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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
O R D E R PER MAHAVIR SINGH, JM:
This appeal by assessee is arising out of the order of CIT (Exemption), Mumbai, vide No. CIT (E) u/s.12A/48025/15-16 dated 24-02-2016 denying registration u/s 12AA of the Income Tax Act 1961 (hereinafter „the Act‟).
The only issue in this appeal of assessee is against the order of CIT (E) in rejecting the application for registration u/s 12AA of the Act without any reason. For this assessee has raised the following grounds:-
“1. Natural Justice 1.1 The learned Commissioner of income tax (Exemptions), Mumbai [“the ld. CIT (Exemptions)”] erred in rejecting the application of Appellant for registration under section 12AA of the Income Tax Act‟ 1961(„the Act”). 1.2 The CIT (E) failed to appreciate that the case of the Appellant did not fall within the condition laid down by section 13 of the Income Tax Act‟ 1961 („the Act”) for rejection of application for registration u/s 12AA. 1.3 The Appellant prays that on the facts and circumstances of the cases and in law the rejection of application be held to be bad and illegal as the necessary conditions for rejection u/s 13 of the income Tax Act‟1961 („the Act”) is not violated.
2. WITHOUT PREJUDICE TO THE ABOVE: i. The ld. CIT (Exemptions) erred in holding the Appellant trust is indulging in activities, which are not per the objects set out in the Trust Deed 2 of the Appellant Trust and are in violation of the provisions of section 13 (1) of the Act and has failed to appreciate the explanation that was offered in regard to the nature of the said activities. ii. While doing so, the ld. CIT (E) filed to appreciate that: (i) The Appellant Trust has been created for carrying on genuine charitable activities. (ii) Neither the provision of section 13 (1) is violated nor the donation has been given for the benefit of particular religious community or caste.”
Brief facts leading to the above issue are that the assessee trust “Roshan Charitable Trust” was established under an instrument i.e. Trust Deed dated 27.11.2012 for educational, medical, sports, cultural, social, environmental and charitable purposes. This trust was registered on 20-09-2013 u/s 19 of the Maharashtra Public Trusts Act, 1950 and the reasoning recorded by Assistant Charity Commissioner (1) Greater Mumbai Region, Mumbai reads as under:- “6. REASONS FOR FINDINGS The record shows that, the trust is in existence by virtue of a trust deed daed 27/11/2012 for education, medical, sports, cultural, social, environmental and charitable purposes at Ex.3. The value of the trust property is Rs. 11,000/-. The name and address of the trustees and managers appear to be correct and the mode of succession is as that “New/additional trustee may be appointed by the existing/surviving trustee” (Detail as per clause 16 of the Trust Deed). The number of trustees shall not be less than 2 and not more than 12. The objects of the trust deed are of educational, medical, sports, cultural, social environmental and charitable nature. Its gross average annual income and expenditure is shown as per Ex.1. The documents under which the trust deed is created are at Ex.3 and other documents thereof are at Ex.1,2,4 to 6 and 8 to 11.
The contributions, interests etc. are the sources of the income of the trust. The trustee Soli Framorze Contraxts is in possession of the documents regarding the trust property. The particulars of the trust given in the application are correct. The trust is named and styled as “Roshan Charitable Trust.”
8. In support of the contents of application Ex.1, the applicant has filed his affidavit at Ex.11. On the basis, the documents produced on the record, I hold that, the trust is entitled to be registered under the Maharashtra Public Trust Act, 1950………..”
