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TMI Blog2015 (9) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g available to all communities and people and its being a private religious body is grossly erroneous and devoid of any material basis. 7. That the learned DIT(Exemption) has erred on facts and in law in rejecting the appellant Trust s application seeking registration under section 12A, in fact without hearing the authorized representatives of the appellant Trust himself, the proceedings all through having been conducted either by his Income Tax Officer (HQ) or his Inspector. 8. That the learned DIT(Exemption) has allowed his decision to be influenced by suspicion and in the end in basing his finding on surmises and conjectures, without confronting the appellant Trust with his suspicions in the matter and thereby infringing the principles of natural justice too. 9. That the order of the learned DIT(Exemption) is erroneous and prejudiced as indicated from his observation about the appellant Trust having made its compliance to the terms of his office notice dated 25.04.2011, as late as on 14.08.2011, instead of on 24.06.2011, a fact borne from the record of the proceedings. 3. Learned counsel for the assessee submitted that the assessee is an institution/trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust, copy filed before the Revenue authorities and as well in the compilation filed before the Tribunal. The various terms and conditions for the smooth running of the affairs of the trust and also regarding appointment of additional trustees etc. have been detailed in the said declaration of the trust. He referred to the reply of the assessee dated 24th June, 2011 addressed to the Assessing Officer wherein, in point No.1, the original declaration of the trust was produced before him for verification, copy of the said letter has been filed in the compilation by the assessee. He referred to the letter of the assessee dated 23rd August, 2011 addressed to the Assessing Officer, wherein also, in paragraph 1, it is specifically mentioned that the original declaration of trust was produced before the Assessing Officer. He submitted that all the aims and objects and purposes of the trust were charitable in nature without any discrimination on account of origin, colour, religion, caste, creed or gender. The objects of the trust include establishment and running of educational institutions, the training of students, vocational training institutions, medical care institutions and other soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer at the time of assessment. For this proposition, the learned counsel for the assessee relied on the following decisions:- (i) Malik Hasmullah Islamic Educational and Welfare Society Vs. CIT, Faizabad [2012] 138 ITD 519 (Lucknow). (ii) Sanjeevamma Hanumanthe Gowda Vs. DIT(E) [2006] 285 ITR 327 (Karn). (iii) CIT Vs. Surya Educational and Charitable Trust and another [2013] 355 ITR 280 (P H). (iv) CIT Vs. Leuva Patel Seva Samaj Trust [2014] 42 Taxman.com 18 (Guj.). (v) CIT Vs. R.S. Bajaj Society [2014] 42 Taxman.com 5763 (All). (vi) CIT Vs. Janak G. Education Society [2013] 39 Taxman.com 2 (P H). (vii) CIT Vs. BKK Memorial Trust [2013] 29 Taxman.com 286 (P H). (viii) CIT Vs. Arulmigu Sri Kamakatchi Amman Trust 20 Taxman.com 55 (Mad). (ix) CIT Vs. Springdale Educational Society [2011] 16 Taxman.com 285 (P H). (x) DIT(E) Vs. JITO Chennai Chapter [2012] 204 Taxman 157 (Madras). (xi) CIT Vs. Arulmigu Sri Kamatchi Amman Trust [2012] 206 Taxman 69 (Madras)(Mag.). (xii) CIT Vs. Dawoodi Bohara Jamat [2009] 317 ITR 342 (MP). (xiii) CIT Vs. Chandra Chairtable Trust [2007] 294 ITR 86 (Guj). (xiv) CIT Vs. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned that the assessee trust to undertake to establish, aid, manage and or run any institution or project of general public utility which is a charitable purpose within the contemplation of clause (15) of section 2 of the Income-tax Act, 1961 which is not in derogation of the tenets of the Dharma preached and propagated by it . He submitted that likewise, the aim object No.(o) in the said declaration of trust provides to undertake and or aid programmes and projects for the preservation and protection of environment with active engagement of monasteries, communities and other related development organizations . He submitted that these objects could not exist in the year 1159 AD as the Income-tax Act, 1961 itself came into being centuries later and the subject of preservation and protection of environment has come into existence recently and, therefore, the assessee has to prove with evidence that when the objects of the assessee trust were amended to this effect, incorporating these objects in its aims and objects, and when resolution to this effect was passed by the trustees of the assessee trust. He submitted that the trust is stated to be created in the year 1159 AD in China a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. He submitted that the assessee has filed a copy of the declaration of trust by His