2019 (2) TMI 44 - AT - Income Tax

Charitable activity - registration u/s 12AA - activities in accordance to its objects specified in the trust deed and for charitable purposes - complete inactivity till the sale of land and the associated gains from the sale are clear pointers that the activities (rather zero activities) are not in sync with the stated objects - amendment of trust deed on 27.03.2014 incorporating dissolution clause and at the same time introduction of new trustees - registration of Supplementary Trust Deed dated 27-03-2014 Held that - It is trite to say that at the time of registration u/s 12AA, the Ld. CIT(E) has to consider the twin requirement (i) objects of the assessee society (ii) genuineness of its activity. Nowhere in the order, the Ld. CIT(E) has neither pointed out any defect in the objects of the society and/or activities of the applicant society nor doubted the genuineness of the activities specifically, therefore we are of the considered view that the Appellant is carrying its activities in accordance to its objects specified in the trust deed and for charitable purposes. As clearly demonstrated by the Appellant that before to establishing the 'Bhawan' the Appellant has not carried out any activity due to paucity of funds, which in our considered view seems to be logical reason for not carrying out any activity previously, hence this ground of rejection can not sustain. in the instant case new trustees have been appointed in place of erstwhile trustees who have died, by the board of trustees and therefore situation clearly seems to be covered by sub clause (a) of section 73 of the Indian Trusts Act and in our opinion there is no embargo and impediment in appointment of new trustees, except as specified in section 73 of the Act, which otherwise is not applicable to the instant case, hence we are of the considered view that new trustees have been appointed in accordance of law. It is seen that a supplementary trust deed has been submitted to the sub-registrar, Ludhiana. Whether the same has been registered and whether the Sub-Registrar is competent to do the same in the case of Public Charitable Trust has not been evidenced. The components of the trust deed (till the amendments are accepted by the competent Court) are held to be restrictive and to that extent not enduring to the benefit of the general public, seems to be general remarks without considering the intricacies of the law and therefore the reasons are illogical, hence, we are not inclined to accept this ground of rejection also. We are inclined to grant the registration to the Appellant trust and hence direct the Ld. CIT(E) to grant the registration u/s 12AA of the Act, however, it is clarified that the Ld. CIT(E) while granting the registration, shall be at liberty to endorse the condition, if any, he find to be reasonable in accordance with law. - Decided in favour of assessee

Issues Involved:
1. Legality and justification of the denial of exemption by the Commissioner of Income Tax (Exemptions) [CIT(E)].
2. Genuineness of the activities and objects of the Trust.
3. Validity of the appointment of new trustees and registration of the supplementary trust deed.
4. Compliance with the Indian Trusts Act, 1882 and the Indian Registration Act, 1908.

Detailed Analysis:

1. Legality and Justification of the Denial of Exemption:
The CIT(E) denied the exemption application under section 12A of the Income Tax Act, 1961, citing that the application was not made earlier and that the exemption was sought to cover the Bank Interest portion from the tax net. The Appellant argued that the interest received was utilized for the attainment of the trust's objectives and that the CIT(E) did not dispute any activities undertaken by the trust. The Tribunal found that the CIT(E) did not point out any defect in the objects of the society or the genuineness of its activities, thus the denial was not justified.

2. Genuineness of the Activities and Objects of the Trust:
The Tribunal examined the trust deed, which outlined various charitable objectives, including establishing educational institutions, providing scholarships, maintaining hospitals, and aiding during natural calamities. The Appellant demonstrated that the trust had been carrying out its activities in line with these objectives, including running a Dharamshala, organizing health camps, and managing a homeopathy dispensary. The Tribunal concluded that the trust was genuinely engaged in charitable activities, and the CIT(E)'s observation that the financial statements did not confirm these activities was not supported by evidence.

3. Validity of the Appointment of New Trustees and Registration of the Supplementary Trust Deed:
The CIT(E) questioned the legality of the supplementary trust deed and the appointment of new trustees, suggesting that these changes required the sanction of a competent court. The Tribunal referred to Sections 73 and 74 of the Indian Trusts Act, 1882, which allow for the appointment of new trustees in case of death or disqualification of existing trustees. The Tribunal found that the new trustees were appointed in accordance with the law and that the supplementary trust deed was registered with the Sub-Registrar, Ludhiana, as required under the Indian Registration Act, 1908. Therefore, the Tribunal held that the changes in the trust deed were legally tenable.

4. Compliance with the Indian Trusts Act, 1882, and the Indian Registration Act, 1908:
The Tribunal clarified that the registration of the trust deed or supplementary trust deed is required under the Indian Registration Act, 1908, and that the Sub-Registrar is the competent authority for such registration. The Tribunal disagreed with the CIT(E)'s assertion that the amendments to the trust deed did not have the sanction of a competent court, stating that the registration with the Sub-Registrar was sufficient. The Tribunal directed the CIT(E) to grant registration under section 12AA of the Income Tax Act, subject to any reasonable conditions deemed necessary.

Conclusion:
The Tribunal allowed the appeal filed by the assessee society, directing the CIT(E) to grant the registration under section 12AA of the Act. The Tribunal appreciated the fair and impartial assistance provided by the Department Representative, emphasizing the importance of fair play and sportsmanship in the administration of justice. The order was pronounced in the open court on 28.01.2019.

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