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Jaipur Rural Health and Development Trust Versus The Commissioner of Income-tax, (Exemptions) , Jaipur

2016 (10) TMI 419 - ITAT JAIPUR

Grant of exemption u/s 80G denied - denial of claim for want of registration under section 12AA - Held that:- We find merit in the submission of the ld. Counsel for the assessee that the objects of the assessee of clause (a) and (d) are for establishment of hospitals and colleges. We also find that as per clause 16 of the Trust Deed, no income or part of income or assets of the Trust Fund can be applied or transferred for any purposes other than charitable purposes. Keeping this clause in view, .....

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d SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri P.C. Parwal (CA) For The Revenue : Shri D.S. Kothari (CIT) ORDER PER SHRI KUL BHARAT, JM. These two appeals by the assessee are directed against the two different orders of ld. CIT (Exemptions), Jaipur dated 24.02.2016. First, we take up the assessee s appeal in ITA No. 210/JP/2016. The assessee has raised the following grounds of appeal :- 1. The learned Commissioner of Income Tax has erred on facts and in law in refusing to grant exemption .....

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f the Trust gave a finding that the activities of the Trust are neither as per objects nor the accounts are maintained as per the Rajasthan Public Trust Acts, 1959. The ld. Counsel for the assessee has reiterated the submissions as made in the written brief. 3. On the contrary, the ld. CIT D/R supposed the submissions and submitted that the ld. CIT was within his right to enquire about the nature of activities. If the ld. CIT comes to the conclusion that the activities of the assessee trust are .....

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he grant of registration u/s 12AA. Each of such observation is explained as under :- (i) From the copy of the order dated 14.05.1986 (PB 36-37) allotting the land to the trust, it is specifically mentioned that the same is to be used by the trust for construction of school, college, hospital, dharamshala and other public utility activities. Therefore, it was incorrect on part of CIT to observe that the land has been allotted for middle school and dispensary and not for running of hospital and me .....

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of registration. Once the land is revalued by crediting to the capital fund account of the trust, one fail to understand how it would give benefit to the trustees. The capital fund remains of the trust only. Whether it is credited to the capital fund or the revaluation reserve makes no difference. Further, it is irrelevant on part of CIT to observe that such revaluation can be made only by business undertakings or that a land which is allotted free of cost cannot be revalued by the trust. Even t .....

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as received letter of intent from Government of Rajasthan, Medical Education vide letter dated 10.07.2013 (PB 40-41). For grant of registration u/s 12AA, the CIT, as per sub-section (1) of this section is required to satisfy himself about the objectives of the trust and the genuineness of its activities. There is no finding of CIT that the objects of trust are not charitable or that the activities of the trust are not genuine. It is a settled law that at the stage of grant of registration, CIT i .....

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to make enquiry related to the objects of the Trust before granting the registration under section 12AA. The ld. CIT has declined registration by observing as under :- 7. On examination of the details, it is seen that the trust was allotted land by State Government of Rajasthan for Rs. Nil for running of middle school and dispensary at Village Champapura. It was further mentioned by the applicant that it has revalued the land for ₹ 29.09 crore. It is very interesting to note that the land .....

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the Act empowers the trust to revalue the assets. The concept of revaluation basically comes from Companies Act or business undertakings. Those provisions are limited to companies only and are not applicable to the trust established under the Rajasthan Public Trust Act, 1959. Revaluation has not merely remained revaluation of land but it has created capital in the hands of trustees/settlers of the trust. 8. Further, while revaluating the asset, the trust has not created any reserve, instead it h .....

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s, gives huge benefit to the settler/trustees. The concept of capital and revaluation is applicable to the business undertaking only. These indicate that the applicant is intending to run the above organization as business undertaking. On further enquiring about the purpose of revaluation of assets the applicant submitted that the trust is to establish medical college and hospital and to avail the finance from bankers, trust has revalued the land and building. This raised another issue that whet .....

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tees of the trust. 9. The attention is also drawn to the newly inserted provision to the section 12AA of the I.T.Act, 1961 w.e.f. 01.10.2014. Sub section (4) of section 12AA read as under :- (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subseque .....

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nted if provisions of sec. 13(1) become operative. Once the Act has empowered the authority to cancel the registration with reference to section 13(1), it automatically indicates that if at the time of registration, any of the conditions mentioned in sec. 13(1) is noticed, then registration may not be granted. It will save the valuable time of authorities and applicants by avoiding double rigorous of first granting the registration and then cancelling it. In the present case, the revaluation of .....

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f the trust. In other words the trust is entering into an activity which is not as per the objects of the trust. As the trust is doing the activities not as per the objects it cannot be held as charitable within the meaning of section 2(15) of the IT Act, 1961. 11. From the above discussion it can be seen that neither the activities of the trust are as per objects nor the accounts are maintained as per the Rajasthan Public Trust Acts, 1959. The trust has also given undue benefit to the Settlers/ .....

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