SADIYA EDUCATIONAL AND CHARITABLE TRUST vs. CIT,

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH ‘ A ’ BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T. A. Nos.422 & 1632/Bang/2013 M/s. Sadiya Educational & Charitable Trust, Mattadgadde Road, Sadiya Nagar, Shiralkoppa-577 428 …. Appellant.

Vs. Commissioner of Income Tax, Davangere. ….. Respondent. Appellant By : Shri V. Srinivasan, C.A. Respondent By : Shri G.R. Reddy, CIT (D.R) Date of Hearing : 20.7.2015. Date of Pronouncement : 4.9.2015. O R D E R Per Shri Jason P. Boaz, A.M. : These two appeals by the assessee are directed against two separate orders under Section 12AA of the Income Tax Act, 1961 (in short 'the Act') dt.31.1.2013 and 27.9.2013 respectively refusing the assessee Registration under Section 12AA of the Act. Since the issues involved are inter-connected, these appeals were heard together and are being disposed off by way of this common order. 2. The facts of the case, briefly are as under :- 2.1 The assessee trust was constituted under the Instrument of Declaration of Trust dt.4.6.2005 for attainment of certain aims and objectives mentioned in Chapter IV of the Trust Deed. The assessee trust made an application for registration in Form No.10A on 30.3.2011. The said application was disposed off by the CIT, Davangere by order dt.28.9.2011, refusing

2 ITA Nos.422 & 1632/Bang/2013 it registration on the ground that the assessee had not fulfilled the conditions for grant of registration. In the said order it was mentioned that some of the objects mentioned in Chapter IV of the Trust Deed are for the benefit of a particular religious community and therefore the provisions of Section 13(1)(b) of the Act, was also invoked by the learned CIT while refusing the assessee registration under Section 12AA of the Act. 2.2 Aggrieved by the order dt.28.9.2011 of the ld. CIT, Davangere, the assessee filed an appeal before the Tribunal raising several grounds. The co-ordinate bench of this Tribunal after hearing of the assessee's appeal including its reliance on the decision of the Hon'ble Apex Court in the case of Ahmedabad Rana Caste Association reported in 140 ITR 1 set aside the order of the ld. CIT and remanded the issue of grant of registration for fresh consideration vide its order in ITA No.1235/Bang/2011 dt.12.9.2012 granting the assessee liberty to put forth all its contentions in this regard. 2.3 Subsequent to the order of the ITAT, Bangalore in ITA No.1235/Bang/2011 dt.12.9.2012, the assessee appeared before the CIT, Davangere and made its submissions. It was contended by the assessee that the benefits of the trust were open to all persons and it was not restricted to a particular community. The ld.CIT, however, was not in agreement with the arguments put forth by the assessee and rejected its application for registration under Section 12AA of the Act vide order dt.31.1.2013. In the said order, the ld. CIT once again took the view that the object clauses 1, 4, 6, 9,11, 12, 19, 20 and 21 of the Trust Deed dt.31.1.2013 are for a specific religious community and hence the trust gets hit by the mischief of the provisions of section 13(1)(b) of the Act. The ld. CIT also distinguished the decision of the Hon'ble Apex Court in the case of Ahmedabad Rana Caste Association reported in 140 ITR 1 on the ground that the said judgment was rendered before the enactment of section

