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TMI Blog2018 (10) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to act in a Trust by such person.Section 73 per se cannot invalidate a Trust, but rather provides bar for appointment of non-resident as a trustee. Thus provisions of Section 60 and 73 of the ‘Indian Trust Act, 1882’ as relied upon by the ld. CIT(E) to hold that assessee Trust is not a valid Trust, and therefore, cannot be granted registration u/s.12AA cannot be held to be a valid reason. As pointed out by the learned counsel before the ld. CIT (E) in the application filed in ‘Form 10A’, assessee-applicant Trust has already given the list of the trustees and one of the trustee was citizen of India and domiciled in India, and therefore, it cannot be held that simply because other four trustees were non-resident and the assessee trust is not a valid trust. We accordingly, hold that assessee is a valid trust under the Indian Trust Act, 1882. Coming to the ‘objects’ as given in the ‘Trust Deed’, prima facie, it appears that all the objects are ostensibly for the charitable purposes. CIT(E) has not examined the objects and the genuineness of the activities of the assessee trust which is required to be examined while considering the registration u/s 12AA, and therefore, in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , bequests, devises, benefits of trusts and property of any sort, without limitation as to value or amount, for such Charitable Purposes, and make grants and contributions of income and principal as the Board of Trustees may from time to time determine, to international, national and community-based foundations, institutions, associations and other organizations organized for the same or similar purposes; (4) to borrow money or contract debts and mortgage, pledge, convey, assign in trust or otherwise encumber or dispose of, the property or other assets of the Trust; (5) to purchase, lease or otherwise acquire, to own, hold, use, operate, manage, improve, repair, maintain, control, to sell, assign, transfer, convey, exchange, lease or otherwise dispose of, to mortgage or otherwise encumber, real property, whether improved or unimproved, or structures, buildings, or other improvements thereon, and to construct, improve, alter or remove structures, buildings or other improvements upon real property. (6) To construct and run schools, colleges, and educational institutions for the benefit of the public at large. (7) To provide grants, scholarships, fellowships and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less he is domiciled in India. Based on this reasoning, he has rejected the assessee s application for grant of registration u/s.12AA and application for exemption u/s.80G. The relevant observation of the ld. CIT(E) reads as under: 3. In this connection, it is pertinent to mention that Explanation 1 to 60 of the Indian Trusts Act provides, inter alia, that a person domiciled abroad or an alien enemy, i.e. a person not domiciled/resident in India or a person belonging to a state which is at war with India, are not proper persons to be trustees and they are not permitted to be trustees of Indian resident trusts. Indian Courts have held that a non- resident cannot be a trustee of an Indian resident trust unless he is domiciled in India. The rationale behind this is that the trustee at all times must be within the reach of Indian courts in order to ensure the enforcement of the terms of the trust. However, if an Indian trust does not have a resident trustee, then a court application would have to be made in order to invalidate the trust. 3.1. Section 73 of the Indian Trusts Act provides that where a person appointed as a trustee is absent for a continuous period of six m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of ITAT Jaipur Bench in the case of Sidha Sthan Shri Kapleshwar Mahadev Sanyas Ashram Trust vs. CIT(E), ITA Nos.655 656/JP/2017 dated 28th September 2007, (2018) 162 DTR (JP) (Trib) 202 . He further submitted that all the other trustees otherwise were basically from Indian origin and their parents were staying in India and due to their professional activities they were settled abroad. Thus, trustees who are well reputed and famed doctors are doing genuine work for imparting education in modern medicine and medical science and educating the doctors in global standards in medical fields and medicine. He also pointed out that Pondicherry Government has given grant to the assessee Trust looking to its noble cause. Thus, not only it is a valid Trust but also its objects were charitable and hence registration u/s.12A should be granted. 6. On the other hand, learned CIT-DR relied upon the order of the ld. CIT(E) and submitted that all the trustees were NRIs; and in terms of Sections 60 and 73 of the Indian Trust Act, 1882 , they cannot be held to be as proper persons/trustees for the purpose of Indian Trust Act. He further submitted that out of the 4 trustees th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise of discretion, he (trustee) cannot execute it unless he is competent to contract. Thus, a person who may be trustee must be capable of holding a property of which the Trust is declared and must be competent to deal with the property as required by the Trust or as directed by the beneficiaries. The Ld. CIT (E) in his order has also mentioned that under the Indian exchange control regime, it is not possible for a trust holding immovable property to have a non-resident trustee. However, he is not specified under which Indian control regime there is such a bar. On the contrary, provision of Section 6(5) of FEMA 1999 , a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India, if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India. Thus, there is no specific bar under Section 10 of the Trust Act for an appointment of NRI as trustee of an Indian Trust. 8.2 However, certain restriction of appointment of NRI as trustee has been given in the Act, for example Section 73 which provides as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntment of a new trustee in his/her place. This provision also does not forbid the appointment of NRI, albeit acts as an impediment to their appointment. Section 73 per se cannot invalidate a Trust, but rather provides bar for appointment of non-resident as a trustee. 8.3 Similarly, Section 60 r.w.s. Explanation-1 of the Indian Trust Act reads as under: - 60. The beneficiary has a right (subject to the provisions of the instrument of trust) that the trust property shall be properly protected and held and administered by proper persons and by a proper number of such persons. Explanation I-The following are not proper persons within the meaning of this section:- A person domiciled abroad; an alien enemy; a person having an interest inconsistent with that of the beneficiary; a person in insolvent circumstances; and, unless the personal law of the beneficiary allows otherwise, a married woman and a minor. The aforesaid section provides that beneficiary has a right to proper trustees. This section is based on a principle that the trust whose property depends for its continuance upon the faith and integrity of the trustee should be allowed for all practical me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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