TaxTMI 
TaxTMI 
2011 (9) TMI 590
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....by an order of the Government of Karnataka dated 20th August, 1969. Sri, Kuppaswamy settled his 1/3rd undivided interest in the said land to his sons by a registered deed. The remaining extent of land exclusively belongs to the other two co-owners. The remaining two owners viz., K. Savithramma and A.S. Chinnaswamy Raju declared that the extent of 17 acres 37 guntas which exclusively belonged to them as the property of the trust for the purpose of establishing an educational institution as set out in the said trust deed. The said document was executed on 21st December, 1984 and duly registered. Prior to the creation of the trust, as the provisions of the Urban Land Ceiling Act, 1976 was attracted to extent of land, they applied to the Government and got an exemption on the ground that they are utilising the said land for charitable purposes by creating trust. The Government granted exemption by its order dated 02.09.1980 under Section 20 of the Urban Land Ceiling Act and also accorded transfer of the land in favour of the trust. It is not in dispute that on the ground that the said trust property is utilised for charitable purpose and the income therefrom is not liable to income tax....
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.... of 12 acres be treated as the property of the authors. The materials produced by them also showed that after the Urban Land Ceiling Act was repeated, an attempt was made to treat this property as a family property and a settlement was arrived at by partitioning the property treating it as a joint family property. There was also an agreement entered into to sell 4/15th of the land of 15 acres to M/s. Winfield Enterprises for a consideration of about Rs. 20 crores. They applied for and obtained No Objection Certificate from the Income Tax Authorities. The 15 acres of land was also treated as real estate property. The said property was offered as a security to banks to raise funds for the purpose of setting up of A.S.K. Atria Park Company. Taking note of all these material on record, the Commissioner was of the view that the real object in creating the trust was to save the valuable property from the provisions of the Urban Land Ceiling Act with a view to enjoy either all or most of it for their own personal benefit and not for the benefit of the community at large. He was of the view that the main purpose of the creation of the trust is to save and protect the property of the author....
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....tches of Urban Land Ceiling Act, Income Tax Act, Wealth Tax Act. Though in the deed of trust it is mentioned that the purpose of creating trust is educational purposes, which is undoubtedly a charitable purpose in reality the land property is used as a personal properties of the trustees. The income from those properties are appropriated by them. The property is offered as a security to the bank to raise funds for their businesses. They are dividing the property as if it is their joint family properly and therefore these events subsequent to the creation of trust clearly shows bona fide on the part of the authors of the trust in creating trust and do not establish the genuineness of the trust. The Commissioner on proper appreciation of entire material on record rightly declined to grant the certificate of registration, which order has been very lightly interfered by the Tribunal and therefore, interference is called for. 4. Per contra, the learned Counsel appearing for the assessee supported the impugned order. 5. The appeal was admitted on 15.06.2010 to consider the substantial question of law framed on that day. However, on perusal of the same, we are of the view that the subst....
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.... under Sections 11 and 12 of the Act in respect of the income of the trust. It is in this background, the Commissioner to whom an application is made under Section 12AA has to satisfy himself about the objects of the trust or institution end the genuineness of its activities before passing an order either granting registration or refusing to grant registration. In order to satisfy himself, it is open to him to call for such documents or information from the trust or institution and on production of such documents to satisfy himself about the genuiness of the activities of the trust or institution. He also has the power to make an enquiry in this behalf before passing of an order. 9. As is clear from the language employed in Section 12AA, first he should be satisfied about the object of the trust or institution and then the genuineness of its activities. In order to satisfy himself about the abject of the trust what is required to be seen is the object as set out in a deed of trust. After satisfying himself about the object of the trust, it is open to him to see whether the activities of the trust is in conformity with the object as set out in the trust deed and on that basis he ca....
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....or helping the poor and improving their misery and poverty conditions. 13. The above objects are for the benefit of the general public without restriction to any religion, caste, class or sex." 10. A perusal of the aforesaid object makes it very clear that all those objects are charitable in nature. In fact, the said fact is not disputed even by the revenue. But what is contended is that the activities of the trustees and the trust shows that it is not a genuine trust. It is in support of the said contention, the aforesaid activities of the trustees in treating the property as family property and dividing the same, executing a rectification deed, offering the property as a security for borrowing loan for businesses conducted by the trustees in their individual name and constructing buildings in the trust land and letting it out for rent and not collecting the rent from them are cited as instances to show the trust is not genuine. 11. It is in this context, it is necessary to know whether any of those activities in law has any value, Once the authors of the trust transferred the land, which belonged to them, to the trust and got it duly registered, the title of the property....
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....on on his part or the subsequent conduct of himself or his descendants contrary to such dedication would have the effect of nullifying it. If the trust had been really and validly created, any deviation by the founder of the trust or the trustees from the declared purposes would amount only to a breach of trust and would not detract from the declaration of trust. Therefore, the subsequent-conduct of the founder in dealing with the funds of the trust long after the creation of the trust may not put an end to the trust itself." We are in full agreement with the principle stated in the aforesaid passage and we hold that the trustee had no authority or jurisdiction to execute a fresh Trust Deed and the document dated 1st July, 1944 is of no consequence and is no more than a scrap of paper. The Trust as originally established by the Deed dated 28th November, 1941 remained unchanged or unaffected by the later document dated 1st July, 1944." 12. From the aforesaid statement of law, it is clear that once the authors of the trust transfers the title of the property to the trustees and creat a trust, they have no right to meddle with the property even if they have created partition deed, r....