3 ITA Nos.422 & 1632/Bang/2013 13(1)(b) of the Act w.e.f. 1989 and that therefore the assessee could not derive any support form that judgment. 2.4 Aggrieved by the aforesaid order of the CIT, Davangere dt.31.1.2013, the assessee preferred an appeal in ITA No.422/Bang/2013 raising the following grounds :- “ 1. The order of the learned CIT (in the form of certificate) under Section 12AA of the I.T. Act, 1961 dated 31.1.2011 once gain refusing to register the trust under Section 12AA of the IT Act, 1961, in so far as it is against the appellant, is opposed to law, equity, weight of evidence, probabilities facts and circumstances of the case. 2. The learned CIT is not justified in holding that the appellant trust has not fulfilled the conditions laid down for grant of registration under Section 12AA of the IT Act, 1961 under the facts and in the circumstances of the appellant’s case. The finding is on erroneous appreciation of the facts and requires to be vacated. 3. The learned CIT (Appeals) failed to appreciate all the objects mentioned in the trust deed are charitable in nature as contemplated under Section 2(15) of the Act and the objects of developing the Muslim community like object No.1, 2, 9, 11, 19, 20 & 21, which is a broad cross section of general public itself is an object of advancement of general public utility, which is a charitable object along with the other objects No.2, 3, 8, 16 and 17, which are not confined for the benefit of Muslim community but to the public at large and thus all objects are charitable and even if some of them are considered for the benefit of the community, they are for women and children of the community, which is excepted by explanation (2) to section 13(1)(b) of the Act. 4. Without prejudice to the above, even assuming the trust is for the benefit of a particular religious community in respect of certain objects in view of explanation (2) to section 13, the provisions of section 13(1)(b) of the Act would not apply as these objects of the trust is for the benefit of women and children and the trust is entitled to the benefits of section 11 of the Act and the provisions of section 13(1)(b) of the Act would not apply and the learned CIT ought to have granted the registration under Section 12AA of the Act. 5. The learned CIT is not justified in holding that the ratio of the decision of the Hon'ble Supreme Court in the case of CIT V Ahmedabad Rana Caste Association reported in 140 ITR 1, is distinguishable and would not apply under the facts and in the circumstances of the appellant’s case. 5.1 The learned CIT failed to appreciate tht development of a particular community or caste, which is a broad cross section of the general public, by itself is a object general public utility and the ratio of the decision of the Hon'ble Supreme Court in the case of CIT V Ahmedabad Rana Caste Association reported in 140 ITR 1, is applicable and further the objects if they are considered for the benefit of a community, such objects are for the benefit of women and children of such community and they are excepted from the rigour of section 13(1)(b) of the Act. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered.”

4 ITA Nos.422 & 1632/Bang/2013 3.1 After the order dt.31.1.2013 was passed by the CIT, Davangere, the Author of the Trust executed a Deed of Amendment of Trust on 18.3.2013. In the said Deed of Amendment, it was expressed by the author that since the aims and objects of the Trust as contained in the Trust Deed dt.4.6.2005 were considered to be for the benefit of the Muslim Community, therefore registration under Section 12AA of the Act was denied to the Trust. It was also stated that the assessee trust was factually engaged in providing education and awareness of education amongst women and children irrespective of any caste, creed or religious affiliation and therefore the Author of the Trust decided to amend the aims and objectives in the original Trust Deed dt.4/6/2005/ It was stated in the Deed of Amendment that the aims and objects of the Trust shall be amended and replaced with the objects mentioned in the Amendment Deed, which will be adverted to w.r.e.f. 4.6.2005 itself. 3.2 Based on the Amendment Trust Deed dt.18.3.2013, the assessee filed a fresh application in Form No.10A on 28.3.2013 seeking grant of Registration under Section 12AA of the Act. The said application was disposed off by the CIT, Davangere vide order dt.27.9.2013. Once again the ld. CIT refused to grant registration observing that the assessee had already filed an appeal against the earlier order of the CIT, Davangere dt.31.1.2013 refusing the assessee registration and that matter was subjudice. It was also observed by the ld. CIT that the Amended Trust Deed evidences that the assessee had agreed with the findings in the earlier order dt.31.1.2013. In that view of the matter, the fresh application for registration also come to be rejected by the order of the learned CIT dt.27.9.2013. 3.3 Aggrieved by the order of the CIT, Davangere dt.27.9.2013 rejecting the application for Registration under Section 12AA of the Act dt.28.3.2013, the assessee has preferred this appeal raising the following grounds :-

5 ITA Nos.422 & 1632/Bang/2013 “ 1. The order of the learned CIT (in the form of certificate) under Section 12AA of the I.T. Act, 1961 dated 27.9.2013 once gain refusing to register the trust under Section 12AA of the IT Act, 1961, in so far as it is against the appellant, is opposed to law, equity, weight of evidence, probabilities facts and circumstances of the case. 2. The learned CIT is not justified in holding that the appellant trust is not entitled to grant of registration on the ground that the appellant is in appeal before the Hon'ble ITAT against rejection of application for registration under Section 12AA of the Act, dated 31.1.2013, under the facts and in the circumstances of the appellant’s case. 3. The learned CIT (Appeals) failed to appreciate that after rejection for grant of registration under Section 12AA of the Act dt.31.1.2013, the appellant had amended its trust deed to the clarify and remove any doubts that it exists to cater to a particular community and thereafter has applied fresh application for grant of registration under Section 12AA and therefore, the CIT ought to have granted registration under Section 12Aa of the Act. 4. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered.”