The assessee trust filed application for registration u/s 12AA of the Act in from No. 10A alongwith the list of trustees with their addressees and PAN Nos. The assessee also filed Trust Deed by virtue of which the trust came into existence and following are the charitable activities mentioned in the same for which the trust has been established :-
“a) To spread or promotion of education or learning in all its branches in such manner as the trustees may think fit including: (i) Establishment and or acquisition and maintenance and support of schools, colleges, vidyapiths, balmandirs, study centres, universities and other institutions for imparting education and training to students. (ii) Establishment and support of professorships, fellowships, lectureships, scholarships and prizes at schools, colleges or other educational institutions; (iii) Establishment and maintenance of and support of hostels and or boarding houses and grant of free boarding and lodging to poor and deserving students upon such terms and for such period in each case as the trustees may fit; (iv) Grant of Endowments at Universities, Research Institutions and other educational and scientific institutions (whether now existing or hereafter established) for education and knowledge in all or any branches of knowledge. (v) Awarding Scholarships and Fellowships on such terms and conditions as the trustees may think fit for the purpose of undertaking prosecuting and encouraging higher education and research work in any branch of engineering technology, electric therapy radiology and bacteriology, medical science or any other branch or branches of modern applied science in. its widest and more comprehensive sense. (vi) Awarding Scholarships and cash payment or giving loans to poor persons desirous of receiving primary, secondary or higher secondary or higher education on such terms as they may consider appropriate. b) Affording of medical relief in such manner as the trustees may think fit including : (i) Setting up of hospitals or other medical institutions and running them ,or granting of subscriptions and donations to Hospitals, Dispensaries, Convalescent Homes, Asylums, Nursing Homes and other public institutions for administering medical relief to the needy. (ii) Endowments to and help or support to Hospitals, Maternity Homes, Sanatoriums and Dispensaries; (iii) Grant of Medical help to the poor and deserving persons (c) Distribution of food and clothing to the poor and needy; 4 (d) Setting up or helping by endowments or otherwise orphanages or poor houses for the benefit of orphans and or other deserving persons; (e) Helping of poor widows; (f) Establishing or rendering help to any person or institution for the alleviation of human suffering; (g) Promotion public morality and humanity, particularly by checking tendency to cruelty towards human and non human living being and encouraging compassionate feelings and kindness towards them by setting up and maintaining institutions for the purposes of helping those engaged therein. (h) Conducting or helping others to conduct scientific research in any area of activity including Industrial, agricultural medical and social. (i) Promotion of conducting Programmes of social and economic development in rural or backward areas. (j) Promotion Study of Philosophy and enlightenment of the human mind. (k) Subscription, contribution and, or donation to any public charitable trusts or funds or institutions for promotion of any of the aforesaid objects. (l) Affording Shelter, medical relief, fodder, water and other such things to animals, birds and wild life. (m) To undertake up keep, maintenance and repairs of old monuments, temples and other places of‟ historic social or cultural importance. (n) Help to poor or deserving persons irrespective of religion, cast and creed through scholarships or rewards or loans or grants to purchase machinery, apparatus, stocks and other such assets required or becoming self employed. (o) Provided always also without prejudice to the generality of the foregoing that the help to be given under any of the, foregoing heads wherever he case admits may be given either in the way of pecuniary payments or the supply or distribution of food, clothes or medical relief or in any manner which the trustees may consider desirable.”
But the CIT (E) rejected the application of the assessee and refused registration by observing in Para 8 to 11 of his order passed u/s 12AA (1) (b) (ii) read with section 12A of the Act as under:- “8. I have carefully considered the submissions made by the assessee trust. However, the same are not acceptable in View of the facts already discussed above, as it has been ascertained that the assessee trust has violated the basic requirement to become eligible for a registration as a charity organization by donating the Rs.1 crore each in two different financial years to the above „ referred trust namely Navsari Atashbehram & Vadi Daremeher Trust Fund, Navsari, Gujarat with a direction to use the same for the benefit of widows of the mobeds / priests of a particular community and for meeting out general expenses. A perusal of the trust deed of the temple (Navsari Atashbehram & Vadi Daremeher) show that the temple is meant only for the Parsi community 5 and it is a common knowledge that entry and utilization of these places are restricted only to persons belonging to Parsi community. Therefore, the donation has been given for the benefit of a particular religious community or caste. The trust deed of Roshan Charitable Trust does not show any such objects. This indicates the trust is indulging in activities which are not as per the object of the trust deed as directed by the settlor of the trust. This act alone shows the trust has defaulted as a public charity organization right from its inception thereby ineligible the character of a charity organization, thereby ineligible for registration u/s. 12A of the Act as a public charity organization. Incidentally, the activities of the trust are also in violation of provision of section 13 (l) of the LT. Act 1961.
9. Therefore, it is clear from the above discussions that the applicant trust is not eligible for registration u/s. 12AA as the activities conducted by it are not in accordance with the object of the trust and has also violated the provisions of section 13 (1) of the LT. Act 1961.
10. As per the provisions of Section 12AA (1) (b), a Trust is to be granted registration if the Commissioner is satisfied about the objects of the Trust and the genuineness of its activities. Both these requirements are cumulative and not alternative. The satisfaction of the registering authority cannot be a subjective satisfaction based on whim or caprice. It has to be a bona tide and objective satisfaction, based on due application of mind to a certain set of facts or materials before him.
11. Accordingly, in View of the above discussions, I am satisfied that the trust is not entitled for registration u/s. 12AA of the Income Tax Act and its application for grant of registration is accordingly rejected.” Aggrieved, assessee came in appeal before the Tribunal against denial of registration of Trust u/s 12AA of the Act.
