261 - AT - Income Tax

Summary

Issues Involved:
1. Existence of the Trust
2. Bequeathal of Properties
3. Dedication to Deities and Trust
4. Legal Obligation
5. Reopening of Assessment
6. Exemption under Section 11

Issue-wise Detailed Analysis:

Issue No. 1: Existence of the Trust
The consistent stand of the assessee is that there existed a public charitable trust in the name of Shri Ram Navmiwale Public Charitable Trust. This is supported by documentary evidence. The trust included the deities and temples of Shri Ram Laxman Jankiji and Shri Hanumanji, and a dharamshala. The department has not shown any evidence to the contrary. The evidence includes applications for registration under section 12A, assessment orders, and income and expenditure statements, demonstrating the public and charitable use of the properties.

Issue No. 2: Bequeathal of Properties
The Will dated 22-11-1970 by Shri Govind Prasad Agarwal bequeathed 1000 sq. yards of land and House No. 15/295A to the trust. The intention of the testator, as inferred from the Will and surrounding circumstances, was to dedicate these properties to the trust for public charitable purposes. The conduct of the testator and the Sarwahakar, including the inclusion of these properties in trust accounts and their use for trust purposes, supports this conclusion.

Issue No. 3: Dedication to Deities and Trust
Even if the properties were dedicated to the deities, the dedication was for public charitable purposes, making the trust the effective holder of the properties. The properties were always included in the trust's returns and used for trust purposes. The legal concept of a deity being a juristic person but the real beneficiaries being the public supports the view that the properties were held under the trust.

Issue No. 4: Legal Obligation
The properties were held under a legal obligation to maintain the deities and temples, as per the Will. This legal obligation qualifies as a trust under Explanation 1 to section 13 of the Income Tax Act. The income from these properties was used solely for the maintenance of the deities and temples, fulfilling the legal obligation and qualifying for exemption under sections 11 and 12.

Issue No. 5: Reopening of Assessment
The reopening of the assessment under sections 147 and 148 was not justified. The assessee had disclosed all material facts, including the Will, to the department. The department's action was based on a mere change of opinion, which is not a valid ground for reopening assessments. The principles laid down by the Supreme Court in cases like CIT v. Bhanji Lavji and Radhasoami Satsang support this view.

Issue No. 6: Exemption under Section 11
The properties were held by the trust and used for public charitable purposes, qualifying for exemption under section 11. The registration under section 12A granted in 1979 included these properties, and there is no evidence of withdrawal or modification of this registration. The alternative plea that the properties were held under a legal obligation also supports the exemption under sections 11 and 12.

Conclusion:
All grounds taken by the assessee are allowed, and the appeals are decided in favor of the assessee. The properties in question are held to be part of the trust and are entitled to exemption under section 11 of the Income Tax Act. The reopening of the assessments was not justified, and the income from these properties is exempt from tax.