Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (6) TMI 129 - ITAT KOLKATA

2016 (6) TMI 129 - ITAT KOLKATA - TMI - Refusal to grant registration u/s 12AA - Held that:- Sufficiency or some irregularities in bringing the initial corpus fund would not automatically make the trust as not to have come into existence.

The charitable objects of the trust are not disputed by the Learned CIT. What is to be seen at the time of granting registration by the Learned CIT is only whether the objects of the trust are charitable and activities carried out are genuine in natu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

: Shri S.Halder, AR For The Respondent : Shri Niraj Kumar, CIT(DR) ORDER Per Shri M.Balaganesh, AM 1. This appeal of the assessee arises out of the order of the Learned CIT, Kol- XXI, Kolkata in Proceedings M.No.CIT-Kol-XXI/12A&80G/2012-13/4297-99 dated 30.1.2013 refusing to grant registration u/s 12AA of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The basic facts of this issue are that the assessee was established on 26.7.2006 and registered on 2.8.2006 by Addl.Regis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

quired by Rule 17A of the Rules. (iii) Besides the society has not filed the application within the stipulated time period of one year from the creation of the trust as per provisions of section 12A(1)(a) of the IT Act. For this reason petition for registration u/s 12A cannot be acted upon. The rejection of the assessee s request for registration u/s 12AA was communicated through this office letter dated 30.8.2012. The assessee trust filed a petition on 25.9.2012 requesting to review the order a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2.8.2006, certified copy of minute book (dated 19.2.2006), certified copy of cash book page 1 to 6 (F.Y. 05-06), confirmation of Settlors towards contribution to corpus fund were furnished. On perusal of the said documents, it was observed that as per deed of trust dated 26.7.2006 vide page no. 5 & 6 it has been testified by the settlors, namely (1) Mr Malay Kumar Ray, (2) Mr Subhas Chandra Debnath, (3) Mr Manas Bhattacharya (4) Mr Santanu Das (5) mr Tapash Chaki (6) Mr Pranes Chakraboty &a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

,00,000/- (Rupees Nine lacs only) in cash as initial Trust Fund to the trustees. In order to examine the authenticity of the coming into existence of the said trust, relevant supporting documentary evidences evidencing creation of the trust was called for from the authorised representative, during hearing. The said documents were produced during course of proceedings on 7.12.2012, namely Trust Deed, Minute Book, cash book, etc certified copies thereof were also produced and kept on record. From .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.2012, the trust was not maintaining any bank account, which was only opened on 16.3.2011. As per the Indian Trusts Act, 1882, a trust may be created for any lawful purpose. The purpose of trust is lawful unless it is (a) forbidden by law, or (b) is of such a nature that, if permitted, it could defeat the provisions of any law, or (c) is fraudulent. Every trust of which purpose is unlawful is void. As per section 5 of Indian Trusts Act, 1882, no trust in relation to movable property is valid unl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sum of ₹ 9 lakhs comprising the movable property to be settled upon creation of the trust was not available with the settlors on the date of registration of the trust deed i.e on 26.7.2006, as discussed in above paragraph. Here the essential precondition of creation of trust is not satisfied. Trust was created on false statement. There was no valid trust on the date of application for registration u/s 12AA. A show cause notice was issued on 13.12.12, asking the applicant to show cause as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ally observed as under:- On careful consideration of applicant s submission it is observed that applicant has admitted that the settlors were not in possession of the trust property. i.e sum amounting to ₹ 9 lacs and thus the said property was not available with the settlors for devolving upon the trust on the date of its creation / registration. Therefore no valid trust had come into existence on the date of registration of the trust. I am, therefore, of the considered opinion that regist .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made u/s 12A(l)(aa) within the time specified. 2. That in the facts, circumstances as well as under the Law, the Ld. C.I.T.-XXI, Kolkata, was not justified in refusing Registration merely pointing out certain rectifiable mistake in the instrument evidencing objects and genuineness of its activities. 3. That in the facts, circumstances as well as under the Law, the Ld. C.l.T.-XXI, Kolkata, erred in referring to Section (5) and (6) of the Indian Trusts Act, 1882, when there has been no violation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ta. The assessee had also raised the following additional ground :- (1A) THAT in the facts, circumstances as well as under the law, the ORDER passed by Ld. CIT - XXI on 30.08.2012, refusing grant of Registration u/s 12AA in violation of statutory period of six months as required u/s 12AA(2), got barred by limitation and the Appellant, in consequence, should be presumed to be granted Registration. [2004]91 ITDI (BANG). 4. The Learned AR argued that the order granting or refusing registration shou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

