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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Shri M.Balaganesh, AM]
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : KOLKATA [Before Hon’ble Sri N.V.Vasudevan, JM & Shri M.Balaganesh, AM] I.T.A No. 2265/Kol/2016
West Bengal Municipal Development -vs.- C.I.T.(Exemptions) Fund Trust, Kolkata Kolkata [PAN : AAATW 1661 P] (Respondent) (Appellant) For the Appellant : Shri A.K.Tibrewal, FCA For the Respondent : Shri A.K.Tiwari, CIT Date of Hearing : 01.08.2017. Date of Pronouncement : 18.08.2017. ORDER Per N.V.Vasudevan, JM
This is an appeal by the Assessee against the order dated 16.09.2016 of C.I.T.(Exemptions), Kolkata refusing to grant registration to the assessee u/s 12AA of the Income Tax Act, 1961 (Act).
The Assessee is a Public Trust which came into existence pursuant to a deed of trust dated 25.02.2008 executed by the Government of West Bengal through its authorised official Shri Samar Ghosh, Principal Secretary. The Principle objective of the Trust is to contribute to the provision of adequate, efficient, affordable, sustainable and modern urban infrastructure services to the people of West Bengal through public, private and community sector initiatives.
The Assessee filed an application for grant of registration u/s 12AA of the Act on 22.03.2016. The C.I.T.(Exemptions), Kolkata did not dispute the fact that the objects of the trust were charitable. Under section 12AA of the Act the conditions for grant of registration are that the CIT(Exemptions) should be satisfied about the objects of the
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trust and the genuineness of its activities. As already stated the CIT(Exemptions) had not disputed the fact that the objects of the trust were charitable in nature as is required u/s 2(15) of the Act. It was also stated that the genuineness of its activiites has been mentioned in the impugned order. The only objection of the CIT(Exemptions) for granting registration u/s 12AA of the Act to the assessee was that the dissolution clause of the society which is as under:-
"If on the winding up of the Trust any property remains after the satisfaction of all its debts and liabilities, the surplus fund, assets and other properties of the Trust shall be transferred to another trust having similar objects or shall vest in the State Government.
also provides that in the event of dissolution of the Trust, the properties and trust fund will vest with State Government. He found that in a similar case of Jammu Development Authority vs CIT, 52 SOT 153 Hon’ble ITAT, Amritsar took the view that held where the trust deed provided that the trust fund on dissolution would vest in the State Government then such a trust cannot be said to be charitable. Following the said ruling, he denied registration to the Assessee u/s.12AA of the Act.
The C.I.T.(Exemption) also referred to the provision of section 13(2)(g) of the Act which lays down that if any income or property of the trust is diverted in favour of any person who has substantial interest in the trust, then the trust would not be eligible for exemption u/s 11 of the Act. We may clarify at this stage itself that this aspect is irrelevant at the time of grant of registration u/s 12AA of the Act. This aspect will be relevant only when the return of income filed by the assessee and exemption u/s 11 of the Act is claimed by the assessee.
The only aspect that needs to be decided is as to whether the provision in the trust deed that in the event of winding up of the trust the assets and surplus funds , assets and other properties of the trust shall be transferred to another trust having similar objects or 2
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shall vest in the State Government, would be sufficient to refuse registration u/s 12AA of the Act.
We have perused the decision of the Hon’ble ITAT, Amritsar in the case of Jammu Development Authority vs CIT (supra) and we find that in the aforesaid decision the trust deed provided that in the event of dissolution of surplus funds and assets of the trust shall vest with the Government. In the trust deed of the assessee there is no such blanket transfer or vesting in the event of dissolution in the State Government. On the other hand, the vesting is only in another trust having similar objects. It is only by way of an alternative that the surplus will vest in the State Government in the event of dissolution. We therefore are of the view that the decision relied on by CIT(Exemption) will not be of any assistance to the plea of the revenue.
On a reading of Clause 8.9 which provides for the contingency of dissolution it is clear that the first alternative shall have preference over the second alternative. In any case, it would be a matter for consideration at a later stage, if at all, there would be a winding up and not otherwise. It has been so held by the Hon'ble Delhi High Court in American School of Bombay Education Trust and Others - Vs. - Union of India and Others [ (2015) 377 ITR 645 (Del.) ], following the decision of the Hon'ble Supreme Court in Queen’s Educational Society - Vs.- C.I.T. [(2015) 372 ITR 699 (SC) ].
We agree with the aforesaid submissions of the assessee and hold that there is no justification for refusing grant of registration to the assessee. The registration is accordingly directed to be granted and the appeal of the assessee is allowed.
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In the result the appeal of the assessee is allowed.
Order pronounced in the Court on 18.08.2017.
Sd/- Sd/- [M.Balaganesh] [ N.V.Vasudevan ] Accountant Member Judicial Member
Dated : 18.08.2017. [RG PS]
Copy of the order forwarded to:
West Bengal Municipal Development Fund Trust, 1CDMC Building (Gr. Floor), Change Management Unit, ILGUS Bhawan, HC Bock, Sector-III, Salt Lake City, Kolkata-700106. 2. C.I.T. (Exemptions), Kolkata. 3. CIT(DR), Kolkata Benches, Kolkata.