Before us learned Senior Advocate Shri Percy Pardiwala, first of all taken us to the Trust Deed wherein the objects of the trusts are mentioned and according to him these are charitable in nature. As regards to genuineness of the trust learned Counsel for the assessee took us through registration certificate issued by Assistant Charity Commissioner Greater Mumbai Region, Mumbai 20-09-2013. Accordingly, learned Counsel stated that all the above said objects are purely charitable in nature and there cannot be two opinions about the genuineness of the aims and objects of the applicant trust. Learned Counsel for the Assessee than taken us through the financial results of the assessee trust for the financial year ended 31-03-2015 and stated that the amounts clearly establishes that these are applied for the charitable purposes since the trust has been established. The below given are the financial results for the year ended 31-03-2015:-
6 Date Name of the party Amount Purposed for Reason funds used 18/09/2014 Navsari Atashbehram & 1,00,00,000 Relief to Corpus Fund Income to be Dar-E-Meher trust Poor use general expenses 18/09/2014 Rotary Club charities 1,00,000 Flood Relief Trust No.3 Food 18/11/2014 Alert lndia 50,000 Medical To Support Leprosy control Relief project 21/11/2014 Seva Sadan Society 3 00 000 Education to Empower underprivileged Gi through Care, education, & Vocational training 21/11/2014 The Foundation 10,000 Corpus Fund The donation towards the crop trust 24/11/2014 The Akshaya Patra 10,00,000 Education / Relief to poor Foundation 08/12/2014 Tanaj Hiraji Jiwasa 17,000 Education Fees for school 03/12/2014 National association for 50,000 Medical Support for the cause of the blind, India Relief bill 04/03/2015 Mancherji Edalji Joshi 1,25,000 Education Support towards youngsters Memorial proceeding abroad for higher 20/03/2015 Navsari Atashbehram & 70,000 Relief to poor Dar-E-Meher trust 31/01/2015 Urban Design Research 1,00,000 Education Institute Further, the assessee also filed the financial results for the period ending as on 31-10-2015, which read as under:- Date Name of the party Amount Purposed for Reason funds used 25/04/15 SH Wandrekar foundation 1,00,000 Relief to Poor 03/06/15 F.K.S foundation 1,00,000 Education Fees for education 24/06/15 Plan International India 72,000 Education Child education 04/09/15 Tanaj Hirji Jiwa 11,710 Education School fees 19/09/15 AlertIndia 25,000 Medical Relief To Support Leprosy control project 12/10/15 Navsari Atashbehram & 100, 00, Relief to Poor Corpus Fund Income Dar-E Meher trust 000 should be used for pension to widows
7. Learned Counsel for the assessee Shri Pardiwala took us through the finding of CIT (E) and argued that the exemption is denied on the basis of donation to the said Navarsari Atashbehram & Wadi Daremehar trust. It was explained by learned Counsel that the donation has not been given for religious activities but was given for the Specific purpose of providing monetary assistance to the widows of „boywalas‟ and „Dastoor‟ and also for general expenses of the said Trust. The said trust is also a public religious trust registered under the provisions of Bombay Public Trusts Act, 1950 under registration no.C-80 and under section 12 A of the Act under registration no. SRT CIT/SB/llO-l67l-N. In this regard he argued that so far as the donation has been given for the alleviation of the poverty, it is covered under object clause of the Trust. He took us through the copy of the letter addressed by the said trust to the applicant trust confirming that the amount shall be utilized for the Specific purpose of providing monetary assistance to the widows of „boywalas‟ and „Dastoor‟ who are in need of such assistance, as directed by the applicant trust. Further, he argued that the said donation has not been given in consideration of the said persons being connected with the religious institution, but solely with the motive of providing monetary assistance to alleviate their poverty and improve their living condition. The monetary assistance, so provided, it is covered by the term “relief of poverty” occurring in sec 2 (15) of the Act.
Apart from the above learned Counsel for the assessee also argued even in case this amount is disallowable by invoking the provisions of the Section 13 (1) of the Act and assessee is not eligible for exemption u/s 11 of the Act, the CIT (E) has no power under the Act to deny registration u/s 12AA of the Act. He argued that the CIT (E) could not have denied the registration u/s 12AA of the Act even if the applicant trust found not to be carrying on charitable activity for application of income, the CIT (E) could only deny it the benefit of Section 11 and 12 of the Act at the time of assessment. Learned Counsel for the assessee also relied on the decision of Hon‟ble Punjab & Haryana High Court in the case of CIT Vs. Surya Education and Charitable Trust (2013) 355 ITR 280 (P&H).
