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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. SANJAY ARORA & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA No.641 (Asr)/2017 Assessment Year:2017-18
M/s Jain Kasur Parivar Trust, Vs. CIT (Exemptions), Ludhiana. Chandigarh [PAN:AACTJ 4502G] (Appellant) (Respondent) Appellant by : Sh. K.R. Jain (Ld. Adv.) Respondent by: Sh. Sandeep Chauhan (Ld. CIT- DR)
Date of hearing: 04.04.2019 Date of pronouncement: 23.04.2019 ORDER PER N.K.CHOUDHRY, JM: The instant appeal has been preferred by the Assessee/Trust against the order dated 27.07.2017 passed by the Ld. CIT (Exemptions), Chandigarh, u/s 12AA(1)(b)(ii) of the I.T. Act, 1961 (hereinafter called as ‘the Act’), whereby the Ld. CIT(E) rejected the application for grant of registration u/s 12AA of the Act.
The Appellant has raised the following grounds of appeal. 2. “1. That the order of the Ld. Asst. Commissioner of Income Tax, Circle-2, Ludhiana u/s 271AA of the Income Tax Act, imposing a penalty of Rs.37,648/- is arbitrary, unjustified against equity and natural justice.
The appeal is within time.
The appellant craves right to add any ground of hearing at the time of hearing.”
ITA No.641 (Asr)/2017 2 M/s. Jain Kasur Parivar Trust vs. CIT(E)
The Appellant has also raised the additional grounds of appeal.
”1. That the Ld. CIT(E) has erred in law and on facts while rejecting the application for registration u/s 12A.
That on facts of the case CIT(E) is not legally justified in holding that lack of dissolution clause and benefit confirmed to restricted group is erroneous and against the facts on record.
The above mentioned additional grounds are purely legal in nature for which all relevant facts are on record. Therefore, the same may kindly be admitted.
Reliance in this regard is placed on the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT 220 ITR page 183.”
As the additional ground raised by the assessee do not involve any additional document and/or submissions to substantiate its claim therefore, in view of the dictum of Apex Court in NTPC Ltd. vs. CIT, 229 ITR 383 (SC), the additional grounds are admitted.
The brief facts of the case are that the assessee trust vide application dated 30.01.2017 filed before the Ld. CIT(E), Chandigarh sought registration u/s 12A of the Income Tax, 1961. The application of the assessee was taken into consideration by the Ld. CIT(E) and the opportunity of being heard was given to the Assessee/Trust by fixing the case on 13.06.2017 and thereafter vide show cause notice 03.07.2017 sought certain clarifications/ documents as mentioned in para 5 of the impugned order.
5.1 In response to the said show cause notice, the assessee vide reply dated 30.06.2017 submitted the documents demanded and
ITA No.641 (Asr)/2017 3 M/s. Jain Kasur Parivar Trust vs. CIT(E)
also answered the query raised by the Ld. CIT(E). The Ld. CIT(E) after perusal of the reply of the assessee trust, rejected the application of the assesee trust. For the sake of brevity and ready reference the concluding part of the order is reproduced herein below.
“6. No one attended on the date fixed. However a reply dated 30.06.2017 was received on 03.07.2017 in response to the query raised through the show cause letter. At "para 9" of the reply dated 30.06.2017 the applicant self confessedly admitted that the Trust has been formed for the purpose of religious activities i.e. Adhiyatmik Sadhana, prayer and at present temple has been constructed. The applicant claimed that the activities of the trust are totally religious and charitable and the funds have been utilized for construction of Aradhana Bhawan/ Prayer center cum temple for the use of public for prayer, pravachan, bhajan kirtan and discussion of spiritual and religious subjects. On the basis of documents on record and the reply submitted by the applicant another show cause letter dated 20.07.2017 was issued raising the following additional queries and requesting to submit the reply on 24.07.2017:-
(i) Explanation as to how construction of temple/ prayer hall etc. amounts to charitable purpose as envisaged in section 2(15) of the Income Tax Act. ?
(ii) Whether the application for registration u/s 12AA has been filed for the first time? Fate of application filed earlier enclosing a copy of the order passed by the income tax authority for approving/rejecting any such application in the past.
(iii) MoA contains several clauses under aims and objects at point 4(i) to 4(xiii). Explanation regarding activities pursued vis-a-vis each objects enumerated at point 4 of the MOA.
(iv) Clarification for the claim of registration u/s 12AA of tire Act in absence of dissolution clause in the MoA of the trust in the light of section 13(1)(c) of the Act.
ITA No.641 (Asr)/2017 4 M/s. Jain Kasur Parivar Trust vs. CIT(E)
The applicant submitted the reply to the query raised vide its letter dated 22.07.2017. It has been self confessedly admitted by the applicant that tire activities of the trust are as per clause 4(ix) and 4(xii) of the trust deed which are for the performance of regular dhian, Sadhna, Prayers and Bhajan Sandhya and preachings on the concept of Ahimsa. The applicant however did not explain that how such activities fall in tire categories of "charitable purpose" as envisaged in section 2(15) of the I.T. Act. Financial statements for the last three years reveal that the applicant trust has received income only through Bank interest. Donations received have been utilized for the construction of temple treating the same as corpus fund. The activities of the applicant trust do not enure to be charitable in nature and by the very name "Jain Kasur Parivar Trust" itself it appears to be a family trust pursuing religious activities of a private nature.
