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2015 (9) TMI 1240 - ITAT DELHI

2015 (9) TMI 1240 - ITAT DELHI - TMI - Registration u/s 12AA/12A denied - trust was created in the year 1159 AD - absence of (Execution of Trust deed and its Registration - genuineness of the activities - trust is a private religious body - whether DIT(Exemption) has allowed his decision to be influenced by suspicion - Held that:- It was declared in the declaration of the Trust that the trustees stand possessed of the “Trust Fund” comprised of the moneys and other properties, both movable and im .....

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at the aims and objects presently being followed by the assessee Institution/Trust should be the same at the time of establishment of the Institution or the creation of the Trust itself. The aims and objects of the trust may be amended and some new aims and objects may be added or deleted in accordance with changing time and as per the requirement of the mankind at large. To ask for documentary evidence in the form of a resolution or some credible proof for the amendment in the aims and objects .....

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tion/trust could not be held as violative of the provisions of Section 13 of the Act. In this view of the matter, the issue is decided in favour of the assessee and it is held that the supreme head of the trust taking food and clothes and similar basic needs from the funds of the trust were not violative of the provisions of Section 13 of the Act.

Genuineness of the activity - DIT(E)/CIT(E) could not go into the issues relating to the income and expenditure account of the assessee, wh .....

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K. Shukla, Advocates For the Respondent : Shri A. K. Saroha, CIT-DR ORDER Per G. C. Gupta, VP These two appeals by the assessee are directed against the order of learned Director of Income Tax (Exemptions) rejecting the claim for registration of the assessee u/s 12AA of the Income-tax Act, 1961. These appeals of the assessee are being disposed of with this consolidated order. ITA No.4941/Del/2011 :- 2. The grounds of appeal of the assessee are as under:- 1. That the learned DIT(Exemption) has er .....

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at the order of the learned DIT(Exemption) is devoid of any reasonable basis and is sought to be sustained on account of non-fulfillment of assumed requirements (Execution of Trust deed and its Registration) for which there is no compulsion in Law, in the face of the position emerging from the well sustained contentions of the appellant Trust. 5. That the findings arrived at by the learned DIT(Exemption) about the appellant Trust s activities being not genuine are contrary to the facts of the ap .....

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aring the authorized representatives of the appellant Trust himself, the proceedings all through having been conducted either by his Income Tax Officer (HQ) or his Inspector. 8. That the learned DIT(Exemption) has allowed his decision to be influenced by suspicion and in the end in basing his finding on surmises and conjectures, without confronting the appellant Trust with his suspicions in the matter and thereby infringing the principles of natural justice too. 9. That the order of the learned .....

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17A of the Income-tax Rules, 1962 as also reproduced by the DIT (Exemptions) in his impugned order to submit that Rule 17A specifically provides that where the trust is created or institution is established under an instrument, the instrument in original together with one copy thereof and where the trust is created or institution is established otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy th .....

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under the relevant laws. He submitted that the registration under relevant laws for foreign donations can be made only after grant of registration u/s 12AA/12A by the Income Tax Department. He submitted that there is no legal requirement of filing of the original trust deed, as in this case, the trust was created in the year 1159 AD and, at that time, there was no law for execution of a trust deed and the trust relates to the period before coming into force the Indian Trust Act or the Income Tax .....

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for in the books of account of Tsurphu Labrang and all the income arising there from upon trust shall be applied for the aims and objects of the trust. He submitted that the aims and objects and purposes of the trust have been detailed in the said declaration of the trust, copy filed before the Revenue authorities and as well in the compilation filed before the Tribunal. The various terms and conditions for the smooth running of the affairs of the trust and also regarding appointment of additio .....

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ly mentioned that the original declaration of trust was produced before the Assessing Officer. He submitted that all the aims and objects and purposes of the trust were charitable in nature without any discrimination on account of origin, colour, religion, caste, creed or gender. The objects of the trust include establishment and running of educational institutions, the training of students, vocational training institutions, medical care institutions and other social institutions and relief camp .....

