2015 (9) TMI 909 - AT - Income Tax

Entitlement for exemption u/s 11 - whether the terms and clauses of the trust deed which were the basis of grant of registration u/s 12A of the Act have been altered after grant of such registration, the very foundation of registration having been removed by voluntary act of the assessee? - Held that - Non-intimation of the amendments in the Trust Deed to the Department cannot ipso-facto lead to cancellation of registration because the statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribe that the cancellation of registration cannot be effectuated unless a case is made out that the new objects do not fit-in with the existing objects (i.e. new objects are non-charitable in nature) or that the activities are in-genuine There is no change in the tone and tenor of the objects pursued by the assessee in a real sense. In fact, analysis of the changes in the Trust deed, do not reflect that the objects of the assessee Trust has undergone changes but the amendments are merely enabling clauses which provide only means or power to achieve objects in the Trust Deed. In our considered opinion, having regard to the aforesaid fact situation, it would be inappropriate to construe the amendments of 1957 and 1979 as insertions of any new objects of the assessee Trust, rather the amendments only seek to provide enabling powers to the Trust to accomplish its original objects which are in the fields of educational purpose, medical purpose, relief of poverty and objects of general public utility not involving carrying on any activity for profit. In fact, Hon ble Bombay High Court in the case of Deccan Gymkhana vs. CIT,(2002 (8) TMI 23 - BOMBAY High Court ) as well as Commissioner of Income-Tax, New Delhi Versus Federation of Indian Chambers of Commerce And Industry 1981 (4) TMI 9 - SUPREME Court has laid down that a distinction has to be made between the purpose of a Trust and the powers conferred upon the Trustees as being incidental to accomplish the purpose of the Trust. In our considered opinion, the amendments in 1975 &1979, which have been noticed above only seek to enable the Trustees to carry out activities for accomplishing the purpose of the Trust which we have found earlier to be for a charitable purpose as per original Trust deed. Therefore, factually speaking, even if one has to consider the amendments of 1975 & 1979 made in the Trust Deed, in our view it does not signify that the registration granted to the assessee on 27/11/1973 under section 12A of the Act is rendered nugatory. - Decided in favour of assessee.

Summary

Issues Involved:
1. Entitlement of the assessee for exemption under section 11 of the Income Tax Act, 1961.
2. Validity of the registration under section 12A of the Income Tax Act post amendments in the Trust Deed.

Issue-wise Detailed Analysis:

1. Entitlement of the Assessee for Exemption under Section 11 of the Income Tax Act, 1961:

The primary ground of appeal by the Revenue was that the CIT(A) erred in holding that the assessee is entitled to exemption under section 11 of the Income Tax Act, 1961. The Revenue contended that the terms and clauses of the Trust Deed, which formed the basis of the grant of registration under section 12A, had been altered after such registration, and thus, the foundation of registration was removed by the voluntary act of the assessee. Consequently, the Assessing Officer (AO) denied the exemption under section 11/12, determining the gross total income of the assessee as taxable.

The CIT(A), however, set aside the AO's order, noting that the Trust had been registered under section 12A for over 40 years and that the amendments in the objects did not detract from their charitable nature. The amendments were carried out in 1975 and 1979 and were duly registered with the Charity Commissioner. Furthermore, the exemption under section 11/12 was not denied in scrutiny assessments for the assessment years 2007-08 and 2008-09. The CIT(A) concluded that the denial of exemption was not justified.

2. Validity of the Registration under Section 12A Post Amendments in the Trust Deed:

The Revenue argued that the registration under section 12A did not survive due to the amendments in the objects of the Trust, which were not intimated to the Director of Income Tax (Exemption). The Revenue relied on the Tribunal's decision in the case of Board of Control for Cricket in India vs. ITO and the judgment of the Allahabad High Court in Allahabad Agricultural Institute & Another vs. Union of India And Others, arguing that the registration would not survive if the objects were altered after the grant of such registration.

The assessee contended that the changes in the objects did not cause a wholesale change in the charitable purpose of the Trust. The Trust continued to be registered under section 12A, and its recognition under section 80G was renewed periodically. The amendments in 1975 and 1979 were meant to enlarge the scope of the original charitable objects, not to change them fundamentally. The Mumbai Tribunal's decision in the case of Mehta Jivraj Makandas & Parikh Govindaji Kalyanji Modh Vanik Vidyarthi Public Trust vs. Director of Income Tax (Exemption) was cited, which held that there was no statutory requirement to intimate the change in objects to the DIT(Exemption).

The Tribunal noted that the AO's denial of exemption was based solely on the non-intimation of amendments to the DIT(E). The amendments in 1975 and 1979 did not render the activities non-charitable. The decision in the case of Board of Control for Cricket in India was distinguished as it involved substantial and material changes in the objects, which was not the case here. The Tribunal emphasized that the statutory requirement for cancellation of registration under section 12AA(3) was not met as there was no finding that the amended objects were non-charitable or that the activities were not genuine.

The Tribunal concluded that the amendments were merely enabling clauses to achieve the original charitable objects and did not signify any new objects. The amendments did not render the registration under section 12A nugatory. The reliance on the Allahabad Agricultural Institute case was also distinguished as it involved wholesale changes in the objects, which was not the situation here.

Conclusion:

The Tribunal affirmed the decision of the CIT(A), directing the AO to allow the exemption to the assessee under section 11/12 of the Act. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 31st August 2015.