6 ITA Nos.422 & 1632/Bang/2013 dt.4.6.2005, which declares that ‘the benefit of the Trust shall ensure to the public without any distinction of caste, community or sex.’ Reliance was placed by the learned Authorised Representative on the decision of the Hon'ble Apex Court in the case of CIT V Dawood Bohra Jamat reported in (2014) 102 DTR (SC) 361. It was contended that the upliftment of a community itself was an object of general public utility as held by the Hon'ble Apex Court in the case of Ahmedabad Rana Caste Association reported in 140 ITR 1. It was submitted that the provisions of section 13(1)(b) of the Act, is to the effect that a trust created or established for the benefit of a particular religions or caste would not be entitled to exemption under Section 11 of the Act. Distinction was sought to be made between upliftment of the community and channeling the benefits of the Trust to a particular community. 5.3 On the issue of the refusal of registration by the ld. CIT’s order dt.3.1.2013 is concerned, we find it relevant that the Hon'ble Apex Court in the case of Dawood Bohara Jamat (supra) has observed as under :- “ 28.The objects of the respondent-trust are not indicative of a wholly religious purpose but are collectively indicative of both charitable and religious purposes. It is expedient to comprehend the objects of the respondent-trust with reference to the construction of the expressions “charitable purpose” and “religious purpose.” 29.................................. 30.According to Section 2(15), the expression “charitable purpose” has been defined by way of an inclusive definition so as to include relief to the poor, education, medical relief and advancement of any other object of general public utility. A catena of decisions of this Court which have interpreted the said provision and especially the expression “any other object of general public utility” have observed that the said expression is of the widest connotation. The word “general” in the said expression means pertaining to a whole class. (CIT v. Gujarat Maritime Board, (2007) 14 SCC 704). Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose. (CIT v. Ahmedabad Rana Caste Assn.) The said expression would prima facie include all objects which promote the wellbeing of the general public. It cannot be said that a purpose would cease to be charitable even when public welfare is intended to be served.

7 ITA Nos.422 & 1632/Bang/2013 31.The Constitution Bench of this Court in CIT v. Surat Art Silk Cloth Manufacturers’ Assn. has held that if the primary purpose and the predominant object of a trust are to promote the welfare of the general public the purpose would be charitable purpose. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charitable trust. (Thiagarajar Charities v. CIT, (1997) 4 SCC 724). 32.This Court in several decisions has reiterated the aforesaid test of predominant purpose and held that the purposes which would yield to profit or not in general public interest could be separated and the trust would only be exigible to tax to the extent of the charitable purposes under its objects. In CIT v. Kamla Town Trust, (1996) 7 SCC 349, the object of the trust included construction of houses for workmen in general and in particular for the workmen, staff and other employees of the settler company. It was held that while the provisions relating to workmen in general did constitute a charitable object, the words “in particular for workmen of the company” negative the charitable purpose and therefore, the entire trust could not be considered to have been established wholly for charitable purpose. 33.In Abdul Sathar Haji Moosa Sait Dharmastapanam v. Commr. of Agri. Income Tax, (1974) 3 SCC 257, at page 259, this Court considered the question whether the appellant therein was a public charitable trust within the meaning of Section 4(b) of the Kerala Agricultural Income Tax Act, 1950. The 3/4th of the income of the bequest was primarily earmarked for the benefit of near relations of the testator only, it cannot be considered as a public charitable trust. While the rest one-fourth was concluded to form the valid charitable trust. (Trustees of Gordhandas Govindram Family Trust v. CIT). In CIT v. Andhra Chamber of Commerce; Ahmedabad Rana Caste Assn. v. CIT; Sole Trustee, Loka Shikshana Trust v. CIT and Yogiraj Charity Trust v. CIT and CIT v. Andhra Chamber of Commerce,[1965] 55 ITR 722 (SC), it was observed that objects for service and benefit to the general masses would indicate that they are meant for public purpose and thus, would create a public charitable trust. 34.Indubitably, the word ‘charity’ connotes altruism in thought and action and involves an idea of benefiting others rather than oneself. (Andhra Chamber of Commerce (supra)). It also cannot be lost sight of that the supreme goal of all religions is philanthropy which could be manifested in various forms. It is held that gifts for religious purposes are prima facie gifts for charitable purposes. (Schoales v. Schoales [1930] 2 Ch. 75 (CA); White v. White (1893) 2 Ch. 41 (CA)) 35.Unlike the phrase “charitable purpose”, “religious purpose” is not defined under the Act. According to lexicographers, the term religious would mean “of or relating to religion.” (Merriam Webster Dictionary, Macmillan English Dictionary). The Shorter Oxford English Dictionary defines the term as follows: “Devoted to religion; exhibiting the spiritual or practical effects of religion, following the requirements of religion; pious, godly, devout.” In Kanga, Palkhivala and Vyas, Law and Practice of Income Tax, Vol. 1, Ed. 9th (at p. 544)