files an application for registration, but no order is passed within statutory period, authority cannot deprive assessee benefit of registration. He argued that the registration has been refused only on the ground that the trust had come into existence in view of the fact that the initial corpus fund of ₹ 9 lacs was not brought in by the settlors as mentioned in the trust deed. He further argued that the objects stated in the trust deed were examined by the Learned CIT and remand report al .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DR argued that the trust deed itself is incorrect and misplaced in as much as the settlors had not brought their initial corpus fund of ₹ 9 lakhs as has been observed by the Learned CIT in his order refusing registration u/s 12AA of the Act and hence he argued that the trust had come into existence at all. He submitted that the documents mentioned in Rule 17A such as original trust deed and accounts for earlier years were not submitted by the assessee before the Learned CIT. With regard to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is not disputed by the revenue. We find that the Learned CIT had not disputed the objects of the trust as charitable in nature. We find that he had only pointed out certain defects in the trust deed which are curable in nature and which would not disturb the root of the existence of the trust per se. We find that the assessee had replied before the Learned CIT that a sum of ₹ 4,33,000/- were seized and possessed with the settlors being the initial corpus fund of the trust and had undertook .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made within one year from the date of creation of the trust and there is no power to condone the delay provided in the statute. In this regard, we find that in case the applicant had preferred an application on or after 1.6.2007, the Learned CIT, if satisfied with the charitable objects of the trust and genuineness of the activities of the trust, is duty bound to grant registration from the date of application of the trust. He cannot simply reject the application just because it is filed beyond .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

settlors / trustees as stated in the trust deed and accordingly held that the trust had not come into existence. We find that the settlors had pumped in ₹ 4,33,000/- as initial corpus fund which is not in dispute and had also undertook to bring in the balance sum of ₹ 4,67,000/- as per the trust deed in future. In our opinion, just because the part of the initial corpus fund has not been brought in by the settlors, it cannot be said that the trust has not come into existence. More s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orized to make such enquiries as he may deem fit. The Commissioner, in the instant case, had not taken any objection to the charitable nature of the trust. In fact, the objects of the trust as declared in the trust deed, were all charitable objects and there was no finding recorded by the Commissioner to the contrary. The real objection of the Commissioner appeared to be that the initial contribution of ₹ 500 made by the founder of the trust and dedicated to the objects of the trust was ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

meet the objects of the trust and had been directed to deposit the contributions into the corpus fund. The corpus fund was to be invested in the prescribed modes and the trust deed authorised the trustees to utilize the earnings from the corpus fund towards meeting the objects of the trust. In special cases, the trustees had been authorized 10 utilize the corpus fund also for such purposes. The trustees had collected a sum of ₹ 5,71,927 towards contribution to the trust which had been depo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

For the above reasons, the registration was to be allowed to the assessee and the order passed by the Commissioner under section 12AA was to be set aside. 5.2. We find that the Learned CIT had also observed that the assessee had violated the provisions of section 5 and 6 of Indian Trusts Act, 1882. For the sake of convenience, the relevant provision is reproduced hereinbelow:- Section 5 of Indian Trusts Act, 1882 Trust of immovable property - No trust in relation to immovable property is valid u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bject to the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee. We find that the provisions of section 5 and 6 of Indian Trusts Act, 1882 have .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ould not tamper the existence of the trust. It is not in dispute that the settlors had brought in ₹ 4,33,000/- as the initial corpus fund of the trust. That itself brings the trust into existence with charitable objects. Moreover, there is no allegation that the monies so brought in have been diverted to the personal benefit of the settlors. The monies so brought in remained in the coffers of the trust to be deployed for the charitable objects of the trust. 5.3. It is true that Rule 17A pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

