TMI Blog2018 (12) TMI 1552X X X X Extracts X X X X X X X X Extracts X X X X ..... management of the Trust from the state and central government officials unto themselves. Under the circumstances, the Ld. CIT(E) had a valid and reasonable apprehension that in case of dissolution, the properties of the trust, which admittedly have been created and constituted out of 100% grants given by the State and Central Government and have now been attempted to be shifted in the hands of the private management, may be distributed amongst the private individual members of the trust. The above facts and circumstances also cast doubt about the functioning and genuineness of the objects of the trust. In view of this, we do not find any infirmity in the order of the CIT(E) in rejecting the application of the trust for registration u/s 12A of the Act. A clear and visible attempt on behalf of the trust to mislead this Bench of the Tribunal by way of concealing the real and true facts that the Members of the Trust have, by not extending the term of Board of Governors, conveniently entrusted unto themselves the control and management of the Trust. Had the case of the Trust been not carefully examined, these important and relevant facts would have remained wrapped under the carpe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lative of such author or founder person or member trustee or manager and even any concern in which any of such person has a substantial interest including a person who has made substantial contribution to the trust of the society. 3. The Ld. CIT(A) (E) observed that in the absence of dissolution clause, there was a reasonable presumption that the assets and liability of the society will be distributed amongst the members of the society in case the society stops its operation or dissolved. He, therefore, observed that the provisions of section 13(1)(c) of the Act were clearly attracted in this case. He further observed that earlier the society was denied registration in the year 1981 by the then Commissioner of Income Tax(E), Patiala stating that the applicant was an educational institution covered u/s 10(22) of the Income-tax Act, 1961 and that the provisions of sections 11 12 of the Act were not applicable in this case. Thereafter, the assessee society did not file any application for 36 years. The society thereafter has been claiming deduction u/s 10(23C) (iiiab) of the Act as the entire capital cost of the school / academy has been met by the Ministry of Defence and Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minutes are enclosed. 5. Copy of letter signed by Sardar Parkash Singh Badal for obtaining approval of Amended Memorandum of Association, along with its enclosure are forwarded herewith for your action please. The Addition / amendment has been carried out in Sub Head (xvi,. Para 2 of Memorandum of Association. An early Action is requested please Sd/- ( .) (Emphasis supplied by us) 5. The scanned amended Memorandum of Association attached with the aforesaid letter is reproduced as under: MEMORANDUM OF ASSOCIATION 1. The name of society is Sri Dasmesh academy Trust hereinafter for the sake of brevity referred as The Trust . 2. The objects for which the Trust is established are to set up and carry on the administration and management of an academic institution at Anandpur Sahib to be known as SRI DASMESH ACADEMY hereinafter called The Academy for imparting education of high standard in general and training for administrative Services and Armed Forces in particular to the children of personnels domiciled in Punjab. 3. The powers and functions of the Trust are:- (i) To regulate the expenditure and to manage the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or dissolution of the Trust the remains after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the society but shall be transferred to the Punjab Government/Punjab Defence Security Relief fund Committee at or before the time of dissolution. 4. (a) The signatories of this Memorandum of Association may admit to the membership of the Trust the following persons subject to their agreeing in writing to join the membership of the Trust. 1. S.Surjit Singh Rakhra Ex- Cabinet Minister, Punjab Rakhra Palace.Patiala to generate Signature digitally. 2. S.Balwinder Singh Bhundar, Hon'ble Member of the Rajya Sabha Kothi No. 256, Sector 11-A, Chandigarh to generate Signature digitally. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etary of the Governing Body and 7. Director of the Academy. We the several persons, whose signatures, occupations and addresses are given hereunder, are desirous of being formed into an Association in accordance with the provisions of the Societies Registration Act, 1980, in pursuance of this Memorandum of Association and in testimony of this, we have subscribed our respective names and signatures hereto on the day of August in the year 2017 at Chandigarh. 