2015 (9) TMI 1240 - AT - Income Tax

Registration u/s 12AA/12A denied - trust was created in the year 1159 AD - absence of (Execution of Trust deed and its Registration - genuineness of the activities - trust is a private religious body - whether DIT(Exemption) has allowed his decision to be influenced by suspicion - Held that - It was declared in the declaration of the Trust that the trustees stand possessed of the Trust Fund comprised of the moneys and other properties, both movable and immovable, which are duly accounted for in the books of accounts of Tsurphu Labrang and is carried forward every year on its balance sheet and the income arising there from is applied to the administration or execution of the aims and objects of the Trust. We hold that in accordance with the provisions of the Income-tax Act, 1961 and rules made there under, the execution of a formal deed of trust was not necessary for grant of registration u/s 12AA/12A of the Act. It is not necessary that the aims and objects presently being followed by the assessee Institution/Trust should be the same at the time of establishment of the Institution or the creation of the Trust itself. The aims and objects of the trust may be amended and some new aims and objects may be added or deleted in accordance with changing time and as per the requirement of the mankind at large. To ask for documentary evidence in the form of a resolution or some credible proof for the amendment in the aims and objects of the Trust, created as back as in 1159 AD, is uncalled for - it is held that the aims and objects and purposes of the assessee trust were charitable in nature, qualifying the trust for registration u/s 12AA/12A of the Act. Expenditure for the benefit of trustees / head of the trust - Held that - The food and clothes and similar expenditure are the basic needs of a person for survival and the expenditure incurred for fulfillment of these basic needs of the supreme head of the institution/trust could not be held as violative of the provisions of Section 13 of the Act. In this view of the matter, the issue is decided in favour of the assessee and it is held that the supreme head of the trust taking food and clothes and similar basic needs from the funds of the trust were not violative of the provisions of Section 13 of the Act. Genuineness of the activity - DIT(E)/CIT(E) could not go into the issues relating to the income and expenditure account of the assessee, which were the subject-matter of assessment and they are not relevant for the purpose of granting or otherwise of registration u/s 12AA/12A of the Act. DIT (Exemptions) directed to grant registration to the assessee trust u/s 12AA/12A of the Act with effect from assessment year 2011-12 onwards - Decided in favour of assessee.

Issues Involved:
1. Whether the execution of a formal deed of trust is necessary for registration under Section 12AA/12A of the Income-tax Act, 1961.
2. Whether the aims and objects of the trust are charitable in nature, qualifying for registration under Section 12AA/12A.
3. Whether the DIT (Exemptions) can examine the income and expenditure account of the assessee during the registration process.
4. Whether the DIT (Exemptions) can make inquiries regarding the genuineness of the aims and objects of the trust but not the application of income for charitable purposes during the registration process.
5. Whether the activities of the trust for the benefit of a particular caste or community would debar it from exemption and registration under Section 12AA/12A.
6. Whether the supreme head of the trust taking food and clothes from the trust funds violates Section 13 of the Act.

Issue-wise Detailed Analysis:

I. Formal Deed of Trust Requirement:
The Tribunal held that the execution of a formal deed of trust is not necessary for registration under Section 12AA/12A. Rule 17A of the Income-tax Rules, 1962, allows for the submission of documents evidencing the creation of the trust, even if it was not created under an instrument. The Tribunal referenced the case of Laxminarayan Maharaj and Another Vs. CIT, where the trust was created without any formal instrument, and the Madhya Pradesh High Court ruled that evidential documents suffice for registration purposes.

II. Charitable Nature of Aims and Objects:
The Tribunal found that the aims and objects of the trust, as detailed in the declaration dated 29th March 2011, were wholly charitable and religious in nature. These included establishing educational institutions, medical care, vocational training, and relief camps, among others, without discrimination based on origin, color, religion, caste, creed, or gender. The Tribunal noted that the Revenue could not point out any non-charitable aim or object of the trust.

III. Examination of Income and Expenditure Account:
The Tribunal ruled that the DIT (Exemptions) should only examine the aims and objects of the trust during the registration process and not delve into the income and expenditure account, which is the subject matter of assessment. This principle was supported by several court decisions, including Sanjeevamma Hanumanthe Gowda Vs. DIT(E) and CIT Vs. Surya Educational and Charitable Trust.

IV. Inquiry into Genuineness of Aims and Objects:
The Tribunal agreed that the DIT (Exemptions) could inquire into the genuineness of the aims and objects of the trust but not the application of income for charitable purposes, which is to be assessed during the assessment process by the Assessing Officer. The Tribunal cited multiple judgments to support this view.

V. Activities Benefiting a Particular Community:
The Tribunal held that a trust serving a particular community could still qualify for registration under Section 12AA/12A, provided its activities are charitable in nature and benefit an indeterminate group of people. This was supported by the Supreme Court's decision in Ahmedabad Rana Caste Association Vs. CIT, which held that an object beneficial to a section of the public is an object of general public utility.

VI. Provision of Basic Needs to the Supreme Head:
The Tribunal found that the provision of food and clothes to the 17th Karmapa, the supreme head of the trust, did not violate Section 13 of the Act. The Tribunal emphasized that the basic needs of the head of the trust, who had renounced the material world and did not draw any salary, could be met from the trust funds without violating the statutory provisions.

Conclusion:
The Tribunal directed the DIT (Exemptions) to grant registration to the assessee trust under Section 12AA/12A with effect from the assessment year 2011-12 onwards, as the trust fulfilled all the preconditions for such registration. The appeal of the assessee in ITA No.4941/Del/2011 was allowed, and the appeal in ITA No.3061/Del/2013 was dismissed as infructuous.

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