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ction of environment and so on. The learned counsel for the assessee submitted that it has been specifically mentioned in the aims and objects and purposes of the trust that all the services to the society at large shall be without any discrimination on account of origin, colour, caste, creed or gender etc. He relied on the decision of Hon ble Apex Court in CIT Vs. Dawoodi Bohra Jamat - [2014] 364 ITR 31 (SC). He submitted that Circular No.108 of the CBDT dated 20th March, 1973 applies to the fa .....

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to the exemption from tax and registration u/s 12AA of the Act. He relied on the decision of Hon'ble Supreme Court in Ahmedabad Rana Caste Association Vs. CIT, Gujarat - [1971] 82 ITR 704 (SC), and of Hon ble Allahabad High Court in CIT Vs. Pt. Ram Shanker Misra Trust - [1996] 222 ITR 252 (Allahabad) and CIT Vs. Surji Devi Kunji Lal Jaipuria Charitable Trust (No.1) - [1990] 186 ITR 728 (Allahabad) in support of his arguments. 4. The learned counsel for the assessee submitted that the DIT(Ex .....

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cisions:- (i) Malik Hasmullah Islamic Educational and Welfare Society Vs. CIT, Faizabad - [2012] 138 ITD 519 (Lucknow). (ii) Sanjeevamma Hanumanthe Gowda Vs. DIT(E) -[2006] 285 ITR 327 (Karn). (iii) CIT Vs. Surya Educational and Charitable Trust and another - [2013] 355 ITR 280 (P&H). (iv) CIT Vs. Leuva Patel Seva Samaj Trust - [2014] 42 Taxman.com 18 (Guj.). (v) CIT Vs. R.S. Bajaj Society - [2014] 42 Taxman.com 5763 (All). (vi) CIT Vs. Janak G. Education Society - [2013] 39 Taxman.com 2 (P& .....

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007] 294 ITR 86 (Guj). (xiv) CIT Vs. Shri Digamber Jain Mandir - [2010] 189 Taxman 106 (Raj). 5. The learned counsel for the assessee argued that the test of general public utility was examined by the various Hon ble Courts and it was held that they were very wide words and would exclude the object of private gain. He relied on the decision of Hon ble Privy Council in All India Spinners Association Vs. CIT, Bombay - [1944] 12 ITR 482 (PC), of Hon ble Madhya Pradesh High Court in Laxminarayan Mah .....

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establish any violation of any of the aims and objects and purposes of the assessee trust duly evidenced by the declaration of trust dated 29th March, 2011 and all the statutory conditions have been complied with and the trust exists for charitable purposes only and, therefore, is eligible for grant of registration u/s 12AA/12A of the Act. 7. Learned CIT-DR has opposed the submissions of the learned counsel for the assessee. He submitted that under the scheme of the Act and in particular in the .....

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made by the trust with the resolution passed from time to time and credible evidence has to be filed by the assessee trust to prove the same. He submitted that a plain reading of the objects of the trust as detailed in the declaration of the trust dated 29th March, 2011 makes it clear that these could not be the aims and objects of the trust in the year 1159 AD. He referred to the aim & object No.(l) wherein it is mentioned that the assessee trust to undertake to establish, aid, manage and .....

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ities and other related development organizations . He submitted that these objects could not exist in the year 1159 AD as the Income-tax Act, 1961 itself came into being centuries later and the subject of preservation and protection of environment has come into existence recently and, therefore, the assessee has to prove with evidence that when the objects of the assessee trust were amended to this effect, incorporating these objects in its aims and objects, and when resolution to this effect w .....

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though there was no activity undertaken by the assessee trust in Delhi. He submitted that the 17th Karmapa, the head of the assessee trust has come to India in the year 1974 but has applied for registration in the year 2011 and there was no valid reason for such inordinate delay in applying for registration u/s 12AA of the Act. He submitted that there was a violation of foreign exchange laws by the assessee trust and the assessee has spent ₹ 30.28 lakhs under the head legal expenses and vi .....

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Learned counsel for the assessee, in his rejoinder, submitted that the assessee is seeking registration from assessment year 2011-12 onwards and has applied for registration u/s 12AA/12A on 31st March, 2011 and, therefore, to say that there is a delay in applying for registration u/s 12AA/12A of the Act, is not relevant. He submitted that the assessee was in the process of acquiring premises in Delhi at the time of filing of application for registration u/s 12AA/12A of the Act and, therefore, fo .....