after 1.6.2007. Hence viewing from this perspective, the assessee trust not bringing in the part of the promised initial corpus fund would not vitiate the status of the trust coming into existence much less seeking registration under the Income Tax Act. We hold that what is relevant at the time of granting registration u/s 12AA of the Act is that the Learned CIT should examine whether the objects of the trust as enumerated in the trust deed are charitable in nature and activities of the trust a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct could be examined in detail. We find that the Hon ble Kerala High Court in its recent decision had an occasion to consider the powers of the Learned CIT vis a vis the behaviour of the trustees at the stage of granting registration u/s 12AA of the Act, in the case of Sree Anjaneya Medical Trust vs CIT reported in (2016) 382 ITR 399 (Ker) dated 11.2.2016, wherein it was held that : It is clear from a plain reading of sections 12A and 12AA of the Act that what is intended thereby is only a regis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed by assesses in terms of sections 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the assessee what is to be looked into is whether the assessee is a genuine one or whether it is a sham institution floated only to avail of the benefits of exemption under the Act. Similarly we find that carrying on of charitable activities of the trust in accordance with the objects is not be treated as a condition precedent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t reported in (2014) 362 ITR 199 (Mad) We are convinced on perusal of the trust deed that the objects enumerated therein are genuine and charitable in nature. 5.4. We find that the reliance placed by the Learned DR on proviso to Rule 11AA(6) of the IT Rules is not well founded . For the sake of convenience, the said provisions are reproduced hereunder:- Rule 11AA-Requirements for approval of an institution or fund under section 80G (6) The time limit within which the Commissioner shall pass an o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

details called for by the Learned CIT were submitted in the month of march 2012 itself and order refusing registration at the first instance was passed on 30.8.2012 which is beyond six months from the end of the month in which application was filed. Moreover, we find that the provision relied upon by Learned DR is relevant for granting approval under section 80G of the Act and not for granting registration u/s 12AA of the Act. 5.5. We find that the Learned AR had raised an additional ground stat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

per section 12AA(2) of the Act 30.8.2012 - First order of Learned CIT refusing registration on the ground that No provision is laid out for condoning the delay in preferring the Application in Form 10A. 24.9.2012 - Submissions of the assessee bringing to the notice of the Learned CIT that the order is passed beyond six months violating the Provisions of section 12AA(2) of the Act thereby automatically Entitled for registration u/s 12AA of the Act and also requesting Learned CIT to rectify his ol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r on 30.8.2012 which is beyond six months was also brought to the notice of the Learned CIT by the assessee which has not been taken into cognizance by the Learned CIT even in the second round of proceedings. We find that the Central Board of Direct Taxes had issued Instruction No. 16/2015 dated 6.11.2015 specifically addressing the impugned issue under dispute which is reproduced hereinbelow :- Instruction No.16/2015 F.No.197/38/2015-ITA.1 Government of India Ministry of Finance, Department of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ration under clause(b) of sub-section (1) of that Section shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) of the sub-section (1) thereof. Thus while processing the application u/s 12AA of the Act, the time limit of six months has to be adhered to by the Commissioner of Income Tax (Exemptions). However, it has been brought to the notice of the Board that the said time limit has not been observed in som .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al No. 1478 of 2016 dated 16.2.2016 had categorically held as below:- 3. The short issue is with regard to the deemed registration of an application under section 12AA of the Income Tax Act. The High Court has taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision. 4. The learned Additional Solicitor General appearing for the appellants, has raise .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

shall take effect from 24.08.2003. We find that the aforesaid judgement had emanated out of the order passed by the Hon ble Allahabad High Court reported in (2008) 171 Taxman 113 (Allahabad) wherein it was held that : Admittedly, after the statutory limitation, the Commissioner would become functus officio, and he could not thereafter pass any order either allowing or rejecting the registration. It is obvious that the application cannot be allowed to be treated as perpetually undecided. Therefor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sing authority fails to make the assessment or reassessment within the limitation prescribed for the same. That also leads occasionally to loss of revenue from that individual assessee. [Para 10] On the other hand, taking the contrary view and holding that not taking a decision within the time fixed by section 12AA(2) was of no consequence would leave the assessee totally at the mercy of the income-tax authorities, inasmuch as the assessee had not been provided with any remedy under the Act agai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion of the registration application within the time fixed by section 12AA(2) would amount to deemed grant of registration, the only adverse consequence likely to flow from such a view, in respect of any case of that assessee arising in future would, at best, be some loss of revenue from that individual assessee from the date of expiry of the limitation under section 12AA(3) till the date of cancellation of that registration, if such cancellation is called for. [Para 12] For the interpretation o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version