ARIHANTH CHARITABLE TRUST,JAIPUR vs. CIT(EXEMPTIONS), JAIPUR

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ITA 1052/JPR/2016Status: DisposedITAT Jaipur31 March 20174 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the Commissioner of Income Tax (Exemptions) erred in rejecting the application solely on the ground that the trust was not registered with the Sub-Registrar or the Assistant Commissioner of Devsthan Vibhag. Citing a coordinate bench decision in Tsurphu Labrang vs. Director of Income Tax (Exemptions), the Tribunal noted that Rule 17A(a) of the Income Tax Rules, 1962, does not mandate registration under state law as a condition precedent. It clarifies that if a trust is created otherwise than under an instrument, the document evidencing creation is sufficient, and the rule does not specify the type of document required. The Tribunal found that the coordinate bench held that even an oral creation of a trust, if evidenced, can be eligible for registration. Therefore, the Tribunal restored the appeal to the CIT (Exemptions) for decision in accordance with the law laid down by the coordinate bench. The operative direction was to restore the appeal to the CIT (Exemptions).

What were the facts?

The assessee, M/s. Arihanth Charitable Trust, filed an application for registration under Section 12AA of the Income Tax Act, 1961, on May 17, 2016. The Commissioner of Income Tax (Exemptions), Jaipur, rejected the application on November 2, 2016. The reason for rejection was that the trust was not registered with the Sub-Registrar or the Assistant Commissioner of Devsthan Vibhag, which the CIT considered a prerequisite for a valid legal trust in Rajasthan. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT), Jaipur Benches.

What were the issues?

1. Whether the Income Tax Appellate Tribunal had to decide if the Commissioner of Income Tax (Exemptions) erred in rejecting the assessee's application for registration under Section 12AA of the Income Tax Act, 1961, on the grounds that the trust was not registered with the Sub-Registrar or the Assistant Commissioner of Devsthan Vibhag, and if this registration is a condition precedent for grant of registration under Section 12AA. The assessee argued that such registration is not a condition precedent under the Income Tax Act and that a notarized document creating the trust is sufficient for registration. The revenue contended that a trust comes into existence only if it is registered as per law. The Tribunal also considered the interpretation of Rule 17A of the Income Tax Rules, 1962, regarding the documents required for registration.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 12A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR

Before: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM

For Appellant: Shri P.C. Parwal (CA)
For Respondent: Shri Varinder Mehta CIT)
Hearing: 31.03.2017Pronounced: 31/03/2017

PER SHRI KUL BHARAT, JM.

The appeal by the assessee is directed against the order of ld. CIT

(Exemptions), Jaipur dated 02.11.2016. The assessee has raised the following

grounds of appeal :-

“ 1. The ld. CIT has erred on facts and in law in rejecting the application of assessee for grant of registration u/s 12AA of Income Tax Act, 1961 for the reason that assessee trust is neither registered before concerned Sub Registrar nor before the Assistant commissioner of Devsthan Vibhag and thus it cannot be held as valid legal trust ignoring that the same is not a condition precedent for grant of registration u/s 12AA.

2.

The assessee craves to amend, alter and modify any of the grounds of appeal

3.

Necessary cost be allowed to the assessee.”

2 ITA No. 1052/JP/2016 Arihanth Charitable Trust

2.

Briefly stated the facts of the case are that the assessee had filed an

application on 17.05.2016 in Form No. 10A for seeking registration under section

12AA of the Income Tax Act, 1961 (hereinafter referred to as the Act). The said

application was rejected by the ld. CIT (Exemptions) on the ground that in the State

of Rajasthan the assessee trust has not come into existence through a legal

document by getting it registered before the Competent Authority within the

prescribed time limit. In the case of the applicant trust it is neither registered before

the concerned Sub Registrar nor before the Assistant Commissioner of “Devsthan

Vibhag. Aggrieved, the assessee is in present appeal before this Tribunal.

3.

The ld. Counsel for the assessee submitted that the decision of the ld. CIT

(Exemptions) is contrary to the decision of the Coordinate Bench of the Tribunal

rendered in the case of Tsurphu Labrang vs. Director of Income Tax (Exemptions),

(2016) 159 ITD 848 (Delhi). He submitted that there is no such requirement under

the Income Tax Act that the Trust is required to be registered under the relevant law

of the State. He submitted that in the present case the Trust is created through a

document duly notarized. Therefore, he submitted that for the purpose of

registration under the IT Act, the notarized document is sufficient.

3.1 On the contrary, the ld. D/R opposed the submissions and submitted that the

Trust would into existence if it is registered as per the law.

3.2. We have heard rival contentions, perused the material available on record

and gone through the order of ld. CIT (Exemptions). We find that under the

identical facts, the Coordinate Bench of the Tribunal in ITA No. 4941/Del/2011 &

3061/Del/2013 has held as under :-

3 ITA No. 1052/JP/2016 Arihanth Charitable Trust

“13. A plain reading of Rule 17A(a) makes it clear that where the Trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof, has to be filed along with prescribed Form No.10A for registration of the Institution/Trust u/s 12A of the Act. However, the second limb of Rule 17A(a) provides that where the Trust is created, or the Institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof, has to be filed along with the statutory Form No.10A for registration of the Institution/Trust u/s12AA/12A of the Act. Thus, the applicable Rule 17A itself provides that it is not necessary that the Institution/Trust should be established under an instrument. The Rule 17A does not prescribe that in case the Institution/Trust is established otherwise than under an instrument, what type of document evidencing the creation of the Trust or the establishment of the Institution, has to be filed, meaning thereby that the document evidencing the creation of Trust or the establishment of Institution could be of any type. As per the provisions of the Indian Trust Act, the Trust can be created even orally and if the assessee is able to give some evidence of creation of such Trust by a word of mouth, the same shall be eligible for registration u/s 12AA/12A of the Act, provided such evidence is filed and the other conditions under the statute are satisfied.”

In view of the decision of the Coordinate Bench, we deem it proper to restore this

appeal of the assessee before the ld. CIT (Exemptions) to decide in accordance with

law laid down by the Coordinate Bench.

4.

In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 31 /03/2017.

Sd/- Sd/- ( dqy Hkkjr) ¼foØe flag ;kno½ (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 31 /03/2017. Pooja

4 ITA No. 1052/JP/2016 Arihanth Charitable Trust

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

1.

The Appellant- M/s. Arihanth Charitable Trust, Pali. 2. The Respondent- The CIT (Exemptions), Jaipur. 3. The CIT, 4. The CIT (A) 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 1052/JP/2016) vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

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