We have heard rival contentions and gone through the facts and circumstances of the case. We have also perused the relevant materials produced before us. We have “Procedure for registration. 12AA. (1) The [Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall— (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he— (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant.”
From the above reading of section 12AA of the Act, it is evident that at the stage of filing of application for registration by any Trust u/s 12AA of the Act, the CIT (E) is not to examine the application of income and all that he may examine is whether the application is made in accordance with the requirements of section 12AA of the Act read with Rule 17A of the Income Tax Rules, 1962 (hereinafter the rules) and whether form No. 10A has properly been filled up. He must also examine whether the objects of the trust are charitable or not and the trust is genuine or not. The CIT (E) to make necessary investigation after calling for such documents and information from the trust as may be required and only after satisfying himself about the objects of the trust and the genuineness of its activities, he shall pass an order for registration of trust, registering the trust or rejecting the registration. At this stage, it is not proper for CIT (E) to examine the application income and moreover merely because the objects of a charitable trust are general, they do not ceased to be charitable. The language of Section 12AA of the Act does not show that in order to be able to get registration, there is necessity of first establishing as to how the concerned institution or, as the case may be, the trust would be able to claim the exemption u/s 11 or 12 of the Act. There is nothing in the language to suggest that an institution of a religious nature is precluded from getting registration u/s 12AA of the Act. The question of exemption u/s 11 and 12 of the Act or as the case may be, u/s 80G of the Act, would be pre- judging the issue before the grant of registration u/s 12AA of the Act. This issue has 9 been deliberated in the judgment Hon‟ble Punjab & Haryana High Court in the case of Surya Educational and Charitable Trust (supra) wherein it is held as under : “We have heard learned counsel for the appellant, but find no merit in the present appeals. As per s. 12AA of the Act, an application for registration of the trust and institution is required to be made within one year from the date of creation of the trust or the establishment of such institution. The procedure for registration of the trust or institution is prescribed under s. 12AA of the Act. In terms of cl. (a) of s. 12AA of the Act, the CIT is to satisfy himself about the genuineness of the activities of the Trust on such inquiries as he may deem necessary. Sub-ss. (1A) and (2) of s. 12AA of the Act, are procedural in nature, whereas Sub-s. (3) of s. 12AA of the Act, empowers the CIT to cancel the registration of the Trust or Institution, if he is satisfied that the activities of such Trust or Institution are not genuine or are not carried out in accordance with the objects of the trust or institution. Sec. 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas s. 12 of the Act, deals with the contributions received by the trust or an institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of s. 11 of the Act. The benefit of ss. 11 and 12 of the Act, are available only if such Trust or Institution is registered under s. 12AA of the Act. On the other hand, s. 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of s. 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of ss. 11, 12 or s. 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under s. 12AA of the Act. Unless a Trust or Institution is registered under s. 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under s. 10(22) now 10(23)(C) or ss. 11 and 12 are not applicable while considering the application for registration under s. 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Sec. 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate to undertake. www.taxpundit.org www.taxpundit.org www.taxpundit.org www.taxpundit.org 1 of 2 www.taxpundit.org www.taxpundit.org The insertion of sub-s. (3) to s. 12AA of the Act, clarifies the said fact, when it empowers the CIT to cancel the registration if the activities of the Trust are not carried out in accordance with such objects. Therefore, the object of s. 12AA of the Act, is to examine the genuineness of the objects of the trust, but not the income of the trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such trust or institution files its return. Therefore, we find that the judgments 10 referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the trust and not of assessment.”
In the present case before us also, we find that the only objection of CIT (E) is regarding the donation made by assessee trust of Rs. 1 Crore on 18-09-2014 in FY 2014-15 and another Rs. 1 Crore on 12-10-2015 in FY 2015-16 to Navsari Atashbehram & Vadi Daremeher Trust Fund, Navsari, Gujarat. First of all the facts are clear that the above referred trust is a religious trust and that the CIT Surat has granted registration u/s 12 A of the Act vide Registration No. SRT/CIT/SB/110-167-N and details are filed by the assessee before CIT (E). It means that the registration is denied only on the basis of application of income by the CIT (E) and the genuineness of the activities of trust and objects of the trust is not in doubt. Accordingly, in view of the given facts of the case, we are convinced that the assessee trust‟s activities and objects are genuine and hence, the assessee trust is entitled for registration u/s 12AA of the Act. However, for limited purpose of verification of documents, we are restoring the mater back to the file of CIT (E) and after verification he will register the trust u/s 12AA of the Act. Accordingly, the appeal of the assessee is allowed as indicated above.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 04-11-2016.