TMI Blog2017 (11) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... the preceding years on not getting the accounts audited disentitles the assessee from being granted registration. Assessee trust is running like a private limited entity - all the trustees are family members - Held that:- We find the Ahmedabad Bench of the Tribunal in the case of Jupiter Medical Research Centre Trust (2009 (8) TMI 1150 - ITAT AHMEDABAD) following the decision of case of Deoki Nandan v. Murlidhar [1956 (10) TMI 35 - SUPREME COURT OF INDIA] has held that merely because all trustees are family members, it does not mean that the trust is not a public trust and therefore registration granted under section 12AA cannot be withdrawn. The objection of the learned Commissioner of Income-tax that the society is a private limited concern and therefore there can be misuse of power by the president and the society is susceptible to use for purpose other than charitable ones has no basis. Activities of the societies are profit motive and non-charitable in nature - Held that:- we find it is an admitted fact that the society is imparting education. While imparting education, the assessee-trust is charging fees from the students. The issue has already been decided by the hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fulfilled the conditions required for the grant of registration. The report of the Assessing Officer through the Additional Commissioner of Income-tax did not clearly recommend the case for registration and left the matter to be decided on merit by the learned Commissioner of Income-tax. 4. From the various details furnished by the assessee, the learned Commissioner of Income-tax noted that the assessee has not filed the return of income for the different years which is obligatory before seeking registration under section 12AA of the Income-tax Act. Further accounts are not audited although the total income of the applicant-society is more than the prescribed limit before giving effect to the provisions of sections 11 and 12 of the Act. 5. The learned Commissioner of Income-tax further noted that the process of the construction of the building does not correspond to the dates of different certificates and the dates of communications to the university/higher education Department, Haryana with reference to the acquisition of land, conversation of land use, no-objection approval of maps, purchase of building materials, reasonable period for construction of the specified area, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust and it is definitely not for charity. 9. He observed that although the trust was established on 26 June, 1998 with a petty capital however, the corpus capital of the society has grown to ₹ 76,59,235 up to March 31, 2008 as per the balance-sheet enclosed with the copy of the accounts of the society for the financial years 2005-06 to 2007-08. According to him the capital of the society increased by ₹ 69,09,235 merely in three years from April 1, 2005 to March 31, 2008 mainly due to diversion of general funds towards corpus without there being any donation towards corpus with specific directions of the donor. The confirmations produced by the assessee from the donors cannot be said to be the direction from the donors as per section 11(1)(d) of the Income-tax Act. The assessee also could not produce the counterfoils of the receipts issued to the corpus donors. According to the learned Commissioner of Income-tax, counterfoils of receipts of donations which were produced before him do not bear the details of the corpus donors as claimed nor do they bear the donation thereof. Computerised receipts produced subsequently were not accepted by him on the ground that thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is being imparted as per Rules and factum of establishing and running the school or college is a genuine activity. 5. That the learned Commissioner of Income-tax in his order at page 4 observed that 'the society is running senior secondary school as well as a B. Ed/D. Ed college to spread education. It charges high fee for imparting education and thus provides aid to those who can pay for the services obtained and thus cannot be called charitable'. Once it was established that the educational institution was set up by the assessee trust for imparting education which by itself was a charitable activity, it was not required for the assessee trust to provide for any concession in fee or other charges and the absence of such provision, in our opinion, would not make its activity of imparting education as non-charitable as alleged by the learned Commissioner of Income-tax. 6. That the appellant craves the leave to add, amend, modify, delete any of the ground of appeal before or at the time of hearing and all the above grounds are without prejudice to each other. 12. The learned counsel for the assessee strongly objected to the denial of registration under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l purpose and not for purpose of profit. 14. So far as the allegation of the learned Commissioner of Income-tax that the society is running like a private limited concern is concerned, the learned counsel for the assessee referring to the decision of the Ahmedabad Bench of the Tribunal in the case of Jupiter Medical Research Centre Trust v. DIT (Exemption) [2010] 128 TTJ (Ahd) 118 (UO) submitted that the Tribunal in the said decision has held that merely because all the trustees are family members, it does not mean that the trust is not a public trust. It has further been held that merely because the assessee-trust has not carried out any activities, that would not mean that trust has totally stopped activities for ever. It was accordingly held that withdrawal of registration granted to assessee-trust under section 12AA on these two grounds could not be said to be justified. 15. Referring to the decision of the Delhi Bench of the Tribunal in the case of NLB Charitable Trust v. CIT [2010] 38 SOT 291 (Delhi), he submitted that the Tribunal in the said decision has held that where the objects of the assessee-trust were purely charitable in nature, mere fact that there was a perp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration under section 12AA cannot be granted to a trust that is controlled by a single family. He submitted that the assessee did not file Income-tax return for financial years 2005-06, 2006-07 and 2007-08 as well as for earlier years despite the fact that its income was above taxable limit without giving effect to the provisions of sections 11 and 12. He submitted that the assessee did not get its books of account audited for the financial years 2005-06 to 2007-08 as well as for the earlier years despite the fact that its gross receipts exceeded the prescribed limits. He submitted that the confirmations filed for the corpus donation cannot be said to be directions from donors as envisaged under section 11(1)(d). The receipt does not make a mention of the mode of payment nor does it stipulate if it is donation for a specific purpose or a loan. He submitted that the land purchased from the vice-president of the society is not transparent and no payment appears to have been made for land leased at ₹ 6,000 per year. Since the members of the society are relatives of the president, there is no provision for independent internal check. The learned Departmental representative furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision held that since the petitioner-society had not done any charitable work during relevant period and its activities were only for purpose of generating income for its members, rejection of application could hardly be termed as illegal or arbitrary. 