Holiness 17th Karmapa running in 18 pages before the Revenue authorities as well as the Tribunal and has also filed the copies of 29 other eminent persons well versed with the activities of the trust, copy of which has been filed in the compilation before the Tribunal stating on oath the fact of the existence of the assessee trust for more than 800 years and the fact of donations received by the assessee for charitable and religious purposes under obligation to spend these on charitable and religious activities and purposes in India. The learned counsel for the assessee referred to page 202 of the compilation before the Tribunal which shows the details of the application of funds on charitable and religious activities during the period 01.04.2004 to 31.03.2010. He referred to the copy of registration certificate dated 31.08.2009 issued by the Registering Authority, Human Resource Development Department, Government of Sikkim, Gangtok registering the school set up and managed by the assessee trust. He referred to the letter of the Joint Secretary, Government of Sikkim dated 28.02.1984 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh in January, 2000 and the national headquarters of Tsurphu Labrang were located in Delhi. On 29th day of March, 2011, the present Supreme Head of the sect the 17th Karmapa made a declaration of trust by way of duly sworn affidavit wherein the relevant facts with regard to the history of the trust were recorded and also it was declared that all the moneys and other properties, both moveable and immovable which were duly accounted for in the books of account of Tsurphu Labrang and carried on its balance sheet and all income arising there from upon trust from time to time were possessed by the trust fund and such income of the trust fund could be applied to the execution of the aims and objects of the trust. The various aims, objects and purposes of the Tsurphu Labrang were detailed in the said declaration of trust dated 29th March, 2011 by the 17th Karmapa. It was claimed that all the aims and objects of the trust were wholly charitable and religious in nature without any discrimination with regard to origin, colour, religion, caste, creed or gender. The various clauses were detailed in this declaration of the trust with regard to management of the trust fund and with regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal expenses of the head of the trust, the 17th Karmapa, from the funds of the assessee trust. 11. We find that the various issues as culled out from the pleadings of the parties could be summarized as under:- (I) Whether, for registration under the provisions of Section 12AA/12A of the Income-tax Act, 1961, the execution of a formal deed of trust is necessary, without which the registration could not be granted to the institution/trust. (II) Whether, the aims and objects and purposes of the assessee trust were charitable in nature, qualifying the trust for registration u/s 12A/12AA of the Act. (III) Whether, the DIT (Exemptions) could go into the issues relating to the income and expenditure account of the assessee, which were the subject-matter of assessment and whether they are relevant for the purpose of granting or otherwise of registration u/s 12AA/12A of the Act. (IV) Whether, the DIT (Exemptions)/CIT(E) while making enquiries during the course of proceedings u/s 12AA/12A of the Act for grant of registration could make enquiry only with regard to the genuineness or otherwise of the aims and objects of the trust but not regarding the application of income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up. 13. A plain reading of Rule 17A(a) makes it clear that where the Trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof, has to be filed along with prescribed Form No.10A for registration of the Institution/Trust u/s 12A of the Act. However, the second limb of Rule 17A(a) provides that where the Trust is created, or the Institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof, has to be filed along with the statutory Form No.10A for registration of the Institution/Trust u/s 12AA/12A of the Act. Thus, the applicable Rule 17A itself provides that it is not necessary that the Institution/Trust should be established under an instrument. The Rule 17A does not prescribe that in case the Institution/Trust is established otherwise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r years. The plea of the learned CIT-DR regarding the involvement of the name of the 17th Karmapa in a case u/s 120B (Criminal conspiracy) of Indian Penal Code, which was later on quashed by the Lower Court against the Karmapa and the order of the Lower Court has been reversed by the Hon ble High Court of Himachal Pradesh and as a result, the Karmapa will remain an accused and trial would continue against him in this case, is of no consequence as the same pertains to the violation of law of the land for which separate proceedings are pending before the Hon ble Court and shall not affect the issue that whether the assessee trust was having aims and objects and purposes