8 ITA Nos.422 & 1632/Bang/2013 religious purposes are indicated to include the advancement, support or propagation of a religion and tenets. Thus, a religious purpose would be one relating to a particular religion and broadly would encompass objects relating to observance of rituals and ceremonies, propagation of tenets of the religion and other allied activities of the religious community. An example of such would entail activities such as the dance performances (Garba) or distribution of food specifically for people on fast during the Hindu festivities of Navratri. 36.In certain cases, the activities of the trust may contain elements of both: religious and charitable and thus, both the purposes may be over lapping. More so when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community and also public at large. For example, the practice of optional charity in the form of Khairat or Sadaquah under Mohammadan Law would be covered under both charitable as well as religious purpose. Further, while providing food and fodder to animals especially cow is religious activity for Hindus, it would be charitable in respect to non-Hindus as well. Similarly, service of water to the thirsty would find mention as religious activity in sacred texts and at the same time would qualify as a charitable activity. 37................................. 38. Unquestionably, objects (c) and (f) which provide for the activities completely religious in nature and restricted to the specific community of the respondent-trust are objects with religious purpose only. However, in respect to the other objects, in our view the fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in color. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. The Privy Council in Re The Tribune, 7 ITR 415 has held that in judging whether a certain purpose is of public benefit or not, the Courts must in general apply the standards of customary law and common opinion amongst the community to which the parties interested belong to. Therefore, it is pertinent to analyse whether the customary law would restrict the charitable disposition of the intended activities in the objects. 39.The provision of food to the public on religious days of the community as per object (a) and (b), the establishment of Madarsa and organizations for dissemination of religious education under object (d) and rendering assistance to the needy and poor for religious activities under object (e) would reflect the essence of charity. The objects (a) and (b) provide for arrangement for nyaz and majlis (lunch and dinner) on the religious occasion of the birth anniversary and Urs Mubarak of Awliya-e-Quiram (SA) and the Saints of the Dawoodji Bohra community and for arrangement of lunch and dinner on religious occasions and auspicious days of the Dawoodi Bohra community, respectively. Nyaz refers to the food a person makes and offers to others on any particular occasion on the occasion of the death of a saint and Majhlis implies a place of gathering or meeting. The activity of providing for food on certain specific occasions and other religious and auspicious events of the Dawoodi Bohra

9 ITA Nos.422 & 1632/Bang/2013 community do not restrict the benefit to the members of the community. Neither the religious tenets nor the objects as expressed limit the service of food on the said occasions only to the members of the specific community. Thus, the activity of Nyaz performed by the respondent-trust does not delineate a separate class but extends the benefit of free service of food to public at large irrespective of their religion, caste or sect and thereby qualifies as a charitable purpose which would entail general public utility. 40.Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15) of the Act. The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The House of Lords in Barralet v. IR, 54 TC 446, has observed that “the study and dissemination of ethical principles and the cultivation of rational religious sentiment” would fall in the category of educational purposes. The Madarsa as a Mohommedan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the object (d) would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character. 41..................................... 42. ................................... 43.Thus, the second issue which arises for our consideration and decision is, whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under Section 11 of the Act in view of provisions of Section 13(1)(b) of the Act. 44........................ 45.From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste. 46.Such trusts with composite objects would not be expelled out of the purview of Section 13(1)(b) per se. The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say, it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large. (Sole Trustee, Loka Shikshana Trust v. CIT, (1975) 101 ITR 234 (SC)). The section of community sought to be benefited must be either sufficiently defined or identifiable by a common quality of a public or impersonal nature. (CIT v. Andhra Chamber of Commerce, 55 ITR 722).