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on of Section 13 of the Income-tax Act. He submitted that the assessee has filed a copy of the declaration of trust by His Holiness 17th Karmapa running in 18 pages before the Revenue authorities as well as the Tribunal and has also filed the copies of 29 other eminent persons well versed with the activities of the trust, copy of which has been filed in the compilation before the Tribunal stating on oath the fact of the existence of the assessee trust for more than 800 years and the fact of dona .....

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Human Resource Development Department, Government of Sikkim, Gangtok registering the school set up and managed by the assessee trust. He referred to the letter of the Joint Secretary, Government of Sikkim dated 28.02.1984 addressed to the 17th Karmapa giving recognition to Shri Nalanda Institute for Higher Buddhist Studies set up and managed by the assessee trust and a copy of which has been filed in the compilation before the Tribunal. The learned counsel for the assessee referred to various d .....

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rused the contents of the declaration of the trust dated 29th March, 2011 and also the copies of documents and evidences filed in the various compilations filed by the assessee before the Tribunal. We find that the assessee has claimed that it is an institution/trust which was created centuries ago in the year 1159 AD and that no formal deed of trust was executed at that time. However, the aims and objects of the trust right from its inception in the year 1159 AD were charitable and religious in .....

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h the Dharma and does not accept or own any kind of properties personally and, by tradition, have been diverting all such offerings at source to the charitable purposes of general public utility and for propagation of Dharma and Gyan. In the year 1959, His Holiness the 16th Gyalwang Karmapa, followed by Lamas, Sangha and lay communities carrying with them religious ritual articles, murals and lama dance costumes etc. fled Tibet and came into exile in the erstwhile Himalayan Kingdom of Sikkim, no .....

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, both moveable and immovable which were duly accounted for in the books of account of Tsurphu Labrang and carried on its balance sheet and all income arising there from upon trust from time to time were possessed by the trust fund and such income of the trust fund could be applied to the execution of the aims and objects of the trust. The various aims, objects and purposes of the Tsurphu Labrang were detailed in the said declaration of trust dated 29th March, 2011 by the 17th Karmapa. It was cl .....

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s as trustees. It was specifically provided that in case of winding up or dissolution of the trust, its assets shall not be distributed amongst the trustees but shall be given or transferred to such societies, trusts or associations having objects similar to that of the trust to be determined by the board of trustees at the time of dissolution or, in default thereof, by the court of competent jurisdiction. The assessee trust applied for registration u/s 12AA/12A of the Income tax Act, 1961 on th .....

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registration u/s 12AA/12A was that the assessee trust could not file any evidence to prove that the trust was created in the year 1159 AD and was doing charitable activities and that the onus was on the assessee to file evidence that the objects existed in the year 1159 AD and the amendment to the objects of the trust were made with the resolution passed from time to time and credible evidence has to be filed by the assessee trust to prove the same. The learned CIT-DR has pointed out certain ai .....

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d that the assessee trust exists for a particular caste or community and not public at large and has objected to violation of foreign exchange laws by the assessee trust. The department has also objection to the personal expenses of the head of the trust, the 17th Karmapa, from the funds of the assessee trust. 11. We find that the various issues as culled out from the pleadings of the parties could be summarized as under:- (I) Whether, for registration under the provisions of Section 12AA/12A of .....

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they are relevant for the purpose of granting or otherwise of registration u/s 12AA/12A of the Act. (IV) Whether, the DIT (Exemptions)/CIT(E) while making enquiries during the course of proceedings u/s 12AA/12A of the Act for grant of registration could make enquiry only with regard to the genuineness or otherwise of the aims and objects of the trust but not regarding the application of income of the trust for charitable or religious purposes, which is a subject-matter of assessment, to be consi .....

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ny salary for his services rendered to the trust. 12. Now, we proceed to deal with the above mentioned issues in the light of the facts of the case and the law applicable to it. The first and second issues as reproduced above are taken together. With regard to the first issue that whether for registration under the provisions of section 12AA/12A of the Income-tax Act, 1961, the execution of formal deed of Trust is necessary without which the registration could not be granted to the Institution/T .....