of charitable in nature entitled to registration u/s 12AA/12A of the Act. 15. In Laxminarayan Maharaj and Another Vs. CIT [1984] 150 ITR 465 (MP), the trust was created 100 years ago without any instrument of document. However, the revenue records relating to land held by the trust, orders relating to property tax and affidavits and declaration of citizens were in support of existence of trust and were filed along with application for registration u/s 12A of the Act. The Commissioner of Income Tax rejected the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 954-55. In all these documents, the petitioner-trust is entered as tenant or bhumiswami and the name of the Sarbarahkar is also mentioned. The assessment orders relating to the property tax for 1967-68 to 1974-75 were filed. All these documents, though not directly evidencing the creation of the trust, afford a logical basis for inferring creation of the trust prior to 1910-11 and can be described as documents evidencing creation of the trust for purposes of rule 17A. In our opinion, the Commissioner was not right in taking a very narrow view of rule 17A and in holding that the petitioner-trust has not complied with that rule. 16. The SLP against this decision of Hon ble Madhya Pradesh High Court in CIT Vs. Laxminarayan Maharaj and Another was dismissed by the Hon ble Apex Court in 186 ITR 32 (St.)(SC). 17. In the case of the assessee before us, the assessee has claimed that the Institution/Trust was created centuries ago in the year 1159 AD and that no formal deed for the Trust was executed at that time. We find that the Indian Trust Act has not come into existence in the year 1159 AD and it was not possible to execute a deed of Trust on stamp paper or in writing centurie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second issue that whether the aims and objects and purposes of the assessee trust were charitable in nature, qualifying for registration u/s 12AA/12A of the Act, the aims objects and purposes of the Trust have been detailed in the said declaration of Trust dated 29.03.2011 which are reproduced here under : 1. Tsurphu Labrang has and will have the following aims and objects : a). To preach the understanding and practicing of Dharma according to the tenets of the Karma Kagyu lineage of Buddhism and propagate it for the benefit of the entire mankind without any discrimination on account of origin, colour, religion, cast, creed or gender; and b). To organize performance of all Dharma rituals and rites for the benefit and participation of members of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and c). To establish, aid, manage and or run Educational institutions or projects for the benefit of members of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and d) To establish, aid, manage and or run educational institutions for tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertake and or aid programmes and projects for the preservation and protection of environment with active engagement of monasteries, communities and other related development organizations; and p) To undertake and execute all such work as is necessary for and incidental or ancillary to the aims objects above and are not in derogation of the tenets of the Dharma and the aims objects above. 19. The various clauses for the proper management of the Trust Fund and also the appointment of the Trustees and maintenance of the account books of the trust, have been detailed in the said declaration of the Trust. It further provides that the Trustees shall not be entitled to any remuneration for their services as trustees. It provides that in the event of the Trust being wind up on dissolution of Trust, its properties after satisfaction of all the debts and liabilities, shall not be distributed amongst the Trustees, but shall be given or transferred to such societies/Trust or Associations having similar objects to be determined by the Board of Trustees or, in default thereof, by the court of competent jurisdiction. 20. From a reading of various aims, objects and purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dical relief to the poor for the public at large without any discrimination on account of religion or caste, have been filed in the compilation before the Tribunal. The Revenue could not file any evidence to discredit the documentary evidence filed on behalf of the assessee-trust. The argument of the learned CIT-DR that onus was on the assessee to file the evidences that the objects of the assessee trust existed in the year 1159 AD and amendments to the objects of the Trust were made by the Trust with resolution passed from time to time, is devoid of any merits. There could not have possibly any formal trust deed executed on stamp paper centuries ago. The assessee has filed other evidences to prove the creation of the Trust and that the Trust existed for charitable purpose and the same could not be controverted on behalf of the Revenue. The learned CIT-DR has referred to aim and object No.