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TMI Blog2007 (4) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the objects to be not to his satisfaction. None of these objects has been stated to be outside the purview of section 2(15) of the act, which holds charitable purposes to include relief of the poor, education, medical relief, and the advancement of any other object of internal public utility. Then, APB 6 to 8 is a copy of the balance subject of the assessee trust, as on 31-3-2005. It shows that all the income earned by the trust has been invested in the trust only. Further, the earned CIT has not, anywhere in the impugned order, doubted either the genuineness of the activities of the trust, or its objects. It has not been stated that any object of the trust is not that of charity or that the income of the trust has been used for the purpose of the trustees or their families and had not been utilised for charity. Thus, in the absence of any dissatisfaction of the earned CIT with regard to either the objects or the genuineness of the activities of the trust, registration has been refused to the trust in violation of the provisions of section 12AA of the Act. The reasons recorded for such rejection of registration we entirely extraneously to the requirement of the said se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her been observed that the assessee firm has made huge investment in the construction of school building during these two years through introduction of capital by the two lady partners and mainly through unsecured loans from friends and relatives: 3. That the perusal of documents including trust deed and agreement dt. 31st Dec, 2004 (copy placed on record) clearly shows that the firm constituted of the abovementioned two trustees was floated with the aim of introducing huge capital through its partners and subsequently, the firm with its assets and liabilities have been taken over by the trust through a unilateral action. No formal agreement of the takeover has been executed which would ensure the passing of the legal title of the building built on the trust land to the trust. In other words, the building taken over by the trust still continues to be the property of the firm i.e., M/s Dream Land Public School and any future action of the partners of this firm can jeopardize the functioning of the trust as these partners can claim their right over the property anytime. It has also been observed that the building taken over by the trust has been financed by the J K Bank, Shalimar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The IT Act, 1961 does not debar family trusts from undertaking charitable objects. The said provisions are eligible for registration under Section 12A(a) of the IT Act, 1961 at par with other trusts. The board of trustees of the trust has appointed managing committee for management and administration of Dream Land Public School in terms of para (i) of powers and duties of the board of trustees appearing on p. 6 of the trust deed. The said committee, a copy of which enclosed for your reference, comprises of nominees of staff members of the institution, parents of students and Education Department, J K, besides trustees. The affairs of the institution are managed by the said committee. The institution is recognised/affiliated by J K Board of School Education. 2. The assets and liabilities of Dream Land Public School, Disco Road, Janipur, Jammu (partnership firm), were transferred by the partners of the firm to Dream Land Educational Trust which included building under construction, on which a substantial investment was made by the firm. The said firm was acquired in terms of dissolution deed executed by the partners of the firm and trust deed, duly registered under Court of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 100 lacs and has applied Rs. 118.62 lacs. The balance has been utilized out of loans. In any case, this is something which has to be considered for purposes of assessment and not for purposes of registration under Section 12A. The fee structure of the institution has been devised by the managing committee as per the fee structure of other educational institutions. There are other institutions charging higher fee and those have been recorded charitable institutions. The trust is running a separate wing under the name of Anchal meant for slum children providing free education, free books, free uniforms and free midday meals. The aim of the management is to help under privileged and deserving students at the cost of privileged ones. There is thus no reason to come to the conclusion that the trust is not performing charitable activities. 5. The trust is irrevocable and both the settlers are trustees for life. It is submitted that in terms of Section 12AA of the IT Act, your good self has to satisfy as to the genuineness of the objects of the trust. At the time of registration of the trust for purposes of Section 12AA nothing more is required. The provisions contained in the deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that action can jeopardize the functioning of the trust and its objects. Again, as regards the fact that there being no NOC from the bankers viz., J K Bank, who financed the building of the above firm, the assessee has stated that they had informed the bankers about this takeover and that the bank had not objected to the takeover. This explanation is not based upon any evidence and is a mere statement which cannot be accepted. The assessee failed to file any NOC from the bank. Therefore, this statement in absence of any documentary evidence cannot be relied upon. Therefore, the apprehension, that any future action of the partners of the above firm or the financiers of the above firm is totally realistic and under these circumstances, the assets or income of the trust will get applied towards the objects which do not form the basic objects of the trust. 