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TMI Blog2009 (12) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... by the managing trustees and production of original documents for verification, etc. On December 16, 2008, Shri Jayesh Chheda, trustee attended and made certain submissions. After seeing the reply, the learned Director of Income-tax (Exemption) noted that the objects of the assessee are commercial in nature. Accordingly, vide letter dated March 18, 2009, the assessee was requested to explain as to how the objects/activities of the trust are charitable within the meaning of section 2(15) of the Act. The assessee was also requested to explain clause No. 4 of the objects of the trust. Vide letter dated March 21, 2009, clause 4(11) to 4(13) were explained. Reliance was placed on the decision of the Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT reported in [1971] 82 ITR 704 and in the case of Ganga Prasad Varma Memorial Society v. CIT reported in [1982] 134 ITR 421 (All). After going through the submissions and various judicial pronouncements, the learned Director of Income-tax (Exemption) found that the objects of the assessee are not charitable in nature ; in his view, the objects are very vague in nature. It was observed by him that such vague objects may run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering all the relevant material on record, we find that the assessee deserves to succeed in this ground. Section 12A of the Act provides that : "The provisions of sections 11 and 12 shall not apply in relation to the income of any trust or institution unless the conditions are fulfilled, i.e., the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973 or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA." Thereafter, in view of the provisions of section 12AA, the Commissioner, on receipt of an application for registration of a trust or institution shall call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or he shall pass order in writing registering the trust or institution and a copy of such order shall be sent to the assessee. In the present case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for their residence needs." On the basis of these sub-clauses of clause 4, the learned Director of Income-tax (Exemption) has held that the objects of the assessee are vague in nature. In our view, the totality of all sub-clauses of clause 4 of the charitable trust has to be taken into consideration. If the totality of these objects is taken into consideration then it is seen that the objects of the assessee are charitable in nature. In all other clauses, except clauses 11, 12 and 13, the objects of the trust provides that they are charitable in nature. For example, in clauses 1 to 4, it is provided that trust will provide medical relief and help to the poor and deserving persons by providing monetary and/or non-monetary help, and/or to open, form, establish, promote, set up, run, acquire, maintain, assist, finance, support running hospitals, nursing home, nature cure centre, yoga centre, medication centre, etc. To provide for the educational grant, or scholarship, stipends, prizes, rewards, allowances and other financial and/or non-financial assistance in cash or kind to students and/or to open, form, establish, promote, set up, run, acquire families, maintain, assist, finance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not exempt from tax." The hon'ble apex court held that the requirement of section 11(1)(a) and the income of the trust was not exempt from tax for the reason that the trust property used by the trust was not for the purposes of charitable nor clauses of objects were clear that how the income derived from the trust property was to be utilised. Therefore, it was held that the requirement of section 11(1)(a) are not satisfied. However, in the present case, it is clearly provided under the clauses of objects that the assessee will construct or purchase dwelling units for providing needy/weaker sections of the society. Similar objects are provided in other various clauses which are self explanatory. On a later stage, in the case of CIT/CWT v. Babulal Khinchand Trust the hon'ble Madras High Court in [2000] 243 ITR 790 considering the decision in the case of Gangabai Charities [1992] 197 ITR 416 has held that the trust was charitable trust. The hon'ble Madras High Court has held as under (headnote) : "A trust was created by a deed dated October 10, 1986. It provided that `if however, the settlor leaves no wife or children, the trust properties shall be applied for such charitable p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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