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Aditya Birla GBTL Jan Kalyan Trust Grasim Bhiwani Textiles Ltd. Versus Commissioner of Income Tax

2015 (12) TMI 1415 - ITAT DELHI

Registration u/s 12AA denied - CIT(A)'s first conclusion is that amendment carried out through supplementary deed was illegal and unacceptable - Held that:- In the case in hand also the amendment has been carried out under the authority granted by the settler company and it was registered with Registration Authorities rather than court. The supplementary deed was otherwise not found to be fictitious or shame by the learned Commissioner of Income-tax in case in hand. We find that in view of clear .....

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nd for refusing the registration if otherwise the trust fulfills the conditions for registration.

The third conclusion drawn by CIT(A) that certain clauses of trust deed envisage control of the company over the activities of the trust and serve the interest of the settler company. It is seen that, sometimes settler wants to have some sort of control over the affairs of the trust so as to ensure that Trust work in the direction of its objects and for this purpose , the settler also bec .....

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only on the presumptions and possibilities. The object clauses containing welfare of the employees had already been removed through supplementary deed and now there was not any object which was in violation of charitable object as defined in section 2(15) of the Act.

Fourth conclusion also the CIT(A) has expressed general notion that trustees being employees of the company look forward toward corporate office and do not carry out activities of the trust independently. We find nothing .....

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d the activities in the nature of relief to poor like distribution of blanket etc. The activities were not started as large scale as there were no funds in the trust. As regards to the activity, the ld. Commissioner has not concluded that same were not genuine, might be at small scale. The discrepancies observed by the ld. Commissioner in recording bills or minutes of meeting are not material in sense when we look the activities which were carried out were charitable in nature. The learned Commi .....

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DER Per O. P. Kant, A. M. The present appeal by the assessee is directed against the order dated 27th September, 2013 of the Commissioner of Income Tax, Hisar, passed under section 12AA of the Income Tax Act, 1961, raising following grounds of appeal: i. In the facts and circumstances of the case the learned Commissioner of Income Tax has erred in law & facts in refusing to grant registration u/s 12AA of the IT Act for the reasons given in para 6.1 of the order. ii. The appellant craves leav .....

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rd of Directors of M/s Grasim Bhiwani Textiles Ltd. (hereinafter called, the company ) on 21.07.2012, and employees of the company were made trustees of the Trust. 2.2 The learned Commissioner of Income Tax further observed in respect of objects of the trust as under: (i) that the clause 4(b)(v) of the deed contained rendering of services to the person of high order, however, the Trust could not clarify meaning of the term persons of high order . (ii) that sub-clause (j) and (k) of clause 5 of t .....

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the company. ii. Clause 15 of the deed provided that company should nominate one of the trustees as managing trustee , who should preside over the meetings of the trustees. iii. Sub clause (f) of clause 23 provided that before taking any major decision, the trustees should take approval from the Board of Directors of the company, wherever required. 2.4 The learned Commissioner of Income Tax also observed that the winding up of clause of the deed contain Clauses 36 and 37, which provided transfer .....

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use related to retirement of the trustees and clause related to winding up of the trust. In the supplementary deed, a new clause authorizing amendment of clauses of the trust deed to the trustees was inserted. The learned Commissioner of Income Tax was of the view that there was no amendment clause in the original deed and therefore the supplementary trust deed executed amending the original deed was in violation of the terms of original trust deed. In this respect, the assessee submitted that t .....

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case of Laxminarain Lath Trust Vs. Commissioner of Income Tax, (1988) 170 ITR 375, and claimed that it was permissible for the settler to clarify his intention in creating the trust under the settlement deed by executing the supplementary deed and the route of amendment of original deed via court was not required. The Commissioner of Income Tax, however, distinguished the facts of the said case and observed that there was no mistake in the original trust deed and the amendments have been incorp .....

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the meetings of the trustees. The learned Commissioner of Income Tax concluded that the constitution of the trust could not be amended by a supplementary deed registered with the Sub-Registrar in the garb of rectification of mistake and trust was always irrevocable by its inherent nature and the amendment routed without the permission of the court was not having any legal sanctity. Regarding genuineness of the activities, the learned Commissioner of Income-tax observed that scale of activities w .....

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see explained that bill was obtained from the supplier on subsequent date therefore the mistake happened. The learned Commissioner of Income Tax also observed irregularities in maintaining minutes of meeting by the trustee and demonstrated that even the minutes of meeting of the trustee were engineered by the finance department of the company indicating the control over the affairs of the trust in practice. The learned Commissioner of Income Tax also noted casual approach of the trustees in reco .....