5. Further, as regards the fact that as per the trust deed, on dissolution, it has been left to the trustees to decide the fate of the net assets, the explanation provided by the assessee and reproduced above cannot be accepted. When a trust is to be registered, a safeguard regarding the fate of assets at the time of dissoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is as to whether registration has rightly been refused to the assessee by the learned CIT. Section 12AA of the Act, prescribes the procedure for registration of a trust. As per this section, the CIT, on receipt of an application for registration, shall call for such documents or information from the trust as he thinks necessary in order to satisfy himself about the genuineness of the trust and may also make such enquiry as he may deem necessary in this behalf; and that after satisfying himself about the objects of the trust and the genuineness of its activities, he shall pass an order in writing, registering the trust. Therefore, in accordance with Section 12AA of the Act, the learned CIT was required to satisfy himself about the objects of the trust and the genuineness of its activities. A perusal of the above extracted portion of the impugned order would show that the learned CIT has not recorded any dissatisfaction on either of these two aspects. The first issue raised by the learned CIT is with regard to the registration of the dissolution deed of the firm. The erstwhile firm, having two partners, which are the trustees of the present assessee trust, was dissolved vide a dissol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This observation, as such, has no effect adverse to the registration of the trust. 11. The learned CIT has further observed that since no objection certificate was not obtained from the bankers, the apprehension of any future action by the partners of the erstwhile firm or the financiers thereof, regarding claiming back the property from the trust, was entirely realistic. Again, it is seen that this observation has no bearing on the registration of the assessee trust. As noted above, under Section 12AA of the Act, the CIT was only required to satisfy himself with regard to the objects and genuineness of the activities of the trust. The observation under consideration does not at all impinge upon either of these aspects. Again, this observation is the result of merely surmises and conjectures. Nothing turns on it against the assessee qua registration. 12. Lastly, the learned CIT has observed that as per the trust deed, on dissolution of the firm, it has been left to the trustees to decide the fate of the net assets. It has been observed that while registering a trust, safeguards regarding the fate of the trust are to be considered very minutely; that no trust, the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the deserving candidates for education, vocational training and to other pursuit with a view to upright the poor and needy persons. 7. To accept donations, grants, presents and other offerings and to deal with the same for the purpose of the trust. 8. To charge moderate tuition fees and otherwise recoup themselves for the outlay and expenses incurred in the upkeep and maintenance of institutions established or about to be established under the deed. 9. To train and equip the pupils so as to be self-supporting in an honourable and decent way of life so as to develop into good, healthy and progressive citizens. 10. To encourage sportsman and adventurous spirit in the pupils and those connected with the institution and coming in contract with them and to participate in games of skill and prowess. 11. To bring out, encourage and develop the incentive and research faculties of the pupils and teachers and to afford opportunity to research work in art, science and various other fields of education. 12. To develop a healthy as well as critical attitude towards the development of mental, physical and moral uplift of the students and all those connected with the instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cancellation of registration if the provisions are misused. 17. In St. Don Bosco Educational Society v. CIT (2004) 84 TTJ (Luck) 805: (2004) 90 LTD 477 (Luck), it has been held that under Section 12AA, the CIT is empowered to satisfy himself about the objects of the trust and the genuineness of its activities; and that once the CIT has not doubted the genuineness of the activities of the assessee, nor doubted its charitable object, his powers under Section 12AA end. 18. In Smt. Mansukhi Devi Bihani Jan Hitkari Trust v. CIT (2004) 83 TTJ (Jd) 763: (2005) 94 TTD 1 (Jd), it has been, inter alia, held that where the CIT, while refusing registration under Section 12AA, did not state that the object of the trust was not charity or the income of trust was used for the benefit of the trustees or their families and had not been utilised for charity, refusal to grant registration was not justified. 19. In People Education Economic Development Society (PEEDS) v. ITO (2006) 104 TTJ (Chennai)(TM) 467: (2006) 100 LTD 87 (Chennai)(TM), it was held that while considering the application for registration under Section 12A, the CIT cannot examine the application aspect of the income a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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