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TMI Blog2015 (10) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. - Decided in favour of assessee. - I.T. A. Nos.422 & 1632/Bang/2013 - - - Dated:- 4-9-2015 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER For The Appellant Shri V. Srinivasan, C.A. For The Respondent Shri G.R. Reddy, CIT (D.R) ORDER Per Shri Jason P. Boaz, A.M. : These two appeals by the assessee are directed against two separate orders under Section 12AA of the Income Tax Act, 1961 (in short 'the Act') dt.31.1.2013 and 27.9.2013 respectively refusing the assessee Registration under Section 12AA of the Act. Since the issues involved are inter-connected, these appeals were heard together and are being disposed off by way of this common order. 2. The facts of the case, briefly are as under 2.1 The assessee trust was constituted under the Instrument of Declaration of Trust dt.4.6.2005 for attainment of certain aims and objectives mentioned in Chapter IV of the Trust Deed. The assessee trust made an application for registration in Form No.10A on 30.3.2011. The said application was disposed off by the CIT, Davangere by order dt.28.9.2011, refusing it registration on the ground that the assessee had not fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to register the trust under Section 12AA of the IT Act, 1961, in so far as it is against the appellant, is opposed to law, equity, weight of evidence, probabilities facts and circumstances of the case. 2. The learned CIT is not justified in holding that the appellant trust has not fulfilled the conditions laid down for grant of registration under Section 12AA of the IT Act, 1961 under the facts and in the circumstances of the appellant s case. The finding is on erroneous appreciation of the facts and requires to be vacated. 3. The learned CIT (Appeals) failed to appreciate all the objects mentioned in the trust deed are charitable in nature as contemplated under Section 2(15) of the Act and the objects of developing the Muslim community like object No.1, 2, 9, 11, 19, 20 21, which is a broad cross section of general public itself is an object of advancement of general public utility, which is a charitable object along with the other objects No.2, 3, 8, 16 and 17, which are not confined for the benefit of Muslim community but to the public at large and thus all objects are charitable and even if some of them are considered for the benefit of the community, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided to amend the aims and objectives in the original Trust Deed dt.4/6/2005/ It was stated in the Deed of Amendment that the aims and objects of the Trust shall be amended and replaced with the objects mentioned in the Amendment Deed, which will be adverted to w.r.e.f. 4.6.2005 itself. 3.2 Based on the Amendment Trust Deed dt.18.3.2013, the assessee filed a fresh application in Form No.10A on 28.3.2013 seeking grant of Registration under Section 12AA of the Act. The said application was disposed off by the CIT, Davangere vide order dt.27.9.2013. Once again the ld. CIT refused to grant registration observing that the assessee had already filed an appeal against the earlier order of the CIT, Davangere dt.31.1.2013 refusing the assessee registration and that matter was subjudice. It was also observed by the ld. CIT that the Amended Trust Deed evidences that the assessee had agreed with the findings in the earlier order dt.31.1.2013. In that view of the matter, the fresh application for registration also come to be rejected by the order of the learned CIT dt.27.9.2013. 3.3 Aggrieved by the order of the CIT, Davangere dt.27.9.2013 rejecting the application for Registration under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits of the assessee Trust are open to all persons without distinction of caste, community or sex. Our attention in this regard was invited to clause 26 of the Trust Deed dt.4.6.2005, which declares that the benefit of the Trust shall ensure to the public without any distinction of caste, community or sex. Reliance was placed by the learned Authorised Representative on the decision of the Hon'ble Apex Court in the case of CIT V Dawood Bohra Jamat reported in (2014) 102 DTR (SC) 361. It was contended that the upliftment of a community itself was an object of general public utility as held by the Hon'ble Apex Court in the case of Ahmedabad Rana Caste Association reported in 140 ITR 1. It was submitted that the provisions of section 13(1)(b) of the Act, is to the effect that a trust created or established for the benefit of a particular religions or caste would not be entitled to exemption under Section 11 of the Act. Distinction was sought to be made between upliftment of the community and channeling the benefits of the Trust to a particular community. 5.3 On the issue of the refusal of registration by the ld. CIT s order dt.3.1.2013 is concerned, we find it relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the charitable purposes under its objects. In CIT v. Kamla Town Trust, (1996) 7 SCC 349, the object of the trust included construction of houses for workmen in general and in particular for the workmen, staff and other employees of the settler company. It was held that while the provisions relating to workmen in general did constitute a charitable object, the words in particular for workmen of the company negative the charitable purpose and therefore, the entire trust could not be considered to have been established wholly for charitable purpose. 33.In Abdul Sathar Haji Moosa Sait Dharmastapanam v. Commr. of Agri. Income Tax, (1974) 3 SCC 257, at page 259, this Court considered the question whether the appellant therein was a public charitable trust within the meaning of Section 4(b) of the Kerala Agricultural Income Tax Act, 1950. The 3/4th of the income of the bequest was primarily earmarked for the benefit of near relations of the testator only, it cannot be considered as a public charitable trust. While the rest one-fourth was concluded to form the valid charitable trust. (Trustees of Gordhandas Govindram Family Trust v. CIT). In CIT v. Andhra Chamber of Commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Mohammadan Law would be covered under both charitable as well as religious purpose. Further, while providing food and fodder to animals especially cow is religious activity for Hindus, it would be charitable in respect to non-Hindus as well. Similarly, service of water to the thirsty would find mention as religious activity in sacred texts and at the same time would qualify as a charitable activity. 37................................. 38. Unquestionably, objects (c) and (f) which provide for the activities completely religious in nature and restricted to the specific community of the respondent-trust are objects with religious purpose only. However, in respect to the other objects, in our view the fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in color. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. The Privy Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the study and dissemination of ethical principles and the cultivation of rational religious sentiment would fall in the category of educational purposes. The Madarsa as a Mohommedan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the object (d) would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character. 