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.10A and shall be accompanied by the following documents, namely :- (a) where the trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof; and where the trust is created, or the institution is established, otherwise than under the instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof : Provided that if the instrument or document in original .....

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ts have been made up. 13. A plain reading of Rule 17A(a) makes it clear that where the Trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof, has to be filed along with prescribed Form No.10A for registration of the Institution/Trust u/s 12A of the Act. However, the second limb of Rule 17A(a) provides that where the Trust is created, or the Institution is established, otherwise than under an instrument, the document e .....

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document evidencing the creation of the Trust or the establishment of the Institution, has to be filed, meaning thereby that the document evidencing the creation of Trust or the establishment of Institution could be of any type. As per the provisions of the Indian Trust Act, the Trust can be created even orally and if the assessee is able to give some evidence of creation of such Trust by a word of mouth, the same shall be eligible for registration u/s 12AA/12A of the Act, provided such evidenc .....

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titution or the trust is established otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof can be filed along with the prescribed form No.10A for registration u/s 12AA/12A of the Act. What would be the document evidencing creation of the trust or the establishment of the institution, has not been defined in the Rules. Accordingly, any evidence to establish the creation of the trust or the esta .....

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see nor any application for registration u/s 12A was submitted and that the returns for the assessment year 2005-06 to 2010-11 do not contain the stamp affixed by the Department showing the date of receipt thereof, has no relevance as the assessee has sought the benefit of registration u/s 12AA/12A from assessment year 2011-12 onwards only and not the earlier years. The plea of the learned CIT-DR regarding the involvement of the name of the 17th Karmapa in a case u/s 120B (Criminal conspiracy) o .....

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having aims and objects and purposes of charitable in nature entitled to registration u/s 12AA/12A of the Act. 15. In Laxminarayan Maharaj and Another Vs. CIT - [1984] 150 ITR 465 (MP), the trust was created 100 years ago without any instrument of document. However, the revenue records relating to land held by the trust, orders relating to property tax and affidavits and declaration of citizens were in support of existence of trust and were filed along with application for registration u/s 12A o .....

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is a trust created under an instrument, rule 17 requires filing of 'the instrument in original' and when the trust is created otherwise than under an instrument 'the document evidencing the creation of the trust has to be filed. An analysis of section 12A(a) and rule 17A(a) will show that the fact to be established is the creation of trust and this fact is required to be established by producing constitutive and evidential documents. When the trust is created under an instrument, th .....

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l basis of inferring creation of the trust and all such documents can be described to be 'document evidencing the creation of the trust' within the meaning of rule 17A( a). A document directly evidencing the creation of the trust is normally the constitutive document which cannot be produced when the trust is not created by an instrument and if the words 'document evidencing the creation of the trust' are construed as limited to documents directly evidencing the creation of the t .....

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rust is entered as tenant or bhumiswami and the name of the Sarbarahkar is also mentioned. The assessment orders relating to the property tax for 1967-68 to 1974-75 were filed. All these documents, though not directly evidencing the creation of the trust, afford a logical basis for inferring creation of the trust prior to 1910-11 and can be described as documents evidencing creation of the trust for purposes of rule 17A. In our opinion, the Commissioner was not right in taking a very narrow view .....

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st Act has not come into existence in the year 1159 AD and it was not possible to execute a deed of Trust on stamp paper or in writing centuries ago. However, the supreme Head of the Trust, i.e., 17th Karmapa, who is the supreme spiritual Head of Karma Kagyu lineage, has made a declaration of Trust on stamp paper on 29th day of March, 2011 at Delhi, wherein the entire history of the Trust along with their aims, objects and purposes of the Trust, various provisions with regard to the management o .....

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me spiritual Head of Karma Kagyu lineage and that he is recognized all over world and the voluntarily customary offerings from devotees all over the world remain untouched by Karmapas, as they do not accept or own any kind of properties personally by continuing tradition of diverting all these offerings at source to charitable purposes of general public utility and for preservation and propagation of Dharma and Gyan. He declared that in the year 1974, His Holiness the 16th Karmapa followed by La .....

