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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: SHRI R.C.SHARMA (AM) & SHRI RAM LAL NEGI (JM)
PER RAM LAL NEGI, JM
The present appeal has been filed by the appellant Motiwala Upiftment Social Trust, Mumbai, against order dated 24/05/2013 passed by the Director of Income Tax (Exemptions), Mumbai, hereinafter referred to as ‘DIT (E)’ whereby the Ld. DIT(E) rejected the application of the appellant Trust filed u/s 12A of the Income Tax Act, 1961 (in Short ‘the Act’) for grant of registration.
Brief facts which need necessary mention for the purpose of deciding the present appeal are that the appellant Trust filed an application for registration u/s 12A of the Act in the prescribed form as the Trust had been created by a deed of Trust dated 19/03/2012 and registered with the Charity Commissioner, Mumbai on 03/11/2012. In response to the notice issued by the DIT (E), the requisite documents were submitted by the appellant Trust for verification. The Ld. CIT(E) after perusing the documents in the light of the submissions of the appellant rejected the application on the following Grounds:- i) That the Trust deed does not have a proper “dissolution clause” to the effect that the Trust is irrevocable and that if for some reason its objects cannot be carried out by the Trustees, then as per the provisions of the Bombay Public Trusts Act, 1950 its net assets will be given to another Trust having similar objects and under no circumstances, these will be distributed among the Trustees. ii) The appellant Trust has been formed with both charitable and religious objects and since the objects are such as establishment and maintenance of Madarsa and Masjid, construction and maintenance of Dargah, sending needy and poor persons on Haj and Umrah and other religious places, the same is hit by section 13(1)(b) of the Act. Under sections 11 and 12 the expression used is “charitable or religious purposes” which cannot be construed to mean ‘charitable and religious purposes”.
Before us the Ld. Authorized Representative (AR) submitted that in view of the ratio laid down by the Hon’ble Supreme Court in Commissioner of Income Tax, Ujjan v. Dawoodi Bohara Jamat [2014]43 taxmann.com 243(SC) and Hon’ble High Court of Gujarat in Director of Income tax (Exemption) v. Vanchhara Tirthaadhipati-Chintamani Paraswaprwabhu [2015] 59 taxmann.com 417 (Gujarat) the impugned order is bad in law and liable to be set aside. On the other hand the Ld Departmental Representative (DR) relying on the order of DIT(E) submitted that the authority below has passed the impugned order in accordance with the law laid down by the Hon’ble Supreme Court in State of Kerala v. M.P. Shanti Verma Jain 231 ITR 787 (SC), CIT v. Palghat Shdi Mahal Trust 254 ITR 212 (SC) and Hon’able High Court of J&K in Ghulam Mohidin Trust v. CIT 248 ITR 587 (J&K).
We have heard the rival submissions and also perused the material placed before us including the case laws relied upon by the parties. From the language of section 12A of the Act it is clear that at the stage of registration under section 12A of the Act the authority concerned is required to see whether the application is made in accordance with the requirements of section 12A read with rule 17A and whether Form No. 10A has been properly filled up. The authority may also see whether the objects of the Trust are charitable or not. In the present case the DIT(E) has held that the appellant Trust is not eligible for registration firstly in view of the fact that the Trust deed does not have the specific dissolution clause so as to transfer the net assets of the Trust to another Trust having similar objects as per the provisions of Mumbai public Trust Act 1950 if for some reason its objects cannot be carried out by the Trustees. However, as pointed out by the Ld. AR Clause 37 of the Trust contemplates the arrangement regarding handing over of the corpus of the Trust to some other Trust, society or institution having similar objects in case the Trustees in future decide unanimously. Clause 37 of the Trust reads as under:-
“the Trust shall be and remain irrevocable for all times to come but in case the Trustees to decide unanimously, they may handover the corpus of the Trust fund to any other Trust or institution or society being a society registered under the societies registration act having identical or similar objects and purposes on such terms and conditions as the Trustees may think fit to impose at the time of handing over the Trust fund to the intent and purpose that thereafter the Trust fund shall be owned and managed by such Trust, institution or society for the purpose of their objects.”
Hence, in our considered view it is not correct to say that the appellant Trust has no dissolution clause to transfer the corpus of the Trust in accordance with the Bombay Public Charitable Trust Act, 1950. Even if it is not specifically mentioned in the Trust deed that the property shall be transferred in accordance with the said Act, the said Act shall automatically come into operation in case the Trust is dissolved. Moreover, the Hon’able Gujarat High Court in Director of Income tax (Exemption) v. Vanchhara Tirthaadhipati- Chintamani Paraswaprwabhu (supra) has held that refusal to grant registration to assessee Trust on the ground of absence of dissolution clause in Trust deed was unjustified where Trust deed specifically provided that in case of closure, property of Trust be handed over to other Trust having similar objects. In view of the law laid down by the Hon’able High Court of Gujarat aforesaid, the findings of the learned DIT(E) are erroneous and not sustainable in the law.
So far as the second ground of rejection of the application is concerned, the Hon’able Supreme Court in Commissioner of Income Tax, Ujjan v. Dawoodi Bohara Jamat (supra) has held that where assessee Trust is formed with both religious and charitable objects, in terms of section 13(1)(b) of the Act, its claim for registration under section 12AA can be denied only in case when such objects are carried out for benefit of a particular religious community or caste. Hence, the registration cannot be refused in case where Trust is formed with both religious and charitable objects unless it is established that the objects are carried out for benefit of a particular religious community or caste. In the present case the intention of the settler of the Trust has been incorporated in clause (a) of the Trust deed which reads as under:-
“The settler being desirous of creating a Trust called Motiwala upliftment social Trust (MUST) (hereinafter referred as “the said Trust”) for carrying out charitable objects and purposes wide enough to confer benefits thereof on all persons irrespective of class, creed and community and for relief of poor, education, medical relief and advancement of similar objects of general and social welfare and so that such benefit may be given directly to the said Trust.”
From the contents of clause (a) of the Trust it cannot be inferred that the Trust has been created for the benefit of any particular religion or caste within the meaning of section 13(1)(b) of the Act. The facts of the cases relied upon by the Ld. DIT(E) are distinguishable from the facts of the present case. In the State Kerala vs. M.P. Shanti Verma Jain 231 ITR 787(SC), CIT v. Palghat Shadi Mahal Trust (254 ITR 212 SC), Gulam Mohidin Trust vs. CIT (248 ITR 587 J& K) and Shri. Dhakad Samaj Dharmashala Bhawan Trust vs. CIT (302 ITR 321 MP) the question to be decided before the respective courts was whether the Trust was entitled for benefit of exemption u/s 11 of the Act in the light of their respective objects, whereas in the present case the core issue to be decided is, whether in the light of the facts and circumstances of the case, the appellant Trust is eligible for registration u/s 12A of the Act or is not eligible for the same. Hence, in our considered opinion the impugned order is not in accordance with the law discussed above. We, therefore, set aside the impugned order and direct the Ld. DIT(E) to grant registration within sixty days from the date of receipt of this order.
In the result, the appeal filed by the appellant Trust is allowed.
Order pronounced in the open court 21st September, 2016.