TMI Blog2013 (9) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in this position and implementation of the objects of the Trust is still a legal obligation to be discharged - Merely registration as a Society does not disentitle the applicant from the exemption claimed - The ld. CIT is directed to grant exemption u/s 80G of the Act to the assessee in accordance with law – Decided in favor of Assessee. - ITA No.783/Del/2010, C.O. No.108/Del/2010 - - - Dated:- 28-6-2013 - Shri G. D. Agrawal And Shri A. D. Jain,JJ. For the Petitioner : Shri S. D. Kapila, Advocate Shri Sanjay Kakkar, CA For the Respondent : Shri Satpal Singh, Sr. DR ORDER Per A. D. Jain, Judicial Member This is an appeal filed by the assessee against the order passed by the ld. CIT, Faridabad, dated 22.01.2010 u/s 80G of the IT Act, 1961 read with Rule 11AA (5) of the IT Rules, 1962. The department has filed the Cross Objections. 2. The assessee Trust filed an application for renewal of exemption u/s 80G on 22.06.2009. The ld. CIT, vide order sheet entry dated 04.12.2009, put the assessee to show cause as follows:- "1. As per documents furnished, it is noticed that a trust was registered with the Income Tax Department vide order No. 227/24 R 77-78/E d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for verification. 3. Further it is again stated in view of foregoing provisions that there is no bar to a trust being registered as a society and there is no ambiguity. Further point 8 in the Memorandum is a restrictive clause which debars trustees from taking unilateral decisions so that at no stage property of the trust is not jeopardized. Your contention that Board of Trustees does not exist needs to be reconsidered because in the Trust Deed Board of Trustees is defined explicitly. 4. In the last submission Financial Statements for the year ending 31-3-2009 were filed. We are also now enclosing Financial Statements for the year ending 31-3-2008. As you will observe that expenses incurred are for the benefit of general public and are charitable in nature and no benefit accrues to any particular section of society or any specific class of persons. 5. The provisions contained in clause VB of Memorandum and are administrative in nature and only determine how the activities of Trust are to be conducted and in no way are contrary to provisions in section 2(15) of the Act which only defines Charitable Purposes." 4. Additional Information was asked for from the assessee by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Memorandum of Association Rules Regulations, which were produced before the Registrar of Societies, Chandigarh have been filed before you and based on those several questions were raised on 04/12/2009. Copies of the same are again produced herewith. It is to confirm that these very documents were produced before the Registrar of Societies, Chandigarh while obtaining registration dated 23/10/1981. 3) Queries no. 2 3 (extracted above) are prima facie based on certain assumptions, presumptions and technical view of law. Before replying to them it may be useful to note the past history of the applicant. 4.1)(i) The RKM Trust was brought into being vide the trust deed dated 14/04/1976 by the late Sh. BS Ahluwalia for the benefit of the needy people irrespective of caste creed with the following objects namely, a) To award Scholarships Advance loans for the education of indigent, needy deserving students b) To support poor patients in hospital for their treatment and c) Award prizes to the students for distinction in studies and other co curricular activities. (ii) Clause l(d) of the deed stipulated as follows "In the light of experience gained, the founde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust is purely a public trust public service organization". 7.2) Clause (5) of the Memorandum of Association provided for the "Governing Body" first members of which were named therein, total No. being 17. Seven of these were also members of the "First Board of Trustees" (Named in the Trust deed Dated 14/04/1976) 7.3) Introduction to the "Rules Regulations" accompanying the aforesaid memorandum of association stated inter alia as below: "RKM Educational Charitable Trust, 1288, Sector 15, Faridabad came into being on April 14th, 1976 as a result of an initial donation of Rs. 31393.50/- by Prof Balwant Singh Ahluwalia (Retired Director of Public Instruction) and subsequent donations by other founder members. 7.4) The Term "Founder Members" in Sub Section (a) of Clause 3 of the said Rules Regulations read as follows: a) Founder Members are those who have been actively and closely associated with the setting up of the Trust and its subsequent growth. 7.5) Clause (4) of the Rules described the "Trust Organization" as below: The Trust Organization It has two wings: a) General Body b) Board of Trustees Sub Clause (a) of this clause defines, "General Body" a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterating inter alia the following: "The trust has been enjoying the extension of concession since 1976...." 9.3) The renewal of exemption U/S 80G of the Income Tax Act, 1961 on the basis of the aforesaid representation was allowed vide order of C.I.T Haryana-Rohtak dated 30/04/1985/ 03/05/1985 for a period of three years from 1/04/1985 to 31/03/1988. 10.1) As the end of the period of exemption drew nearer, the assessee moved a fresh application seeking extension of the benefit. Para 3 of the said application again reiterated the submission that" since its inception in 1976, the Trust has been strictly following the Rules Regulations laid down by the Income Tax Deptt. From time to time" 10.2) In response to this, the C.I.T., Rohtak granted renewal of exemption upto 31/03/1989 vide his letter dated 22/09/1988. 10.3) To seek Extension beyond 31/03/1989 the assessee again moved an application on the basis of which renewal was granted upto 31/03/1992 Vide C.I.T. order dated 04/06/1989. 