10 ITA Nos.422 & 1632/Bang/2013 47.................. 48................. 49.In the present case, the objects of the respondent-trust are based on religious tenets under Quran according to religious faith of Islam. We have already noticed that the perusal of the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community. The objects, as explained in the preceding paragraphs, do not channel the benefits to any community if not the Dawoodi Bohra Community and thus, would not fall under the provisions of Section 13(1)(b) of the Act.”

5.4. The general principles that can be culled out from the above decision, in our view, appears to be that the test of predominant purpose of the objects of the trust have to be considered and if the predominant purpose does not show any channeling of benefits to a particular community, the trust would not be hit by the provisions of section 13(1)(b) of the Act. However, in so far as the assessee in the case on hand is concerned, we are not expressing any opinion on the predominant purpose of the aims and objects contained in the declaration of Trust dt.4.6.2005, simply because the same stands amended with retrospective effect by the Amendment Deed dt.18.3.2013. We find that the disposal of the appeal in ITA No.1632/Bang/2013 against the order dt.27.9.2013 of the learned CIT will automatically dispose off this appeal and no separate adjudication is required as these objects are no longer relevant for the purpose of grant of Registration under Section 12AA of the Act. ITA No.1632/Bang/2013 6.1 Although several grounds have been raised in this appeal, the sole issue that arises for our consideration is whether the assessee is entitled to Registration under Section 12AA of the Act in the light of the amended objects contained in the Amendment Trust Deed dt.18.3.2013.

11 ITA Nos.422 & 1632/Bang/2013 6.2 On the aspect of the Amendment of the Trust Deed, we find that the Hon'ble Rajasthan High Court in the case of Laxminarain Lath Trust reported in 170 ITR 370 has observed as under :- “ 9. The next question which needs to be considered is as to the effect of the supplementary deed dt. 21st May, 1958, whereby cl. 2(vi) has been amended and the words "belonging to the family of Laths" have been deleted and in their place, the words "in distress" have been inserted. As a result of the aforesaid amendment, cl. 2(vi) reads as under : "To render aid to any persons in distress and to grant monthly and other periodical aids to them." The supplementary deed dt. 21st May, 1958, was executed by the settlor, Shri Lakshminarain Lath, and who is party of the one part and the trustees of the assessee who are parties of the other part in the said deed. The trustees who were parties to the supplementary deed were Shri Lakshminarain Lath, the settlor of the trust, his son, Shri Narbada Prasad Lath, Shri Mahabir Prasad Poddar and Shri Motilal Lath. Three out of the four trustees, namely, Shri Laxminarain Lath, Shri Narbada Prasad Lath and Shri Motilal Lath, were also parties, as trustees, to the original settlement deed dt. 25th Aug., 1948. Shri Bissessurlal Lath, who was a party to the original settlement deed dt. 25th Aug., 1948, as a trustee, was not a party to the supplementary deed dt. 21st May, 1958. The reason being that in the meanwhile, Shri Bissessurlal Lath had died and in his place, Shri Mahabir Prasad Poddar had been appointed as a trustee and he was a party to the settlement deed dt. 21st May, 1958. 10. The Bombay Bench of the Tribunal, in its order dt. 30th Sept., 1975, has held that amendments introduced in the settlement deed by the supplementary deed were invalid for the reason that the objects of the trust as set out in the original trust deed could be modified only with the consent of the beneficiaries and in a case where the beneficiaries are found to be incompetent to contract, approval of the Court was necessary which had not been obtained in this case. The Bombay Bench of the Tribunal has, in this connection, referred to ss. 9, 11, 58, 61 and 78 of the Indian Trusts Act, 1882. 11. We have looked into the said provisions of the Indian Trusts Act, 1882. Sec. 9 makes provision with regard to persons who may be beneficiaries. Sec. 11 relates to the duties of the trustees to execute the trust. Sec. 58 relates to the right of the beneficiary to transfer his beneficial interest. Sec. 61 provides for the right of the beneficiary to compel the trustee to perform any particular act or his duty. Sec. 78 provides for revocation of the trust. On a closer reading of the order of the Bombay Bench of the Tribunal, we find that the Tribunal has relied upon s. 11 of the Indian Trusts Act. Shri Surolia, learned counsel for the Revenue, has also laid stress on the provisions of the said section which provide as under : "Sec. 11 : Trustee to execute trust.—The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal civil Court of original jurisdiction. Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries. Explanation.—Unless a

