COMMISSIONER OF INCOME TAX, FARIDABAD vs. R.K.M. EDUCATIONAL & CHARITABLE TRUST ETC.

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ITA/115/2014HC Punjab & HaryanaPHHC01109237201408 July 2014Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE RAJAN GUPTA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal by the revenue had no merit. The Court noted that the exemption under Section 80G was granted to the trust for the first time in 1978 and subsequently renewed until March 31, 2009. The objects of the trust and the society were found to be similar. The Tribunal's reasoning, which the High Court found persuasive, indicated that the change in legal status from a trust to a society did not alter the fundamental nature of the entity or its beneficiaries. The management and property remained under the same trustees, and the property continued to be held for public benefit. The society, in practice, had remained a paper entity with no separate filings or PAN. Therefore, the conversion to a society did not disentitle the applicant from claiming exemption under Section 80G. The High Court upheld the Tribunal's decision, directing the CIT to grant exemption under Section 80G to the assessee in accordance with law. No issue was expressly left undecided.

What were the facts?

The assessee, RKM Educational and Charitable Trust, established in 1976, was granted registration under Section 12AA and exemption under Section 80G of the Income Tax Act, 1961, with the latter exemption valid until March 31, 2009. The trust later formed a society with the same name, registered in 1981. The assessee applied for renewal of Section 80G exemption in June 2009. The Commissioner of Income Tax (CIT) rejected the claim, citing that the society was not granted Section 12AA registration and that its Memorandum of Association differed from the trust deed. The Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeal, and the revenue filed an appeal before the High Court. The dispute concerns the eligibility for Section 80G exemption for assessment year(s) not explicitly stated but implied to be post-March 31, 2009.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the claim of the society under Section 80G of the Income Tax Act, 1961, when the society was never granted registration under Section 12AA by the Commissioner of Income Tax? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the claim of the society under Section 80G of the Income Tax Act, 1961, when the memorandum of association and rules and regulations of the society registered on 23.10.1981 are entirely different from the trust deed executed on 14.4.1976? Assessee's arguments: The judgment does not record specific arguments made by the assessee before the High Court. However, the ITAT's reasoning, as quoted, suggests the assessee argued that the objects of the trust and society were similar, the management and property remained the same, and the society was a mere paper entity without independent operations or filings. The trust itself was irrevocable, and the change to society status did not alter the implementation of its objects. Revenue's arguments: The revenue contended that the assessee-trust was converted into a society, and therefore, the CIT was justified in refusing to grant exemption under Section 80G. The revenue argued that the Tribunal erred in reversing the CIT's order.

Which sections of the Income-tax Act were involved?

Section 80G,Section 12AA,Section 260A,Section 2(31),Section 12A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:8.7.2014 Commissioner of Income Tax, Faridabad ……Appellant Vs. RKM Educational and Charitable Trust, 1288, Prerna Dham, Sector 15, Faridabad …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Tejinder K.Joshi, Advocate for the appellant. Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 28.6.2013, Annexure A.II passed by the Income Tax Appellate Tribunal, Delhi Bench ‘F’ New Delhi in ITA No.783/DEL/2010 and CO No.108/DEL/2010 (ITA No.783/DEL/2010), claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the claim of the society under section 80G of the Income Tax Act, 1961 whereas the society was never granted registration under section 12AA by the Commissioner of Income Tax? GURBAX SINGH 2014.08.12 16:14 integrity of this document High Court Chandigarh ii) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the claim of the society under section 80G of the Income Tax Act, 1961 whereas memorandum of association and rules and regulations of the society registered on 23.10.1981 are entirely different from the trust deed executed on 14.4.1976?”

2.

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The applicant trust was founded/established vide trust deed dated 14.4.1976 and was registered with the Sub Registrar, Ballabgarh. Registration of the trust under section 12AA of the Act was granted firstly by the Commissioner of Income Tax, Rohtak [CIT] vide order dated 6.3.1978. Lastly, exemption under section 80G(5) of the Act was granted upto 31.3.2009 vide order dated 29.1.2004. Application for renewal of exemption under Section 80G of the Act was filed by the applicant on 22.6.2009. Perusal of the documents filed by the applicant trust revealed that the trust deed was made on 14.4.1976 in favour of Smt.Rattan Kaur Memorial Educational and Charitable Trust. This deed was got registered under section 12A as charitable trust with CIT, Rohtak vide order dated 6.3.1978. Later, a society was formed with Memorandum of Association, Rules and regulations. The applicant trust got it registered with the Registrar of societies vide certificate of registration dated 23.10.1981 in favour of Rattan Kaur Memorial Education and Charitable Trust, Faridabad with the same name as that of the old trust. The assessee was asked vide order dated 4.12.2009 to explain whether the organisation was a trust or society. It submitted its reply on 23.12.2009. The claim of the society was rejected by the CIT vide order dated 22.1.2010, Annexure A.1 under section GURBAX SINGH 2014.08.12 16:14 integrity of this document High Court Chandigarh 80G of the Act read with Rule 11AA(5) of the Income Tax Rules, 1962 (in short, “the Rules”). Aggrieved by the order, the assessee filed appeal before the Tribunal. Vide order dated 28.6.2013, Annexure A.II, the Tribunal allowed the appeal of the assessee and dismissed the cross objections filed by the department. Hence the instant appeal by the revenue.