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the moneys and other properties, both movable and immovable, which are duly accounted for in the books of accounts of Tsurphu Labrang and is carried forward every year on its balance sheet and the income arising there from is applied to the administration or execution of the aims and objects of the Trust. We hold that in accordance with the provisions of the Income-tax Act, 1961 and rules made there under, the execution of a formal deed of trust was not necessary for grant of registration u/s 1 .....

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tenets of the Karma Kagyu lineage of Buddhism and propagate it for the benefit of the entire mankind without any discrimination on account of origin, colour, religion, cast, creed or gender; and b). To organize performance of all Dharma rituals and rites for the benefit and participation of members of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and c). To establish, aid, manage and or run Educational institutions or projects for .....

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anage and or run Vocational Training institutions or projects for the benefit of members of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and g) To establish, aid, manage and or run Medical care institutions or projects for the benefit of members of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and h) To establish, aid, manage and or run Social institutions or project .....

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ed, down trodden and weaker sections of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and k) To render assistance, including financial help, to the deserving students and scholars, especially from the weaker sections, of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender; and l) To undertake to establish, aid, manage and or run any institution or project of general public u .....

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nd tradition in the Himalaya region; and o) To undertake and or aid programmes and projects for the preservation and protection of environment with active engagement of monasteries, communities and other related development organizations; and p) To undertake and execute all such work as is necessary for and incidental or ancillary to the aims & objects above and are not in derogation of the tenets of the Dharma and the aims & objects above. 19. The various clauses for the proper manageme .....

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transferred to such societies/Trust or Associations having similar objects to be determined by the Board of Trustees or, in default thereof, by the court of competent jurisdiction. 20. From a reading of various aims, objects and purpose of the Trust, we find that the aims and objects as detailed above were wholly charitable and religious in nature without any discrimination on account of origin, colour, religion, caste, creed or gender. It provides the objects of running educational Institution .....

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es and projects for the preservation and protection of environment and put all incidental or ancillary work in accordance with the aims and objects detailed in the declaration of Trust and not in derogation of the tenets of the Dharma and the aims and objects of the Trust. We find that it has been specifically provided time and again in the aims and objects and purpose of the Trust that it should be without any discrimination on account of religion, colour, origin, caste, creed or gender and sha .....

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d from the year 1159 AD for the aims and objects as specified in the declaration of Trust dated 29.03.2011. The copy of the Revenue record and the copy of registration certificate issued by the Human Resource Development Department, Govt. of Sikkim dated 31.08.2009 granting registration to the school run by assessee-trust, copy of recognition letter dated 28.02.1984 issued by Govt. of Sikkim of Nalanda Institute for Higher Buddhist Studies run by the assesseetrust and various documentary evidenc .....

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dences that the objects of the assessee trust existed in the year 1159 AD and amendments to the objects of the Trust were made by the Trust with resolution passed from time to time, is devoid of any merits. There could not have possibly any formal trust deed executed on stamp paper centuries ago. The assessee has filed other evidences to prove the creation of the Trust and that the Trust existed for charitable purpose and the same could not be controverted on behalf of the Revenue. The learned C .....

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lowed by the assessee Institution/Trust should be the same at the time of establishment of the Institution or the creation of the Trust itself. The aims and objects of the trust may be amended and some new aims and objects may be added or deleted in accordance with changing time and as per the requirement of the mankind at large. To ask for documentary evidence in the form of a resolution or some credible proof for the amendment in the aims and objects of the Trust, created as back as in 1159 AD .....

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ion of a formal deed of Trust is not necessary and the Institution/Trust could be registered under these provisions of the Act without execution of formal deed of trust, in case the other conditions for registration are fulfilled by the assessee. The second issue is also decided in favour of the assessee and it is held that the aims and objects and purposes of the assessee trust were charitable in nature, qualifying the trust for registration u/s 12AA/12A of the Act. 21. With regard to the third .....