12 ITA Nos.422 & 1632/Bang/2013 contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be : (a) to pay only the debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest." 12. With regard to the aforesaid provisions of the Indian Trusts Act, it may be stated that in s. 1 of the Indian Trusts Act, it has been expressly laid down that nothing contained in the said Act would apply to public or private religious or charitable endowments. Although the provisions of the Indian Trusts Act as such are not applicable to public trusts in view of s. 1 of the said Act, the principles underlying them, being based on general principles or rules of English Law, are applied by the Courts to public trusts also (See Phulchand Lakhmichand Jain vs. Hukamchand Gulabchand Jain, AIR 1960 Bom 438 and Kishore Joo vs. Guman Behari Joo Deo, AIR 1978 All 1. In State of Uttar Pradesh vs. Bansi Dhar, AIR 1974 SC 1084, the Supreme Court has observed as under : "The next question is whether the Indian Trusts Act, 1882, applies to the present case. The Courts below have argued themselves into an application of s. 83 of the Trusts Act. Shri Dixit rightly objects to this course because that Act relates only to private trusts, public charitable trusts having been expressly excluded from its ambit. But while these provisions proprio vigore do not apply, certainly there is a common area of legal principles which covers all trusts, private and public and merely because they find a place in the Trusts Act, they cannot become ‘untouchable' where public trusts are involved. Care must certainly be exercised not to import by analogy what is not germane to the general law of trusts, but we need have no inhibitions in administering the law by invoking the universal rules of equity and good conscience upheld by the English Judges, though also sanctified by the statute relating to private trusts. The Courts below have drawn inspiration from s. 83 of the Trusts Act and we are not inclined to find fault with them on that score because the provision merely reflects a rule of good conscience and of general application." 13. The question which needs to be considered is whether the rule incorporated in s. 11 of the Indian Trusts Act can be regarded as a rule which is germane to the general law of trusts to be applied as part of the rules of equity and good conscience to public trusts. In this context, it may be stated that in a private trust the beneficiaries are a determinate body and, therefore, any modification in the matter of terms of the author of the trust is required to be made with the consent of all the beneficiaries who are competent to contract and in cases where the beneficiary is incompetent to contract, his consent may be given by the civil Court. The situation in the case of a public trust is, however, different because in a public trust, the beneficiaries are generally indeterminate and the provisions of s. 11 requiring the consent of the beneficiaries cannot, therefore, be applied to a public trust.” 6.3 The Hon'ble Apex Court in the case of Kamala Town Trust reported in 217 ITR 699 had quoted with approval the aforesaid judgment of the Hon'ble Rajasthan High Court in the case of Laxminarian Lath Trust (supra) and observed as under :- “ In the case of Laxminarain Lath Trust vs. CIT (1987) 65 CTR (Raj) 91 : (1988) 170 ITR 375 (Raj) : TC 23R. 763 a Division Bench of Rajasthan High Court speaking through S.C. Agrawal, J., as he then was, had to consider the question whether any rectification of the trust deed which changed character of the private trust into public charitable trust could be relied upon before the IT authorities for claiming exemption under s. 11 of the IT Act, 1961 by the assessee-trust. In that case the original trust deed executed in August, 1948 did not bring out the real intention of the settlor to create a public charitable trust on account of certain sub-clauses of object cl. No. 2. It was, therefore, felt necessary to rectify the mistake in the original settlement deed so as to put