3.

We have heard learned counsel for the revenue and perused the record.

4.

Learned counsel for the revenue submitted that the assessee- trust was converted from trust into society and, therefore, the CIT was justified in refusing to grant exemption under section 80G of the Act. According to the learned counsel, the Tribunal had erred in reversing the order of the CIT.

5.

After hearing learned counsel for the revenue, we do not find any merit in the arguments of the learned counsel for the revenue.

6.

It was not disputed that the exemption under section 80G of the Act was granted to the trust for the first time on 19.10.1978 from 1.4.1977 to 31.3.1978 which was subsequently renewed on 29.1.2004 upto 31.3.2009. The objects of the trust and the society were similar. The Tribunal while deciding the issue in favour of the assessee had noticed as under:- “14. It has also nowhere been disputed by the learned CIT that the objects of the trust and those of the society are similar. No, be it a trust or a society, the legal status of either is that of a body of individuals and the benefit in either case inures to the same indeterminate public. Neither the trust nor the society, by itself,is a ‘person’ under section 2(31) of the Act. GURBAX SINGH 2014.08.12 16:14 integrity of this document High Court Chandigarh

15.

Moreover, there is nothing on record to show that the management of the trust has been taken over by the society, or that the property of the trust, post registration as society, belongs to the society. Undisputedly, the board of Trustees are the same. The property, as earlier, continues to be held under trust for pro bono publico or for the benefit of the public. As such, there is no transfer of ownership of property and the assessee continues to be the indeterminate beneficiary and not the trust. And due to this reason, the learned CIT has fallen into error in holding that the approval under Section 12A of the Act was granted to the trust and not to the society, the society is not eligible for grant of certificate under section 80G (5) of the Act. Undeniably, the trust is an irrevocable trust. Change over to the status of society makes no difference in this position and implementation of the objects of the trust is still a legal obligation to be discharged.

16.

Still further, ever since the date of its coming into existence, the society has remained a mere paper entity. As per the sequence of events (AP B II, page 131), no return of the society has ever been filed, no PAN was applied for, nor was any ever allotted to the assessee. The exemption under section 80G of the Act was granted to the trust, for the first time, for the period from 1.4.1977 to 31.3.1978 on 19.10.1978. A copy of the certificate dated 19.10.1978 in this regard is at APB 1, page 63. Then onwards,the exemption under section 80G was regularly granted to the trust. The latest order granting such exemption was that passed on 29.1.2004 for the period from 1.4.2004 to 31.3.2009 (copy at APB 1, page 56). This position has not been denied by the learned CIT. Rather, his case is that grant of further exemption would amount to perpetuating mistake.

17.

In view of the preceding discussion, we do not find any mistake likely to occur on grant of further exemption under Section 80G to the applicant trust. As seen, there has come GURBAX SINGH 2014.08.12 16:14 integrity of this document High Court Chandigarh about no change in facts or circumstances. Merely registration as a society does not disentitle the applicant from the exemption claimed, has deliberated upon hereinbefore.

18.

Therefore, the grievance sought to be raised by the assessee is found to be justified and is accepted as such. The assessee in fact in this case, are the indeterminate beneficiaries. Accordingly, the order passed by the learned CIT is cancelled. The application filed by the assessee trust is allowed. The learned CIT is directed to grant exemption under section 80G of the Act to the assessee in accordance with law.

7.

The findings recorded by the Tribunal have not been shown to be illegal or perverse in any manner. Consequently, no substantial question of law arises and thus the appeal stands dismissed. (Ajay Kumar Mittal) Judge July 08, 2014 (Jaspal Singh) ‘gs’ Judge GURBAX SINGH 2014.08.12 16:14 integrity of this document High Court Chandigarh

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