TMI Blog2010 (3) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT that the First Trustees were of close relations of the settler. The CIT has referred to the following clauses of the Trust Deed to come to the conclusion that according to some clauses of the trust deed, the stage of implied perpetual succession has been arrived at as the entrusted property would be managed in perpetuity by the heirs and successors of the present Trustees and clauses 2( iv ), 2( vii ) and 2( viii ) implied that the First Trustee exercises full control over the working of the Trust for all time to come. He required the assessee to explain such situations and following reply was furnished : "The choice of Trustees and future Trustees has categorically been set out under certain boundaries by the settler of the Trust so that the command and control of the Trust remains with the persons who are committed to the cause for which the trust has been created. This is the reason why the first trustees are allowed to nominate their successors and as well as to choose new trustees. We hope that you will find the above disclosures relating to the creation of Trust sufficient and will allow the registration under section 12A of Income-tax Act so that the Trust m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontend that where perusal of the Trust Deed along with various documents had clearly showed that the activity of the Trust were genuine the assessee-trust was entitled to have registration under section 12AA of the Act. ( ii ) Aggarwal Mitra Mandal Trust v. DIT (Exemption) [2007] 106 ITD 531 (Delhi) to contend that when once Commissioner has not doubted its charitable object, he cannot refuse to grant registration to the Trust and it is further held that application of section 13 falls within exclusive domain of Assessing Officer and the provisions contained therein can be invoked by him while framing assessment and not by the Commissioner while considering the application for registration under section 12AA. ( iii ) Smt. Mansukhi Devi Bihani Jan Hitkari Trust v. CIT [2005] 94 ITD 1 (Jodh.) wherein it was held by the Tribunal that in case the application for registration has been filed in time and objects of the Trust are charitable in nature or the income was utilized for the charitable purposes or the property held by it was not used for the benefit of Trustees or their family, registration could not be refused to the Trust merely on the basis that there was a clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d advancement of education and knowledge. ( vii )To help poor or promising students in their studies by providing books, uniforms, meals, lodging and other necessaries or facilities and to provide stipends, scholarships, grants and aids for further studies. ( viii )To establish, arrange and maintain rest houses, public houses, old age houses, Ashrams, Water huts or other public utilities for the benefit of the society. ( ix )To formulate and carry out schemes and programmes for the unity of the Country and National Integration. ( x )To formulate and carry out schemes and programmes for spreading brotherhood, love and affection amongst citizens of the world specially India. ( xi )To formulate and carry out schemes and programmes for spreading the message of harmonious living together by persons of different religions and faiths. ( xii )To establish temples and places of worship to spread message that God is one and ways to worship Him are different. ( xiii )To grant aid to or to work in collaboration of other trusts, societies, and organizations working in general public interest including social activities. ( xiv )To promote and work for public welfare in all its d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. If Secretary/Treasurer is not a Trustee he will attend the meetings of Board of Trustees but will not vote, if a call of voting is made by the Chairman for any purpose. ( vii )The Chairman can withdraw the appointment made by him before completion of the tenure of one year, if in his opinion, the appointee is not working efficiently or the change of the office bearer is in the interest of the Trust. His opinion will be final and binding. The Chairman will allocate duties to the Secretary and the Treasurer from time to time. ( viii )The objects of the trust shall be better achieved, if the income of the trust is exempted under the Income-tax Act. In case, however, any clause or sub-clause of this deed has been inadvertently clothed in a language capable of interpretations in conflict with relevant provisions of Income-tax Laws granting exemption, it is hereby agreed and declared that such clause or sub-clause shall have restricted meaning." 9. In the light of the above facts, we have to examine that whether ld. CIT was right in refusing the registration to the assessee. Section 12A regulates the conditions for applicability of sections 11 and 12 and section 12AA regulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the trust for all the time to come. Let us take an example of an ordinary institution created by some individual to carry out the charitable activity. A person who is contributing to the charitable cause may keep in his mind that the control of charitable activity may be with him or his family members, but that fact alone cannot disentitle the institution from registration unless any material is brought on record to suggest that either the objects of the charitable trust are not charitable in nature or there is a clause in the trust deed according to which certain benefits can be given either to the settler or to the trustees or to the persons related to them. Here also it is not the case of the ld. CIT that according to the conditions laid down in trust deed any of such contravention could be done or there is any possibility of applying any income or asset for the benefit of the settler, trustees or the persons related to them. Here, it will be relevant to mention that there is a prohibition clause in the trust deed which is clause No. 7 and which is described as under : "7. Prohibition of trustees. The trustees shall be prohibited from : ( i )Making any distinction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trustees cannot derive any direct or indirect pecuniary advantage either out of property of the trust or from income or application thereof not only for themselves, but for their relatives and associates. In any case, if later on it is found by the department that trustees or their relatives or their associates are deriving any direct or indirect pecuniary advantage out of trust property or its income and if any such property or income is applied for that purpose, then it will be contravention of the trust deed. Therefore, in our opinion, the simple fact that there is perpetual succession in the appointment of trustee, cannot disentitle the assessee institution from getting registration. Moreover, the trust deed has to be read as a whole according to well established law. It has been stated in clause 2( ii ) that if any of the first trustees resigned during his/her lifetime, the vacant seat will be filled by the Board of first trustees with 3/4th majority and, thus, nominated will also be called first trustee. Clause 2( iii ) provides that the number of trustees could be increased by moving an amendment of the trust and getting approval of 3/4th number of first trustees, however, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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