13 ITA Nos.422 & 1632/Bang/2013 on record the true intention of the settlor and of the trust created by him. It was held by the Rajasthan High Court that it was permissible for the settlor to clarify his intention in creating the trust under the original settlement deed by executing the supplementary deed. Even in the original deed, a discretion had been conferred on the trustees to apply the income of the trust in rendering aid to persons belonging to the L family and it was permissible for the trustees not to apply the income of the trust for the said object and in fact the income of the trust had never been applied for that object. It could not be said that the beneficiaries under cl. 2(vi), namely, persons belonging to the family of L, had an enforceable right to the application of the income of the assessee for the object mentioned in cl. 2(vi), and in these circumstances their consent was not necessary before altering the terms of the trust deed. In any case although the supplementary deed was executed in May, 1958, none of the persons belonging to the family of L had challenged the validity of the same in a Court of law. After the execution of the supplementary deed, it was not open to the trustees to apply the funds of the assessee for non-charitable purposes. The assessee-trust had acquired the status of a trust wholly for charitable and religious purposes after the amendment of the trust deed in May, 1958. It was entitled to exemption under s. 11 of the IT Act, 1961. The doctrine of cy pres was also invoked in the said case by observing that in respect of charities the Courts apply the doctrine of cy pres which envisages that if a clear charitable intention is expressed, it will not be permitted to fail because the mode, if specified, cannot be executed and the law will substitute another mode cy pres, i.e., as nearly as possible to the mode specified by the donor. The said doctrine is applied on the principle that the Court would lean in favour of charity and where a general charitable goal is projected and particular objects and modes are indicated, the Court, acting to fulfil the broader benevolence of the donor and to avert the frustration of the good to the community, reconstructs, as nearly as may be, the charitable intent and makes viable what otherwise may die. The aforesaid decision of the Rajasthan High Court also takes a view which is almost parallel to the view taken by the Delhi High Court though the binding nature of the rectification order of the Civil Court on the ITO is not highlighted as no such occasion arose for Rajasthan High Court to pronounce on the same on the facts of that case. However, the fact remains that after due rectification of the original trust deed either by the settlor himself by executing a supplementary deed or by getting it rectified through competent Civil Court under the relevant provisions of the Specific Relief Act, the trustees would be bound to carry out the amended and rectified objects of the trust and if they fail to do so they would be guilty of breach of trust for which even proper proceedings can be initiated against them under s. 92 of the CPC. For all these reasons, therefore, it must be held that when such rectified trust deed is pressed in service before the IT authorities in assessment proceedings concerning the relevant assessment years the ITO will have to interpret such rectified instrument for finding out its correct legal effect. But it will not be open to the ITO to refuse to look at such rectified instrument of trust and to insist that the trustees of the trust should ignore the said rectified objects and should stick to the instrument as it existed prior to its rectification. The ITO will have to take the instrument as it exists in its actual amended form when it is pressed in service for framing the assessment concerning the relevant assessment year in which such rectified instrument holds the field. The second contention, therefore, fails and is rejected.” 6.4 In the light of the aforesaid judgments relied on by the assessee, the ld. CIT ought not to have refused to consider the Deed of Amendment of Trust dt.18.3.2013. As held by the Hon'ble Apex Court, the Deed of Amendment of the Trust binds the Author and Trustees who have to administer the trust in accordance with terms contained in the rectified trust deed that is produced before the authorities below. Therefore, what is before the ld. CIT in the

14 ITA Nos.422 & 1632/Bang/2013 case on hand is the amended objects as contained in the Deed of Amendment dt.18.3.2013 which has amended the objects w.r.e.f. 4.6.2005. 6.5 The Hon'ble Delhi High Court in the case of Jagdamba Charity Trust and Another V. CIT reported in 125 ITR 377 has dealt with the retrospective operations of the deed of Trust. The Hon'ble Delhi High Court observed that :- “ However, we think, that for the purposes of the present case, what concerns us is not whether the provisions of s. 26 of the Specific Relief Act could have been properly invoked but the effect, vis-a-vis the IT Department, of the order which has been passed by the sub-Court under that section. The author of the trust has filed a suit and, after giving notice to the trustees who have been administering the trust, has obtained an order of rectification. Right or wrong, and, whether within the purview of s. 26 or not, there is an order of the sub-Court which is binding on both the parties, namely, the author and the trustees. In the face of this order which is binding on both of them neither the author of the trust nor the trustees could go contrary to the terms of the trust deed as amended. After the document has been amended by the Court in the terms mentioned above, it will not be open to the trustees to ignore the amended document and to proceed to invest the trust funds in commercial concerns or to carry out business transactions. In this context, it appears to us that the failure to give notice to the Department in the suit for rectification, as was done in Van Der Linde's case (supra) is also not quite relevant. It is not as if the IT Department is a party to or bound by, the terms of the trust deed so that such failure would vitiate the rectification or entitle the Department to ignore the Court's order of amendment. So far as the IT Department is concerned its province under s. 11 of the IT Act is to find out and give effect to the contract between the parties; it is entitled to ask whether the trustees are holding the properties in question under a legal obligation wholly for religious or charitable purposes. There can be no doubt, having regard to the order of the Court by which the trustees are bound, that they can administer the trust only in terms of the amendment directed by the Court. The trustees are and must be deemed from the beginning, to have under a legal obligation to hold the properties only for the objects and with the powers set out in the trust deed as amended. It, therefore, appears to us that, whatever may be the correctness or otherwise of the order passed under s. 26, it is not open to the ITO to say that the trustees could administer the trust in accordance with the original deed and that the claim for exemption will have to be dealt with on the basis of the old deed. Though we are concerned with the asst. yrs. 1966-67 and 1967-68, since the amendment is fully retrospective, it is also not possible for the ITO to say that, in the relevant account years, the trustees held the property subject to the terms of the old deed and not under the terms of the amended deed.” 6.6 In the light of the aforesaid position of law as emanate from the judgments referred to and extracted (supra), we hold that the following objects in the Amended Trust Deed dt.18.3.2013 will have to be examined in order for grant of registration under Section 12AA of the Act :- “ 1. The aims and objects of the trust as contained in the Deed of Trust dt.4.6.2005 in Chapter Four shall stand amended and replaced with the following objects with effect

