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TMI Blog2008 (11) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... s proposed by President of the Committee that for management of the said hospital a trust is to be formed and draft of proposed trust was submitted and it was mentioned in the said letter that even on formation of the trust the Committee will not lose its control as the trustees will be appointed by the Committee and also could be removed in case of any misconduct. In pursuance of the said letter the present trust was constituted for the management of the said hospital. Copy of such letter is placed at p. 1 of the paper book. Further, vide office order dt. 27th Feb., 2007 trustees of the said trust were appointed as per resolution passed in the general house meeting held on 9th Feb., 2007 and details of such trustees are mentioned in the said order, a copy of which is placed at p. 14 of the paper book. According to the said office order, trust deed was framed, which is dt. 3rd May, 2007, copy of which is placed at pp. 15 to 31 of the paper book. In the said trust deed the Committee has been described as the settlor and the trustees as per resolution are made trustees. It has been described in the said trust deed that the settlor is running a number of charitable institutions such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manage and administer the same for public charity and public good. Vide cl. 29 it is stipulated that none of the trustees will be entitled to receive any remuneration subject to reimbursement of the expenses actually incurred by them in connection with the trust or duties relating thereto. Vide cl. 31 the accounts of the trust are required to be properly maintained and audited by chartered accountant to be appointed by the trustees. Vide cl. 32 in the event of dissolution of trust all the properties and funds of the trust shall stand transferred to the settlor for the purpose of spending the same for providing medical assistance to the weaker sections of the society and vide cl. 34 the trust has been stated to be irrecoverable. Vide cl. 35, it is declared that no part of trust fund or property or its income shall be applied for any other purpose which is not consistent with the aims and objects of the trust and the provisions of the deed shall be construed accordingly. President and Secretary of the Committee have signed as a settlor to the deed. 3. An application in Form 10A was filed by the above-mentioned trust on 7th July, 2007 seeking registration under s. 12A. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of this Act." 4. Referring to these powers and functions, learned Director of IT (Exemptions) has observed that none of these clauses gives any authority to the Committee to create a trust. According to him cl. (xv) refers to the functions which are prescribed by Regulations for carrying out the purposes of this Act, learned Director of IT (Exemptions) also referred to the copy of Regulations of the Committee which read as under: "(I) To control, direct and manage the Gurudwaras and other institutions according to Sikh Maryada. (2) To ensure safe custody of the funds, movable and immovable properties, deposits, donations, offerings, etc. in cash and kind. (3) To make suitable arrangement for the security, safety, management and maintenance of movable and immovable properties of Gurudwaras, educational and other institutions owned by or belonging to the Committee. (4) To arrange for the proper performance of the Sikh Maryada, religious practices, culture and traditions in the Gurudwaras. (5) To manage the historic and other Gurudwaras, educational and other institutions and their properties in such a way as to make them inspiring centers of Sikh religion, culture a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spread the knowledge of Punjabi in Gurmukhi script. (22) To pay grants to the individuals/religious/cultural/historical/social/educational institutions, etc. and to render financial assistance to researchers and other engaged in the fulfilment of any of the aims and objects of the Committee. (23) To give stipends/scholarships/books, etc. to the needy and deserving students. (24) To open and maintain dispensaries clinics, hospitals, labs, etc. (25) To undertake social and charitable work to help the needy in cash and kind. (26) To do all such things as may be incidental and conducive to the implementations of aims and objections of the Committee including efficient management of the Gurudwaras, educational and other institutions under the Committee and their properties or for the convenience of devotees." 5. Referring to these aims and objects also it is observed by Director of IT (Exemptions) that these also do not provide authority for creating a trust. In response to query it was submitted that the Committee is empowered by the Act to efficiently manage the affairs of the Gurudwaras. Reference was made to cls. 4 and 15 of s. 24 and also regn. 3 of the Regulations, esp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly any authority to create any trust and consequently, transfer its property to a newly created entity. 6. Learned Director of IT (Exemptions) has also referred to the preamble of Delhi Sikh Gurudwara Act, 1971 which provides for proper management of Sikh Gurudwaras and having properties in Delhi and for matters connected therewith. According to him, the preamble controls the scope of the Act. The Committee is creation of the Act. Learned Director of IT (Exemptions) has observed that no doubt the Committee is a person competent to contract and s. 7 of Indian Trust Act provides for person competent to contract can create a trust, but, according to him, the Committee is incompetent to create a trust. Referring to trust deed he observed that an amount of Rs. 1 lac has been transferred by the Committee to the trust which action is ultra vires of the 1971 Act and trust deed provides the right to manage the speciality hospital building along with other movable properties, etc. which is transferred and such right, of managing the properties also cannot be given by the Committee as such transfer is also violative of 1971 Act and, thus, he has held