(l) and (o) with argument that these objects could not exist in the year 1159 AD, as there is a mention of the provision of section 2(15) of the Income-tax Act, 1961 in aim and object No.(l) and the aim object No.(o) provides to undertake the programmes and projects for preservation protection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the institution/trust that they were genuine and were charitable in nature and the institution/trust has fulfilled other statutory conditions for grant of registration u/s 12AA/12A of the Act, the DIT(E)/CIT(E) shall allow the registration to the institution/trust. If any misapplication of income is found during the course of assessment proceedings, the Revenue authorities are free to take note of it and tax the same in assessment. 22. In Sanjeevamma Hanumanthe Gowda Vs. DIT(E) [2006] 285 ITR 327 (Karn), the assessee trust was carrying on its activity by letting out the marriage hall on hire. The Hon ble High Court held that authorities have to satisfy themselves about the genuineness of the activities of the trust or institution and how the income derived from the trust property was applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust. The Hon ble High Court further held that sufficient safeguard is provided under the Act for cancellation of registration obtained by the assessee in the event of its misusing the provisions. 23. In CIT Vs. Surya Educational and Charitable Trust and another [2013] 355 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the community, giving medical help to the community etc. Hon ble Apex Court held that it is well-settled that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the objects should be to benefit the whole of the mankind or all persons in a country or state. The Hon ble Apex Court further held that it is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present and the section of the community sought to be benefited must be sufficiently definite and identifiable or some common quality of a public or impersonal nature. 28. In CIT Vs. Dawoodi Bohra Jamat [2014] 364 ITR 31 (SC), the activities of the trust were both charitable and religious in nature and the objects of the assessee trust were based on religious tenets. The objects of the assessee trust as mentioned in the trust deed were to arrange for nyaz and majlis (lunch and dinner) on various religious occasions of the Dawoodi Bohra community, for the betterment of the Dawoodi Bohra community and also to arrange for religious education and to establish madarsa and such orga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. In Malik Hasmullah Islamic Educational and Welfare Society Vs. CIT, Faizabad [2012] 138 ITD 519 (Lucknow), the assessee society was having principal object to establish schools and educational institutions for Muslim boys and girls for providing Islamic education. The CIT denied registration on the ground that assessee-society was established for the benefit of a particular religious community and, therefore, it could not be considered as charitable institution u/s 11 or 12 in view of provision of Section 13(1)(d). The Lucknow Tribunal held that since the Commissioner did not show that the objects of the assessee were not charitable, order denying registration was not justified and decided the issue in favour of the assessee. 33. The last issue No.(VI) is that whether the supreme head of the trust taking food and clothes etc. from the funds of the trust was violative of the provisions of Section 13 of the Act particularly when he was not drawing any salary for his services rendered to the trust, we find that it is an admitted fact in this case that the 17th Karmapa who is the supreme head of the trust was taking food and clothes and meeting his basic needs from the funds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for registration u/s 12AA/12A with regard to the genuineness or otherwise of the aims and objects of the trust and not regarding the application of income of the trust for charitable or religious purposes, which is a subject-matter of assessment to be considered by the Assessing Officer at the time of assessment and that the supreme head of the trust taking food and clothes etc. from the funds of the trust is not violative of the provisions of Section 13 of the Act, and the assessee in this case has fulfilled all the preconditions for grant of registration u/s 12AA/12A of the Act and, accordingly, we direct the learned DIT (Exemptions) to grant registration to the assessee trust u/s 12AA/12A of the Act with effect from assessment year 2011-12 onwards, within a period of fifteen days from receipt of this order. We direct accordingly. The grounds of appeal of the assessee are allowed. ITA No.3061/Del/2013 :- 35. At the time of hearing, both the parties submitted before us that this appeal of the assessee shall become infructuous since the miscellaneous application of the assessee against the original Tribunal s order in ITA No.4941/Del/2011 was allowed and the ex parte order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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