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re charitable in nature. The stage for application of income shall arrive when such trust or institution files its return of income with the Assessing Officer. In a case where the DIT(E)/CIT(E) is satisfied after examining the aims and objects of the institution/trust that they were genuine and were charitable in nature and the institution/trust has fulfilled other statutory conditions for grant of registration u/s 12AA/12A of the Act, the DIT(E)/CIT(E) shall allow the registration to the instit .....

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income derived from the trust property was applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust. The Hon ble High Court further held that sufficient safeguard is provided under the Act for cancellation of registration obtained by the assessee in the event of its misusing the provisions. 23. In CIT Vs. Surya Educational and Charitable Trust and another - [2013] 355 ITR 280 (P&H), the Hon ble Punjab & Haryana High Court .....

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in the foregoing paragraphs of this order. 25. We, being in agreement with the decisions of the Coordinate Benches of the Tribunal and also respectfully following the decisions of various Hon ble Courts, decide the issue in favour of the assessee and hold that learned DIT(E)/CIT(E) could not go into the issues relating to the income and expenditure account of the assessee, which were the subject-matter of assessment and they are not relevant for the purpose of granting or otherwise of registrati .....

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nstitution/trust to do charity for the whole planet. In case an institution/trust exists for charitable purposes for the benefit of an indeterminate group of people, the same shall be eligible for registration u/s 12AA/12A of the Act. It is now well-settled that an object beneficial to a section of the public is an object of general public utility. The intention of the institution/trust should be impersonal in nature and for a sufficiently defined and identifiable section of the public. 27. In A .....

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bject of general public utility. To serve a charitable purpose, it is not necessary that the objects should be to benefit the whole of the mankind or all persons in a country or state. The Hon ble Apex Court further held that it is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present and the section of the community sought to be benefited must be sufficiently definite and identifiable or some common quality of a public or imperson .....

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stablish madarsa and such organization, to assist/help the needy people for religious activities, to carry out all religious activities according to shariat and direction of shariat-e-mohammediyah for the prosperity of the Dawoodi Bohra community. Hon'ble Supreme Court, dismissing the appeal of the Revenue, held that determination of the nature of the trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact and held that the obje .....

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blic by providing monetary help for marriage of poor girls of a particular community and sacred thread ceremonies of boys also of that community. The Hon ble Allahabad High Court held that the Tribunal was right in holding that the expenditure incurred by the trust in giving monetary help at the time of marriage of poor girls of a particular community and sacred thread ceremony of boys also of that community was incurred for charitable object. 30. In CIT Vs. Surji Devi Kunji Lal Jaipuria Charita .....

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ject of private gain, such as an undertaking for commercial profit though all the same it would subserve general public utility. In this case, the All India Spinners Association was formed for development of handspinning and hand-weaving for relief of poverty and income was derived by sale of cloth. The issue was decided in favour of the assessee and the assessee s appeal was allowed by Hon ble Privy Council. 32. In Malik Hasmullah Islamic Educational and Welfare Society Vs. CIT, Faizabad - [201 .....

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t show that the objects of the assessee were not charitable, order denying registration was not justified and decided the issue in favour of the assessee. 33. The last issue No.(VI) is that whether the supreme head of the trust taking food and clothes etc. from the funds of the trust was violative of the provisions of Section 13 of the Act particularly when he was not drawing any salary for his services rendered to the trust, we find that it is an admitted fact in this case that the 17th Karmapa .....

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hant or supreme head of the trust or trustees. The provision is meant to debar the author or the trustees of the trust from parting away part of the income or any property of the institution/trust for their personal benefit. In the case before us, it is an admitted fact that the supreme head of the trust, the 17th Karmapa, has renounced the world and the offerings made to him are diverted at source to the funds of the trust and no part of the income or property of the trust is kept by the 17th K .....

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the Act. In this view of the matter, the issue is decided in favour of the assessee and it is held that the supreme head of the trust taking food and clothes and similar basic needs from the funds of the trust were not violative of the provisions of Section 13 of the Act. 34. In this view of the matter, we hold that the execution of a formal deed of trust was not necessary for grant of registration u/s 12AA/12A of the Act and that the aims and objects and purposes of the assessee trust were char .....

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