Notwithstanding the above, the papers submitted were examined. It is observed from the copy of Trust Deed that it does not include dissolution clause. The provisions of section 13(l)(c) of the IT Act states that "in case of a trust/ society for charitable or religious purposes or a charitable or religious institution, any income thereof –
(i) If such trust or institution Iras been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or
(ii) If any part of income or any property of the trust or the institution (whenever created or established) is during the previous used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3):"
In the absence of the Dissolution clause, the presumption of the law is that the assets and liabilities of the Trust will be distributed amongst tire members of the Trust in case the entity closes its operations or is disbanded. The provisions of Section 13(l)(c) of the Act are clearly attracted without this dissolution clause. There is no satisfactory response on the issue of lack of dissolution clause in the Trust Deed.
In view of the all the above the genuineness of activities and that of tire Trust cannot be ascertained. The lack of 'dissolution clause' clearly impinges on the public charitable character
ITA No.641 (Asr)/2017 5 M/s. Jain Kasur Parivar Trust vs. CIT(E)
of the applicant which is a sine qua non, in cases seeking exemption from taxation. Not only does it render the Deed restrictive and not ensuring to the benefit of general public, it further exacerbates the issue that ‘the benefits of the entity is confined to a restricted group. No evidence has been adduced in favour of tire entity existing for the benefit of the general public. The application for grant of registration u/s 12AA in the present case is accordingly rejected.”
The assessee on being aggrieved against the order of the Ld. CIT(E) filed the instant appeal.
Having heard the parties at length and perused the material available on record. From the concluding part as referred above of the order impugned, it reflects that the Ld. CIT(E) declined the registration mainly on the following grounds :
(i) That the activities of the trust, as per clause 4(ix) and 4 (xii) of the trust deed are for the performance of regular Dhian, Sadhana, Prayers and Bhajan Sandhya and Preachings on the concept of Ahinsa. However, the appellant did not explain that how such activities falls in the categories of “Charitable Purpose” as envisaged in section 2(15) of the I.T. Act.
(ii) Financial statements for the last three years reveal that the applicant trust has received income only through Bank interest. Donations received have been utilized for the construction of temple treating the same as corpus fund.
ITA No.641 (Asr)/2017 6 M/s. Jain Kasur Parivar Trust vs. CIT(E)
(iii) The activities of the applicant trust do not ensure to be charitable in nature and by the very name. “Jain Kasur Parivar Trust” itself it appears to be a family trust pursuing religious activities of a private nature. (iv) Trust deed does not include the dissolution clause.
7.1 Our attention was drawn to the aims and objects of the trust wherein xiii aims and objects have been included in the trust deed. In the order, it is observed by the Ld. CIT(E) that the assessee trust has been formed for the purposes of religious activities i.e., Dhian, Sadhana, Prayer, Bhajan Sandhya and Preachings and at present temple has been constructed. Further as claimed by the assessee, the funds have been utilized for construction of Aradhana Bhawan/Prayer center cum temple for the use of public for prayer, pravachan, bhajan kirtan and discussion of spiritual and religious subjects, which goes to show that the assessee is carrying out certain activities which can be termed as religious activities but in our considered opinion can also be construed as a charitable activities. As there is no bar in granting a registration u/s 12AA of the Act to the Application trust for religious purposes, therefore, we are not in agreement with the observations of the impugned order as mentioned by us in para not 7(i) and 7(ii).
7.2 Now coming to the objection with regard to the name of the trust whereby the Ld. CIT(A) has held that from the very name of the trust, it appears to be family trust pursuing religious activities of a private nature. This observation is against the aims and objects of the assessee trust. In our considered view, the aims and objects cannot be determined on the basis of name of the trust, until and unless there must be some restrictions, in ensuing the aims and
ITA No.641 (Asr)/2017 7 M/s. Jain Kasur Parivar Trust vs. CIT(E)
objects and trust's activities are of private in nature which we realized from activities and the aims and objects of the assessee trust do not appears so, as held by the Ld. CIT(A), hence, the said ground of rejection is also not sustainable.
Now coming to the 4th ground which relates to absence of 7.3 dissolution clause in the trust deed, our attention was drawn by Mr. K R Jain (Ld A.R. of the Assessee) to the Memorandum of Association and Rules and Regulation of Trust, wherein in para No.45 the dissolution clause has been mentioned indirectly, which for the sake of ready reference is reproduce herein below. TRUST IRREVOCABLE The Trust hereby declared and created shall be and remain irrevocable for all times. However, by a unanimous decision of all the Life Trustees, the same may merge into/amalgamate with any other Trust or Society etc. having inter alia the said or similar objects. So from the clause No.45 of the trust deed, the dissolution clause is exists hence the instant ground of rejection is also not sustainable.
7.4 The Ld. CIT(E) in the concluding part of its order also observed that no evidence has been adduced in favour of the entity existing for the benefit of the general public. From the aims and objects, it clearly reflects that there is no restriction for any caste, colour, creed, sector, sex, age and/or other natural or man-made differences and further the aims and objects of the trust is beneficial to the public at large, hence this ground of rejection is also not sustainable.
ITA No.641 (Asr)/2017 8 M/s. Jain Kasur Parivar Trust vs. CIT(E)
7.5 On the aforesaid analyzation and observations, we are inclined to set aside the order passed by the Ld. CIT(E) and to allow the appeal of the assessee trust. Consequently the Ld. CIT(A) is directed to grant the exemption u/s 12AA of the Act to the assessee trust, from the date of application, however we clarify that the Ld. CIT(E) shall be at liberty to impose condition(s) if any, found suitable and appropriate, under the peculiar facts and circumstances of the instant case.
In the result, the appeal filed by the assessee trust stands allowed. Order pronounce in the open Court on 23.04.2019
Sd/- Sd/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.04.2019 /PK/ Ps. Copy of the order forwarded to: (1) M/s M/s Jain Kasur Parivar Trust, Ludhiana (2) The CIT (Exemption), Chandigarh (3) The SR DR, I.T.A.T., Amritsar True copy By order