15 ITA Nos.422 & 1632/Bang/2013 from 4.6.2005 and shall be deemed tohave been amended and inserted from that day :- A. MEDICAL RELIEF. To provide medical relief to the poor, needy, destitute especially women & children irrespective of any case, cred or religion and belonging to all communities by providing the following : (1) Establishing and running schools, residential institutions for all persons especially for women and children to pursue education; (2) Establishing and managing vocational technical schools, and training centres all persons especially for women and children; (3) Establishing and maintaining reading rooms, libraries, study classes, etc. (4) Providing facilities for education and developing and fostering the interest in education in men, women and children; (5) Teaching children extra-curricular activities; (6) Starting part time schools in villages. C. RELIEF TO POOR :- To provide relief to the poor, needy, destitute especially women & children irrespective of any caste, creed or religion and belonging to all communities by providing the following : (1) Running and maintenance of Orphanages, Destitute Homes, Dispensaries, Hospitals and Nursing homes for the poor of all the communities. (2) Running and maintenance of Orphanages, schools for physically handicapped people irrespective of their caste, religion, etc. (3) To start and workout such schemes as may be necessary, for the amelioration of distress and poverty in the country; (4) To establish and provide wells, such as open type or tube type; (5) To conduct marriages of poor girls of all communities; (6) Relief work during the disastrous times; (7) To provide loans and financial assistance to the poor people to uplift themselves form poverty so that they could engage themselves in gainful employment. D. GENERAL PUBLIC UTILITY :- (1) Foster the spirit of brotherhoold among various sections, shades of opinions and schools of thought among all people at large; (2) To promote inter religious harmony and good understanding between the people of all communities. (3) The benefit of the Trust shall ensure to all sections of the Public i.e. beneficiaries in India, irrespective of their caste, creed and religion and region of domestic in India.”

6.7 From a perusal of the aforesaid objects extracted by us above, it appears to us that the objects of the assessee trust are charitable in nature, coming under the provisions of Section 2(15) of the Act. The only objection of the ld. CIT for grant of Registration was that the objects of the Trust contained in Deed dt.4.6.2005 showed that the trust was set up for the

16 ITA Nos.422 & 1632/Bang/2013 benefit of a particular community. Whatever may be the correctness or otherwise of the said findings of the learned CIT, it is only the amended objects that have to be considered for purpose of grant of Registration. Thus, in our view, the objections of the ld. CIT with regard to the provisions of section 13(1)(b) of the Act, are therefore no longer relevant. In this view of the matter, the CIT is directed to accord the assessee trust Registration under Section 12AA of the Act. In any case, the grant of registration is only a step in the process for claim of exemption under Section 11 to 13 of the Act to enable the Assessing Officer to ensure that the assessee complies with the requirements contained therein to claim exemption. 7. In the result, the assessee's appeals are allowed.

Order pronounced in the open court on 4th Sept., 2015.

Sd/- Sd/- (P. MADHAVI DEVI) (JASON P BOAZ) Judicial Member Accountant Member

*Reddy gp Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File. (True copy) By Order

Asst. Registrar, ITAT, Bangalore