TMI Blog2011 (9) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the definition of charitable purpose in terms of Section 2(15) of the Act and therefore, the assessee trust needs to be registered in terms of Section 12A of the Income Tax Act, 1961. 2. The facts in brief as under:- An extent of 26 acres 27 guntas of land in Sy. No. 6 of Hebbal and Sy. No. 99 and 100 of Cholanayakanahalli of Bangalore North was purchased under a registered sale deed dated 19.08.1961 by one Smt. K. Savithramma, Sri. A.S. Chinnaswamy Raju and Sri. A. Kuppaswamy for a valuable consideration. All of them got the aforesaid land converted for residential purposes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of the said applications called upon the trust to produce the documents to substantiate their claim. From the documents, which are produced, it was noticed that the declaration of the trust was amended by a registered rectification deed dated 05.01.2001, where it is recited that there was an error in describing the entire 17 acres 37 guntas as the trust property and what was intended to be given was only 5 acres 37 guntas only. Consequently, through the rectification deed, it was sought that the property of 5 acres 37 guntas alone be treated as the trust property and the balance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. Once having been satisfied about the genuineness of the activities of the trust and its objects, it was of the view that the assessee trust needs to be registered in terms of Section 12A of the Act and therefore, they set aside the order of the Commissioner and allowed the appeal. Aggrieved by the said order passed by the Tribunal, the revenue is in appeal. 3. The learned Counsel appearing for the revenue assailing the impugned order contends that the aforesaid undisputed material on record clearly establishes that the main object of creating trust is to get away from the clutches 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for such registration certificate is provided in Section 12A. if an assessee wants to claim the benefit under Sections 11 and 12 of the Income Tax Act, unless he has made an application for registration of the trust in the prescribed manner to the Commissioner and unless the said trust or institution is registered under Section 12AA, the assessee would not be entitled to the benefit of exemption from payment of tax under the Act in respect of the income of the trust. Therefore, the certification of registration is a sine qua non for an assessee to claim the benefit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as income of the Trust. 10. To invest, dispose of, transfer or otherwise to deal with the trust properties as the trustees should deem fit so as to enable the trust to carry on and achieve the objects of the trust effectively. 11. To pay out from the income of the trust, stipends and scholarships to poor and deserving students to pursue higher education. 12. To carry out and assist in carrying out activities which are philanthropic and charitable in nature for 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 busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady a complete dedication, (vide Krishnaswamy Pillai v. Kothandarama Naicken [1914] 27 MLJ 582: Sunder Singh Mallah Singh Sanathan Dharam High School Trust v. Managing Committee, Sunder Singh Mallah Singh Rajput High School [1938] 1 MLJ 359 : AIR 1938 PC 73, and Gokuldoss Jamnadoss and Co. v. Lakshminarasimhalu Chetti [1940] 2 MLJ 409 : AIR 1940 Mad. 920), If a valid and complete dedication had taken place, there would be no power left in the founder to revoke and no assertion 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 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the objects set out therein, schools and colleges are being run and educational institutions are being run as rightly held by the Tribunal, nothing more requires to be established to show that the trust in question is a genuine trust and therefore, the assessee is entitled to the registration under Section 12AA of the Act. As set out above, even if the registration is granted, the exemption from the provisions of the Income Tax Act in particular sections 11 and 12 is not automatic. It is only when the assessee satisfies the requirement of section 13, he would be eligible for exemption. That is a matter to be gone into by the Assessing Authority in respect of the returns filed every year and if according to them there is misappropriation of funds and it is hit by section 13 of the Act, certainly, they can deny the benefit of exemption. But that is not a ground to deny the registration in the instant case under Section 12AA, when admittedly the trust has been established to run schools and colleges for imparting education, which is a charitable purpose. In that view of the matter, we do not see any merit in this appeal. The substantial question of law framed in this appeal is answ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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