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TMI Blog1995 (12) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ke the Trust a charitable trust. 4. The donations/gifts received by the assessee-Trust were not income in the hands of the assessee-Trust. 2. Briefly the facts : The assessee-trust was created by a Deed of Trust executed by an between The Concast (India) Pvt. Ltd., Settlor and Shri N.K. Nayar, R.M. Prabhu and Shri S. Kalyanpur, trustees. This Deed of Trust was sworn, scaled and executed on 25th day of March, 1977. The Trust is irrevocable, it was registered with the Charity Commissioner under his No. E-9087 on 23-11-1982. It was registered with the Commissioner of Income-tax, Bombay City-IV, Bombay under his No. IMS/15694 dated 22-3-1983. Certificate under section 80G was issued to the trust on 19-7-1983. It was valid up to 31-3-1985. Again the validity was extended up to 18-3-1989. This trust was created for providing financial assistance to the dependent children of the employees of the Settlor or its associated companies and deserving students from the territory of Maharashtra. 3. Schedule A of the Trust Deed contained the name of initial beneficiaries. Clause 5 of the Trust Deed reads as under : "The Trustees shall hold the Trust Fund upon Trust at their discretion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust : ------------------------------------------------------------------------- Name of the Trustees name Relationship with Beneficiaries the trustee ------------------------------------------------------------------------- Shri Sarosh Nayar Shri N.K. Nayar Son of the trustee Miss Shireen Nayar -do- Daughter of the trustee Miss Aradhana R. Prabhu Shri R.N. Prabhu Daughter of the trustee Shri P.N. Kotian -do- Son of employee of IRD Master Nihar Kalyanpur Late Shri Kalyanpur Son of Ex-trustee Miss Risgaba Kalyanpur -do- Daughter of Ex-trustee. ------------------------------------------------------------------------- 7. On this factual backdrop, the Assessing Officer held that the trust was not eligible for exemption under section 11 of the Act. It fell within the ken of section 13(3) of the Act. In coming to this conclusion, the following facts were also considered : "(a) that the trust is a sham trust, which is merely a medium to divert the funds of the respective companies expended i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under : "10. In the circumstances, the only conclusion is to hold that the trust is not really a charitable trust and benefit is not to the general public but only to a select few persons who happened to be closely connected with the employees/directors of the companies." It was stated the Assessing Officer has given a categorical finding that assessee-trust is not a charitable trust. Therefore, law applicable to the charitable trust cannot be invoked. 10. Our attention was invited on the prescription of section 2(24)(iia) of the Act. It reads as under : "2(24) "Income" includes-- (i) profits and gains; (ii) dividend; (iia) Voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to sub-clause (iv) or sub-clause (v) of clause (23C) to section 10. Explanation --For the purpose of this sub-clause "trust" includes any other legal obligation." He further referred to section 12, which is reproduced here as under : "12. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Commissioner. Inasmuch as, the CIT does not pass the order for registration, it is open for the Assessing Officer to examine the nature of the trust. It is well within his power to say that whether the trust is a charitable trust or not. Once the decision is taken that the trust is not charitable the assessment procedure should follow the consequences. Assessment should not be done in accordance with the rules set out for making the assessment of a charitable trust. Accordingly, the donation received by the trust cannot be treated as income for the year under consideration. 15. Shri K. Balakrishnan, learned departmental representative appeared before us. Our attention was invited on the various provisions of the Trust Deed. It was vehemently contended that the amount of donation received is clearly exigible to tax. The mere fact that in the particular assessment year, the benefit of section 11 was not given to the assessee is not enough to ignore the status and as such, to provide a different tax treatment. It only shows that in that particular year, assessee came within the sweep of section 13 which in effect, debars the assessee from taking advantage to section 11. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o examine that whether the trust carried out the objects in proper manner or not. It was found that the objects which were activated fell within the mischief of section 13. Assessing Officer, therefore, declined to give the benefit of section 11 to the assessee and the assessment was completed by following the procedure set out for giving tax treatment to the charitable trust. 19. From times, immemorial, private philanthrophy in our country, has been playing a very special and prominent role in enriching our cultural heritage and in catering to the educational, medial, socio-economic and religious needs of our countrymen. In so doing, it has supplemented the work of a welfare state ; in turn the state has on its part recognised this contribution by giving generous tax concessions to the charitable institutions. The liberal tax concessions provided by the state for the cause of charity have, however, been found at times to be abused with impurity and utilised for fulfilling personal ends. The profile of fiscal jurisprudence tempted the human ingenuity to defile the cause of charity. Now, since the tax concessions afforded to these institutions involve a sacrifice of public revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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