41..................................... 42. 43.Thus, the second issue which arises for our consideration and decision is, whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under Section 11 of the Act in view of provisions of Section 13(1)(b) of the Act. 44........................ 45.From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds amended with retrospective effect by the Amendment Deed dt.18.3.2013. We find that the disposal of the appeal in ITA No.1632/Bang/2013 against the order dt.27.9.2013 of the learned CIT will automatically dispose off this appeal and no separate adjudication is required as these objects are no longer relevant for the purpose of grant of Registration under Section 12AA of the Act. ITA No.1632/Bang/2013 6.1 Although several grounds have been raised in this appeal, the sole issue that arises for our consideration is whether the assessee is entitled to Registration under Section 12AA of the Act in the light of the amended objects contained in the Amendment Trust Deed dt.18.3.2013. 6.2 On the aspect of the Amendment of the Trust Deed, we find that the Hon'ble Rajasthan High Court in the case of Laxminarain Lath Trust reported in 170 ITR 370 has observed as under 9. The next question which needs to be considered is as to the effect of the supplementary deed dt. 21st May, 1958, whereby cl. 2(vi) has been amended and the words belonging to the family of Laths have been deleted and in their place, the words in distress have been inserted. As a result of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also laid stress on the provisions of the said section which provide as under Sec. 11 Trustee to execute trust.-The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal civil Court of original jurisdiction. Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries. Explanation.-Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be (a) to pay only the debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest. 12. With regard to the aforesaid provisions of the Indian Trusts Act, it may be stated that in s. 1 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the beneficiary is incompetent to contract, his consent may be given by the civil Court. The situation in the case of a public trust is, however, different because in a public trust, the beneficiaries are generally indeterminate and the provisions of s. 11 requiring the consent of the beneficiaries cannot, therefore, be applied to a public trust. 6.3 The Hon'ble Apex Court in the case of Kamala Town Trust reported in 217 ITR 699 had quoted with approval the aforesaid judgment of the Hon'ble Rajasthan High Court in the case of Laxminarian Lath Trust (supra) and observed as under In the case of Laxminarain Lath Trust vs. CIT (1987) 65 CTR (Raj) 91 (1988) 170 ITR 375 (Raj) TC 23R. 763 a Division Bench of Rajasthan High Court speaking through S.C. Agrawal, J., as he then was, had to consider the question whether any rectification of the trust deed which changed character of the private trust into public charitable trust could be relied upon before the IT authorities for claiming exemption under s. 11 of the IT Act, 1961 by the assessee-trust. In that case the original trust deed executed in August, 1948 did not bring out the real intention of the settlor to create ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be, the charitable intent and makes viable what otherwise may die. The aforesaid decision of the Rajasthan High Court also takes a view which is almost parallel to the view taken by the Delhi High Court though the binding nature of the rectification order of the Civil Court on the ITO is not highlighted as no such occasion arose for Rajasthan High Court to pronounce on the same on the facts of that case. However, the fact remains that after due rectification of the original trust deed either by the settlor himself by executing a supplementary deed or by getting it rectified through competent Civil Court under the relevant provisions of the Specific Relief Act, the trustees would be bound to carry out the amended and rectified objects of the trust and if they fail to do so they would be guilty of breach of trust for which even proper proceedings can be initiated against them under s. 92 of the CPC. For all these reasons, therefore, it must be held that when such rectified trust deed is pressed in service before the IT authorities in assessment proceedings concerning the relevant assessment years the ITO will have to interpret such rectified instrument for finding out its correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns or to carry out business transactions. In this context, it appears to us that the failure to give notice to the Department in the suit for rectification, as was done in Van Der Linde's case (supra) is also not quite relevant. It is not as if the IT Department is a party to or bound by, the terms of the trust deed so that such failure would vitiate the rectification or entitle the Department to ignore the Court's order of amendment. So far as the IT Department is concerned its province under s. 11 of the IT Act is to find out and give effect to the contract between the parties; it is entitled to ask whether the trustees are holding the properties in question under a legal obligation wholly for religious or charitable purposes. There can be no doubt, having regard to the order of the Court by which the trustees are bound, that they can administer the trust only in terms of the amendment directed by the Court. The trustees are and must be deemed from the beginning, to have under a legal obligation to hold the properties only for the objects and with the powers set out in the trust deed as amended. It, therefore, appears to us that, whatever may be the correctness or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o start and workout such schemes as may be necessary, for the amelioration of distress and poverty in the country; (4) To establish and provide wells, such as open type or tube type; (5) To conduct marriages of poor girls of all communities; (6) Relief work during the disastrous times; (7) To provide loans and financial assistance to the poor people to uplift themselves form poverty so that they could engage themselves in gainful employment. D. GENERAL PUBLIC UTILITY (1) Foster the spirit of brotherhoold among various sections, shades of opinions and schools of thought among all people at large; (2) To promote inter religious harmony and good understanding between the people of all communities. (3) The benefit of the Trust shall ensure to all sections of the Public i.e. beneficiaries in India, irrespective of their caste, creed and religion and region of domestic in India. 6.7 From a perusal of the aforesaid objects extracted by us above, it appears to us that the objects of the assessee trust are charitable in nature, coming under the provisions of Section 2(15) of the Act. The only objection of the ld. CIT for grant of Regis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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