ADDL. CIT, MEERUT vs. M/S SUBHARTI K.K.B CHARITABLE TRUST, MEERUT

PER O.P. KANT, A.M.: These appeals of the Revenue are directed against common order dated 27/09/2010 of the Ld. Commissioner of Income- Tax (Appeals), Meerut . The grounds of appeal raised in both the years are identical. Therefore both the appeals are heard together and disposed of by this consolidated order. For the sake of convenience grounds of appeal of the assessment year 2004-05 are reproduced as under: 1.Whether the Ld. Commissioner of income-tax (Appeals) has erred in law and facts in giving credence to the orders of Hon’ble Civil Judge senior division, Meerut dated 08/05/2007 over the decision of the Hon’ble Allahabad High Court who had upheld the stand of the Revenue that trust of 1995 was different trust from one that of 1991.

3. Whether in the facts and circumstances of the case, the Ld. Commissioner of income-tax(Appeals) has erred in law in holding that the rejection of rectification petition was unjustified when the issue of allowance of registration under section 12 A of the income tax act, 1961 is subjudice, being pending before the Hon’ble High Court of Allahabad.

ITA No. 5607 &5608 /Del/2010 Subharti KKB Charitable Trust, Meerut The Commissioner of Income-tax was of view that by the 2nd trust deed, which does not refer at all to the earlier trust created vide trust deed dated 15th March 1991, a new independent trust under the same name and of a similar settler amount of Rs. 1101 was created . He further observed that in the 2nd trust ,few trustees are different from the earlier trust and two new objects were included, which were not there in the objects of the earlier trust. The order of the Commissioner of income tax, Meerut dated 17th March, 2006, was challenged by the assessee before the Hon’ble Allahabad High Court through the writ petition No. 817 of 2006. The Hon’ble High Court did not interfere with the findings of Commissioners of Income-tax and directed that if the petitioner applies under section 12AA of the Act for registration of the 2nd trust created by the 1995 trust deed, the Commissioner of income tax, Meerut would take a reasoned decision in granting or refusing such registration within one month of the date on which such application was made. Similarly, the Hon’ble High Court directed to grant or refuse exemption under section 80 G of the Act. The accordingly, the assessee filed an application on 22/12/2006 for granting registration under section 12AA of the Act w.e.f. 17/08/1995 alongwith request for the condoning the delay in filing the application. The Ld. Commissioner of income tax on consideration of overall activities of the trust being charitable granted registration prospectively w.e.f. 01/04/2006. Against the said order of the Commissioner of Income-tax, the assessee filed appeal before the Tribunal. The Tribunal in directed the Commissioner of income tax to grant registration w.e.f. 17/08/1995. 2.2 The return of income for the year under consideration was filed declaring nil income on 31/10/2004. The scrutiny assessment under section 143(3) of the Act was completed on 29/12/2006, wherein the Assessing Officer ( in short ‘AO’) held that in view of the judgement of the Hon’ble Allahabad High Court, a new trust was created by the trust deed dated 17/08/1995 and the new trust was not registered under section 12AA of the Act, and therefore the trust was not allowed to claim exemption under section 11 of the Act. Accordingly, &5608 /Del/2010 Subharti KKB Charitable Trust, Meerut the Assessing Officer assessed the income of the trust at Rs. 3,30,53,573/-under section 143 (3) of the Act. Subsequent to the said assessment order, the assessee filed an application for rectification under section 154 of the Act on 31st December, 2007, on the ground that Hon’ble Court of Civil Judge, ’Senior Division, Meerut in a dispute vis-a-vis the trustees, held that the deed of 1995 was supplementary to the originally created trust of 1991. However the Assessing Officer rejected the request of the assessee trust for rectification under section 154 of the Act , holding that the finding given in the assessment order under section 143(3) of the Act that the trust registered in 1995 was legally different from the original trust created in 1991, was based upon the judgement of the Hon’ble High Court of Allahabad and a subsequent decision of a lower court cannot alter the legal position created by an order of the High Court. Against the rejection of the rectification application under section 154 of the Act, the assessee trust filed appeal before the Ld. Commissioner of income tax (Appeals), Meerut, who vide this impugned order accepted the claim of the assessee and directed the Assessing Officer to carry out the rectification. Aggrieved with the direction of the Commissioner of Income-tax (Appeals), the Revenue is in appeal before the Tribunal.

by the Revenue, the effective ground is in respect of allowing rectification by the Ld. Commissioner of income tax (Appeals) holding that the trust deed of 1995 was supplementary to the originally created trust of 1991 in view of the order of the Hon’ble civil judge and the judgement of the Hon’ble High Court of Allahabad had no bearing on the issue.