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llegal and unacceptable. ii. Certain provisions of the trust deed are not clear. iii. There are certain clauses in the trust deed which ensure control of the company over the activities of the trust and service the interest of the settler company. iv. In practice also, the trustees being employees of the company, look forward towards corporate office of the company/Business Group and do not carry out activities of the trust, independently. v. The activities of the trust are very little and (the .....

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tted that the learned Commissioner of Income Tax had neither given any finding that the objects of the trust were not in the nature of non-charitable nor the activities were of ingenuine nature and after the amendments in the trust deed, the trust satisfied all the conditions for registration under Section 12AA of the Act. The learned Authorized Representative further relied on the judgment of the Hon ble Rajasthan High Court in the case of Laxminarain Lath v/s CIT (Supra) and the Hon ble Punjab .....

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n spite of the amendment to the trust deed the company was in position to control directly or indirectly the affairs of the trust, ultimately to achieve profit motive of the company. She further submitted that the trust deed appears to be a contract between the trust and company to execute the welfare activity for employees and their families. 6.1 We have heard the rival submissions and perused the material on record. The section 12AA of the Act mandates the Commissioner of Income-tax or Directo .....

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st are not charitable in nature. The learned Commissioner of Income-tax has not specifically brought on record that the activities of the trust are not genuine except minor discrepancies of records maintenance. We have observed that the ld. Commissioner of Income-tax has refused registration only in view of five conclusions drawn in para 6.1 of his order. The first conclusion is that amendment carried out through supplementary deed was illegal and unacceptable. The ld. AR on the other hand drew .....

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ths in sections 2(vi) were deleted and in their place the words in distress were inserted. The Tribunal held that the amendments made by the supplementary deed were not valid and the income of the trust was not exempt. 6.2 The Hon ble High Court in above case observed that it was permissible for the settler to clarify his intention in creating the trust under the original settlement deed by executing the supplementary deed. The Hon ble Court further held that the Income Tax authorities could ign .....

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ettler, Madhoo Soodon Sain, made an alteration in the original trust deed and the question was whether it was permissible for the settler to make the said rectification, as stated in the deed of rectification, was that the trust deed did not represent the true intention of the settler and that certain words had crept in which were contrary to his intention. A learned judge of the Calcutta High Court upheld the said deed of rectification executed by the settler on the view that the original trust .....

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served that the mere fact that the trust deed conveys by way of settlement the trust property irrevocably, does not mean that the deed cannot be reformed, and that the irrevocability can be no bar to the deed s rectification. 6.3 Further the Hon ble Court, citing the doctrine of cy pres held as under : In respect of charities, courts apply the doctrine of cy pres which envisages that where a clear charitable intention is expressed, it will not be permitted to fail because the mode, if specified, .....

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e intent and makes viable what otherwise may die (See state of Uttar Pradesh v. Bansi Dhar, AIR 1974 SC 1084). In the present case, the settler was alive and he had indicated what his intention was in creating the trust by executing the supplementary deed. In our opinion, it was permissible for the settler to clarify his intention in creating the trust under the original settlement deed by executing the supplementary deed and it cannot be said that the supplementary deed dated May 21, 1958, exec .....

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ed out in the trust deed through supplementary deed without approval of Court was a valid one and there was no illegality in the same. 6.5 The second conclusion of the ld. Commissioner of Income-tax that certain provisions of the trust deed were not clear. We are of the opinion that non10 clarity of one or two words in the deed can t be a ground for refusing the registration if otherwise the trust fulfills the conditions for registration. 6.6 The third conclusion drawn by the ld. Commissioner of .....

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e trustee. Further, the learned Commissioner of Income-tax has not brought on record how the trust has served the interest of the company. If it was so , before refusing the registration, he was required to clearly record such activities in his order. Further, the Commissioner of Income tax has power to cancel the registration. If at any time, he finds that due to abuse of control by the settler , any activity of the assessee falls in the nature of not genuine activity, the ld Commissioner may c .....

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able object as defined in section 2(15) of the Act. 6.7 In Fourth conclusion also the ld. Commissioner of Income-tax has expressed general notion that trustees being employees of the company look forward toward corporate office and do not carry out activities of the trust independently. We find nothing wrong in taking certain assistance of ministerial or clerical level for carrying out meeting etc. from the office of settler. The ld. Commissioner was required to examine whether taking any assist .....

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