that trust created by the Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration under s. 12AA of the Act. Accordingly, he rejected the application of the assessee by relying on the decision of Kerala High Court in the case of Self Employers Service Society vs. CIT (2000) 164 CTR (Ker) 449 : (2001) 247 ITR 18 (Ker) in which it has been held that though the nature of object was charitable and voluntary but society did not carry out its activities. The society did not produce any evidence before CIT regarding the genuineness of its activities and, thus, the appeal of the said society was dismissed by Hon'ble High Court challenging the order of CIT vide which the application for registration under s. 12AA was rejected. According to learned Director of IT (Exemptions), the facts of the present case are similar to the facts of that case and, hence, said case is applicable to the present case. It is finally observed by Director of IT (Exemptions) that the application of the assessee is rejected on the ground that no valid trust has been created and no charitable activity is carried out by the assessee. It is against these observations and findings of learned Director of IT (Exemptions), the assessee is aggrieved, hence in appeal. 8. After narrating the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible manner and also there is no specific bar on creating a trust. According to s. 14 of General Clauses Act, such power can be used if there is no other intention in the Act to the contrary and the Act does not say that Committee cannot create a trust. 10. Then, learned Authorised Representative referred to the sub-cls. (iv) and (xv) of s. 24 of Delhi Sikh Gurudwara Act, 1971 and regns. 3(24) and (25) of the Regulations for function of Delhi Sikh Gurudwara Management Committee and pleaded that according to these provisions the trust was validly created by the Committee and learned Director of IT (Exemptions) was wrong in holding that no such power was vested in the Committee and, therefore, the trust is invalid trust. 11. So as it relates to observations of Director of IT (Exemptions) that no charitable activity was carried out, learned Authorised Representative pleaded that the trust since its inception has embarked on a process of finding a suitable collaboration partner to act as its management partner for the establishment and management of hospital and such collaboration agreement has been entered into between the trust and MHS on 23rd Nov., 2007. It was submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion learned Director of IT (Exemptions) has expressed an opinion that neither sub-cl. (iv) nor sub-cl. (xv) of s. 25 of the Delhi Sikh Gurudwara Act, 1971, authorises the Committee to constitute trust for effectuating its aims and objects. These clauses have already been reproduced in the above part of this order. In our opinion, sub-cl. (iv) empowers the Committee constituted under the Act to do all such things which are incidental or conducive to the efficient management of the affairs of the Gurudwaras, educational and other institutions under the Committee and their properties or to the convenience to the devotees. In our opinion, such power is wider enough to cover the creation of the trust to facilitate the better administration and better implementation of the objects for which such Committee is constituted. Providing medical facilities is known to be a charitable activity. If a Committee is running several institutions under its management, it will not be possible to efficiently manage these several institutions and thus, the task is generally handed over to specific Committee of members to do a particular job. It is already mentioned that vide letter dt. 4th May, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udwara Management Committee which have also been reproduced in the above part of this order. There also, sub-s. (24) of regn. 3 authorises the Committee to open and maintain dispensaries, clinics, hospitals and laboratories, etc., and, according to sub-s. (26), the Committee is authorized to do all such things as may be incidental and conducive to the implementation of aims and objects of the Committee including efficient management of the Gurudwaras, educational and other institutions under the Committee and their properties or for the convenience of the devotees. Sub-s. (26) is in the line of s. 24(iv) of Delhi Sikh Gurudwara Act, 1971 and it has already been observed that such sub-section provides that Committee is empowered to constitute trust as the powers given there are wide enough to create trust for the efficient management of the institution (hospital) owned by the Committee. Thus, also it is to be held that the observations of Director of IT (Exemptions) that neither Act nor Regulations for function of Delhi Sikh Gurudwara Management Committee authorized the Committee to create trust is incorrect in facts and law. 16. The second objection of learned Director of IT (Exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as its business activity. Finding that object of assessee was education and activity of the assessee in letting out properties and receiving lease rental was an activity carried on only to fulfil the object of the assessee could not be treated as business income of the assessee. Here in the present case if assessee is receiving revenue by making agreement with MHS and that revenue was to be utilized for the charitable activity, then it cannot be held that receiving rental income is not in the nature of charitable activity unless it is shown that the amount to be received by the assessee is not to be utilized to fulfil the objects of assessee. According to trust deed all the incomes to be received are to be utilized for fulfilling the objects of the trust which are charitable in nature. Further, reference can also be made to s. 12AA(3) according to which learned Director of IT (Exemptions) is empowered to cancel the registration if after granting the registration specifically he is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution and by passing an order in writing he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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