4. Before us, the Ld. Authorised Representative of the assessee relying on the order of the Commissioner of income tax (Appeals) submitted that the issue in dispute was already settled by the order of Hon’ble civil judge and therefore the impugned order might be upheld. The Ld. Authorised Representative also submitted an ‘English’ translation of the order of the Hon’ble civil judge. Whereas on the other hand, the Commissioner of income tax (Departmental 4 &5608 /Del/2010 Subharti KKB Charitable Trust, Meerut Representative) vehemently argued that the issue was already decided by the Hon’ble High Court in writ petition , where both the assessee and the Income tax Department were parties. He further submitted that in the dispute before the Hon’ble civil judge the income tax Department was not a party and the judgement of the Hon’ble High Court was also not brought to the notice of the Hon’ble civil judge. He further submitted that despite being inherent defects in the order of the Hon’ble civil judge, the Hon’ble High Court being higher court then the court of Civil Judge, the Ld. Commissioner of income tax (Appeals), should have taken into consideration, the judgement of the Hon’ble High Court of the Allahabad. Further he submitted that application for registration under section 12AA of the Act for the trust created vide trust deed of 1995 was pending before the Commissioner of income tax, Meerut and thus allowing the registration by the Ld. Commissioner of income tax appeals through rectification was not in accordance with law. 5.1 We have heard the rival submissions and perused the material on record. We find from the judgement of the Hon’ble Allahabad High Court in the writ petition (supra) that the Hon’ble High Court declined to interfere in the order of the Commissioner of Income-tax, Meerut withdrawing the registration under section 12A and exemption under section 80 G to the trust created vide deed of 1995 and directed the Commissioner of Income tax, Meerut to grant or refuse the registration under section 12 AA of the Act and exemption u/s 80G of the Act, if that trust so applies. The relevant findings of the Hon’ble High Court are as under: “we have heard Ld. counsel for the petitioner at length and we are of the opinion that on the facts and circumstances detailed in the impugned order of the Commissioner of Income-tax and briefly summarised above by us , this is not a fit case for interfering with the Commissioner’s order in our discretionary jurisdiction under Article 226 of the Constitution of the India. The &5608 /Del/2010 Subharti KKB Charitable Trust, Meerut discretionary jurisdiction should not be utilised to perpetuate illegality, error or fraud. An attempt was made from the petitioner side to show with reference to section 2(15) of the Income-tax Act that education can also be “charitable purpose”. We do not propose to enter into this question as the relevant facts as to whether the kind of education and the terms on which it is being imparted and the use to which proceeds from such imparting of education are to be put by the trust need to be examined which according to us should be left to the authorities entitled to deal with facts and to arrive at conclusions of fact. We, therefore, direct that is the petitioner applies under section 12 AA for registration of the 2nd trust created by the 1995 trust deed, the concerned authority will take a reasoned decision granting or refusing such the registration within one month of the date on which such application is made alongwith certified copy of this order. We, further direct that if registration under section 12 A is granted to the 1995 trust, it will be open to that 2nd trust to apply for exemption under section 80 G and if such a exemption is sought along with a certified copy of this order and after completing necessary formalities, the concerned authority will consider by a reasoned order within 2 months of the date when the petitioner has applied after completing the formalities whether to grant or refuse the exemption” 5.2 Thus, the Hon’ble High Court has accepted the existence of a separate trust created vide deed of 1995. The Hon’ble civil court judge has decided a dispute among the trustees and it is clear from the order of the Hon’ble civil judge that the finding of the Hon’ble ITA No. 5607 &5608 /Del/2010 Subharti KKB Charitable Trust, Meerut Allahabad High Court were not brought before the Hon’ble Civil Judge. It is also clear from the order of the Hon’ble Civil Judge that the Income-tax Department or the Commissioner of Income-tax, Meerut was not a party to the issue in dispute. The Hon’ble civil judge has relied on the submission that only one return of income tax was filed in respect of the trust, whereas the Income-tax Department has held existence of new trust vide trust deed of 1995 and the return filed has been held as pertaining to the new trust. Further, the Tribunal in has accepted the existence of the new trust created vide trust deed of 1995 and directed the Commissioner of Income-tax to grant registration from 17th August 1995. Thus in our considered view, the CIT(Appeal ) was not correct in directing the Assessing officer to carry out the rectification following the decision of the Hon’ble civil judge and ignoring the finding of the Hon’ble Allahabad High Court that the new trust came into existence vide the trust deed of 1995. The grounds No. 1 to 4 of the appeal of the Revenue are allowed accordingly. ITA No. 5607/Del/2010 6. As the grounds of appeal in ITA number 5607/Del/2010 are identical to the grounds raised in ITA number 5607/Del/2010 are decided accordingly to the grounds decided in ITA No. 5608/Del/2010.

7. In the result, both the appeal of the Revenue are allowed. (Order Pronounced in the Court on 18/03/2016).