23. The learned counsel for the assessee in his rejoinder submitted that various decisions relied on by the learned Commissioner of Income-tax Departmental representative are reversed by the higher courts and therefore, those decisions have no relevance at all. The decision of the hon'ble Uttaranchal High Court in the case of Queens' Educational Society has been reversed by the hon'ble Supreme Court as reported in 372 ITR 699. As regards the allegation of the learned Commissioner of Income-tax that Form 10B was not enclosed, the learned counsel for the assessee referring to the Form No. 10B for the year in the March 31, 2008 submitted that the same was duly filed. So far as the non filing of the returns for earlier years despite having sufficient surplus before application of the provisions of sections 11 and 12 is concerned, he submitted that no action has been taken by the Revenue for the earlier years. As re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue despite knowing the fact, if any, that the assessee-trust had surplus income before allowing the exemption under sections 11 and 12 of the Income-tax Act. We find the hon'ble Punjab and Haryana High Court in the case of Shri Sai Darbar Charitable Trust (Dharamshala) (supra) has held that non-filing of returns by a trust in earlier years cannot be a ground for denying registration and the activities of the assessee-trust cannot be said to be non genuine. The relevant observation of the hon'ble Punjab and Haryana High Court from paragraph 4 onwards read as under (page 570) : The matter has been examined by the Tribunal after perusing the relevant statutory provisions. It has been categorically recorded by the Tribunal that the Commissioner of Income-tax (Exemption) has to satisfy the two conditions while granting registration under section 12AA of the Act. Firstly, whether the objects of the assessee are charitable in nature and thus, the activities are genuine. It cannot be concluded on the basis that the assessee has not filed its Income-tax returns in the earlier years that the activities of the assessee are not genuine. It has been further recorded that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey think proper. From the perusal of this clause, we observe that the trustees have been given powers to give property of the trust on lease or on rent We do not find anything wrong in this clause so as to deny the assessee the registration under section 12AA of the Act. As regards the apprehension of the Commissioner of Income-tax (Exemptions) that his clause may attract the provisions of section 13(1)(c) of the Act, we are of the view that the conditions as provided in section 13 or elsewhere are to be seen by the Assessing Officer at the time of assessment proceedings on yearly basis and not by the Commissioner of Income-tax (Appeals) while granting registration under section 12AA of the Act. . . . Section 13 comes Into play at the time of granting exemption under section 11 of the Act and not at the time of granting registra tion under section 12AA of the Act The only two requirements as stated hereinabove while granting registration under section 12A of the Act, are with respect to the charitable nature of the objects of the assessee and genuineness of the activities. Since we observe that no adverse remarks have been made by the Commissioner of Income-tax (Exemptions) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation in the impugned order that activities carried out by the trust are not in accordance with the objects of the trust or institution. Merely because the assessee has not carried out any activities, that does not mean that the trust has totally stopped the activity forever. In these circumstances, in our considered opinion, the learned Director of Income-tax (Exemption) has not made out a case justifying cancel lation of the registration granted under section 12AA. We, therefore, set aside the impugned order of the Director of Income-tax (Exemp tion). However, we may clarify that the learned Director of Income- tax (Exemption) is at liberty to pass any order under sub-section (3) of section 12AA if any of the conditions under that section is fulfilled in future. Subject to this clarification, we allow the appeal of the asses see. 27. Similarly we find the Delhi Bench of the Tribunal in the case of NLB Charitable Trust v. CIT [2010] 38 SOT 291 (Delhi) from paragraphs 9 to 12 has observed as under : 9. In the light of the above facts, we have to examine that whether learned Commissioner of Income-tax was right in refusing the registration to the assessee. Section 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has given a colour of private trust to the applicant, second objection of learned Commissioner of Income-tax is that the trustees would exercise full control over the working of the trust for all the time to come. Let us take an example of an ordinary institution created by some individual to carry out the charitable activity. A person who is contributing to the charitable cause may keep in his mind that the control of charitable activity may be with him or his family members, but that fact alone cannot disentitle the institution from registration unless any material is brought on record to suggest that either the objects of the charitable trust are not charitable in nature or there is a clause in the trust deed according to which certain benefits can be given either to the settler or to the trustees or to the persons related to them. Here also it is not the case of the learned Commissioner of Income-tax that according to the conditions laid down in trust deed any of such contravention could be done or there is any possibility of applying any income or asset for the benefit of the settler, trustees or the persons related to them. Here, it will be relevant to mention that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of trust properties on any object which is not enumerated in the objects of trust is also prohibited and the trustees' act against the interest of trust is also prohibited. Thus, according to the prohibition clause trustees cannot derive any direct or indirect pecuniary advantage either out of prop erty of the trust or from income or application thereof not only for themselves, but for their relatives and associates. In any case if later on it is found by the Department that the trustees or their relatives or their associates are deriving any direct or indirect pecuniary advan tage out of trust property or its income and if any such property or income is applied for that purpose, then it will be contravention of the trust deed. Therefore in our opinion, the simple fact that there is perpetual succession in the appointment of trustee, cannot disentitle the assessee institution from getting registration. Moreover, the trust deed has to be read as a whole according to well established law. It has been stated in clause 2(ii) that if any of the first trustees resigned during his/her lifetime, the vacant seat will be filled by the board of first trustees with 3/4th majority and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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