10.4 Similar has been the pattern of applications for the subsequent period also. Even in its application dated 19/05/2009 presently, under consideration, the assessee has reiterated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be that of "an Association of Persons or Body of Individuals". In no way therefore the interest of revenue is affected. As regards the functioning of the trust, it remains governed by its Rules Regulations. Its status whether it is a trust or Society hardly interferes with the discharge of its charitable functions. Thus taking an overall view of the facts of the present case, the assessee request for grant of exemption U/S 80G may kindly be granted, as has been done hitherto all along. Taking into account its devotion and commitment to the cause of poor and needy the RKM Trust fully deserves to get the requisite exemption certificate, which may kindly be granted." 6. By virtue of the impugned order, the ld. CIT, rejected the claim of the assessee u/s 80G of the IT Act. Aggrieved, the assessee is in appeal before us. 7. The ld. counsel for the assessee, challenging the order under appeal, has submitted that the ld. CIT has erred in rejecting the application filed by the assessee Trust for renewal of exemption u/s 80G of the IT Act, ignoring that all the conditions prescribed in Section 80G of the Act stand duly satisfied; that right from the year of its inception, i.e., 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was approved u/s 12A of the Act and not the Society, the latter is not eligible for grant of certificate u/s 80G (5) of the Act; that the ld. CIT, while illegally rejecting the application of the assessee, has failed to take into consideration all the above facts. 8. The Ld. DR, on the other hand, has placed strong reliance on the impugned order. It has been contended, reiterating the cross objections raised, that the assessee is a Society and not a trust; that the legal status of public charitable trust continued till 22.10.1981, whereafter, a Society was registered on 23.10.1981; that a Society registered under the Societies Registration Act, 1860, cannot claim to be a Trust; that in the Form No.10G, i.e., the application filed by the assessee, the assessee itself mentioned its status to be that of a Society registered under the Societies Registration Act, 1860; that the documents accompanying the application in Form No.10G, as per the assessee itself, prove the status of the assessee to be that of a Society and not that of a Trust; that the assessee Society is not registered u/s 12AA of the Act, which registration is a prerequisite for approval of exemption u/s 80G of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question as to how a trust can be registered as a society should not be raised by the Income Tax Department, as in the counsel's opinion, the Registrar of Societies should have raised this question but he did not. Further, the counsel has expressed his opinion that the technicality of the applicant trust having been registered as a society is not of real significance. 9. On this issue, it is observed that the counsel's contentions are misfounded. The issue as to whether the applicant is a trust or a society is not merely a technical issue, but is a veritable foundation of any exemption u/ s 80G. In order to avail such exemption, it is necessary that the institution claiming such exemption should have a legal status, i.e. it should be constituted as a trust or registered as a society or a charitable company. Then, it should be registered u/ s 12AA of the Income Tax Act. All these processes of creation of an institution are different from each other and all are governed by separate provisions of law. It is not possible for an institution to comply with the provisions laid down by law and judicial pronouncements in respect of a Trust and simultaneously, to also comply with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust deed as a trust and at the same time, to the stipulations of MOA and Rules and Regulations of the society read with provisions of Societies Registration Act, 1860. How can one single institution run equally faithfully under two different instruments? Moreover, at the cost of repetition, it is again mentioned that the latest entity of the Society is not registered u/ s 12AA, which is prerequisite for allowing exemption under sub-section vi of section 80G of the Income Tax Act, 1961 read with clause i of sub-Rule 2 of Rule 11AA of the Income Tax Rules, 1962. As such, the applicant institution's claim of exemption u/ s 80G cannot be accepted." 10. It is seen that the main basis, rather the only basis taken by the ld. CIT to reject the application of the assessee for extension of grant of exemption u/s 80G of the Act has been the reasoning that the assessee, which was initially incorporated as a Trust, ceased to be so after 22.10.1981, as on 23.10.1981, it was registered as a Society under the Societies Registration Act, 1860 under the name and style of "Smt. Rattan Kaur Memorial Educational Charitable Trust, Faridabad." In the opinion of the CIT, once the entity got registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out saying that the provisions of the Trust Act do not apply, since the Trust before us is a Public Trust. However, any new scheme relating to the Trust can be implemented only after grant of approval by the court of competent jurisdiction u/s 92 of the CPC. This is so far as regards the legal position qua the entity per se. 14. It has also nowhere been disputed by the ld. CIT that the objects of the Trust and those of the Society are similar. Now, be it a Trust or a Society, the legal status of either is that of a body of individuals and the benefit in either case inures to the same indeterminate public. Neither the Trust nor the Society, by itself, is a "person" u/s 2 (31) of the Act. 15. Moreover, there is nothing on record to show that the management of the Trust has been taken over by the Society, or that the property of the Trust, post registration as Society, belongs to the Society. Undisputedly, the Board of Trustees are the same. The property, as earlier, continues to be held under Trust for pro bono publico or for the benefit of the public. As such, there is no transfer of ownership of property and the assessee continues to be the indeterminate beneficiary and not the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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