MAHARAWAL KHEWAJI TRUST,,FARIDKOT vs. DCIT, C-1 (E), CHANDIGARH

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ITA 569/CHANDI/2019Status: DisposedITAT Chandigarh06 August 2025AY 2015-16Bench: SHRI RAJPAL YADAV (Vice President), SHRI KRINWANT SAHAY (Accountant Member)7 pages

AI SummaryDismissed

Facts

Maharawal Khewaji Trust, a testamentary trust, applied for registration under Section 12A of the Income Tax Act, 1961, which was rejected by the Commissioner, leading to a writ petition (CWP 9483/1996) in the Punjab and Haryana High Court. The High Court, in an order dated April 01, 2024, found the Trust illegally formed and declared it null and void, a decision later affirmed by the Supreme Court. Consequently, the Assessing Officer and CIT(A) treated the assessee as an Association of Persons (AOP) and taxed its income accordingly.

Held

The Income Tax Appellate Tribunal held that given the jurisdictional High Court's finding that the Trust was illegally formed and declared null and void, a decision upheld by the Supreme Court, the Assessing Officer and CIT(A) were correct in taxing the assessee as an 'AOP'. The tribunal, therefore, dismissed all grounds of the assessee's appeal.

Key Issues

1. Whether the assessee, a testamentary trust, should be treated as a charitable trust or an Association of Persons (AOP) given that its formation was declared illegal and null and void by the High Court and Supreme Court. 2. Consequential issues regarding set-off of losses, treatment of agricultural income, and allowance of income tax/TDS as expenditure, all dependent on the trust's legal status.

Sections Cited

12A, 70, 71

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘B’, CHANDIGARH

Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY

Hearing: 14.05.2025Pronounced: 06.08.2025

Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the assessee against the order dated 15.02.2019 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi.

Grounds of Appeal are as under:-

1. That on the facts and circumstances of the case and in law, the learned CIT(A) should have waited for 569-Chd-2019 Maharawal Khewaji Trust, Faridkot. 2 the result of the decision of the Hon'ble Punjab and Haryana High Court on the issue of registration of the Trust u/s 12A of the Income tax Act, 1961 to avoid multiple proceedings.

2. That the learned CIT(A) should have passed the detailed order as his order is appealable. So, it is liable to be quashed. 3. That the learned AO should have taken the income as per the Income and Expenditure A/c and not head wise. So, the assessment is liable to be quashed. 4. That the learned CIT(A) should have set off the loss in charitable hospital with other income of the current assessment year under appeal u/s 70/71 of the Income tax Act, 1961 as the assessee trust has not been treated as charitable trust but AOP for all the sources of income. The same was allowed for the assessment year 2001-02 in appeal vide order dated 13.01.2005 by CIT(A), Bathinda. 5. That on the facts and circumstances of the case and in law, the learned CIT(A) should not have treated the agricultural income for rate purposes being a case of charitable society. That on the facts and circumstances of the case 6. and in law, the learned CIT(A) erred in not allowing the payment of Income tax/TDS against the assessed income as expenditure being a case of charitable society. It is only application of income.

569-Chd-2019 Maharawal Khewaji Trust, Faridkot. 3 7. That any other relief may kindly be granted to the assessee to whom it is found entitled at the time of hearing of appeal.

3. Brief facts of the case as per the order of the Ld. CIT(A) are as under: “The appellant is a Testamentary Trust which came into existence through "Will" executed by Raja Harinder Singh Brar Bans Bahadur, the erstwhile ruler of Faridkot State. The dominant purpose of the said Trust was to look after the buildings and movable properties of the deceased Raja Harinder Singh Brar. The Trust filed an application before the Commissioner of Income Tax, Jalandhar under the provisions of section 12A of the Act on 22.12.1990 but on examining the activities, objects and Constitution of the Trust, the Commissioner, Jalandhar refused to register the Trust as a Charitable Trust. Similar application was made by the Trust before the Commissioner, Amritsar, which application was also rejected. Against such rejections, the appellant Trust approached the Hon'ble Punjab and Haryana High Court by way of writ petition in the year 1996 bearing no. CWP 9483/1996. This writ was dismissed vide order dated 4.11.2013 for want of persuasion but again revived and thus pending, which is still pending and has not yet seen any finality. The appellant claims 569-Chd-2019 Maharawal Khewaji Trust, Faridkot. 4 itself to be a Trust and a Charitable Trust, though the Department, in the absence of registration to the said Trust, treats it as private Trust and assesses its income accordingly, leading to dispute”.