1. S.Parkash Singh Badal Son of late S. Raghuraj Singh Vill PO Badal Distt. Muktsar to generate Signature digitally. 2. S. Surjit Singh Rakhra S/o Sh. Kartar Singh Rakhra Palace, Patiala to generate Signature digitally. 3. S. Balwinder Singh Bhundar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WITNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. A perusal of the aforesaid amended Memorandum of Association reveals that vide clause 4(a) the MOA, the following persons, subject to their agreeing in writing, have been decided to be admitted to the membership of the Trust. 1. S. Surjit Singh Rakhra, Ex-Cabinet Minister, Punjab 2. S. Balwiner Singh Bhundar, Hon'ble Member of the Rajya Sabha 3. GP Capt Amarjeet Singh Grewal, FRGS (Retd), Chandigarh 4. Air Marshal Manmohan Singh(Retd), AVSM, PVSM, VR C, Chandigarh 7. The aforesaid persons have appended their signatures against their names conveying their acceptance for being admitted to the membership of the trust. 8. This amended MOA / Resolution has been signed by the following persons:- 1 S. Parkash Singh Badal Son of Late S.Raghuraj Singh, Vill PO Badal Distt. Muktsar 2 S. Surjit Singh Rakhra S/o Sh. Kartar Singh, Rakhra Palace, Patiala 3 S. Balwinder Singh Bhundar,M.P. Kothi No.256,Sector 11-A, Chandigarh 4 Air Marshal Manmohan Singh (Retd), PVAS, AVSM, Vr C, S/o S.Iqbal Singh, Kothi No.198, Sector 18A, Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enient for the purpose of The Trust and on such items and conditions as they may think fit and proper; v) to construct, purchase, take on lease or accept as a gift or otherwise, any building or buildings which may be necessary of suitable of the purposes of the Trust and on such items and conditions as they may think fit and proper; vi) to sell, exchange, lease or otherwise disposal of any properties of the Trust, movable or immovable on such terms as may think fit and proper; vii) to exercise conveyance, transfer or government securities, reconveyances, mortgages, leases, bond and agreements in respect of property, movable or immovable belonging to the Trust or to be acquired for the purpose of the Trust; viii) to appoint in order to execute any instrument of transact any business of the Trust, any persons as attorney of the Trust with such powers as they may deem fit; ix) to enter into an agreement with Central Government or state Governments for receiving grants; x) to raise and borrow money on bonds, mortgages, promissory notes and other obligations or securities founded or based upon all or any of the properties and assets of the Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Amendment: the following as sub para (b) to existing para (4) (b ) If a trustee fails to attend three consecutive meetings of the trust, his /her name may be deleted from the list of Trustees on .. We the several persons, whose signatures, occupations and addresses are given hereunder are desirous of being formed into an Association in accordance with the provisions of Societies Registration Act, 1860, in pursuance of this memorandum of Association and in testimony of this, we have subscribed our respective names and signatures hereto on the 17th day of February in the year 1978: 1 S. Parkash Singh Badal Son of Late S.Raghuraj Singh, Vill PO Badal Distt. Faridkot 2 Gurcharan Singh Tohra, M.P. 12-A, Western Court, New Delhi 3 Col. P.S. Gill Lt. Governor, GOA, Panaji 4 Air Chief Marshal Arjan Singh 7-A,Kautiyla Marg, New Delhi 5 Lt Gen Gartaj Singh, Kothi No. 80,Sector 5, Chandigarh 6 Sh. Balawant Singh, Finance Ministry, Punjab 7 Yagna Datt Sharma, M.P. 30, Dr.Rajendraprasad Road New Delhi 8 Dasant Singh Khalsa,M.P. 22, Westorn Court, New Delhi 9 Ravi Inder Singh, Speaker, PunjabVidhan Sabha, Chandigarh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of unsound mind, is declared insolvent, is convicted of criminal offence, involving moral turpitude, ceases to be a member of the committee/trust accepts any paid job or office of profit in the Academy or enters into any contract of relationship with the Academy thereby his interest as member conflicts with his duty as such or is removed by the Trust from the Membership of the Board. DESIGNATION 3. A member other than an ex-officio member may resign his office by a letter addressed to the Chairman and such resignation shall take effect as soon as it had been delivered to the latter. FILLING UP VACANCES 4 (a) Any vacancy in the Board shall be filled in the same manner as is provided in regulation No.2. (b) No act done, or proceedings taken by the Board shall be invalid merely on the ground of any vacancy of defect in the constitution of the Board or of any defect or irregularity in the nomination of any person acting as member thereof or of any defect or irregularity in such act or procedure not effecting the merits of the case. POWER OF THE BOARD 5 The Board shall have all powers which may be necessary or expedient for the achievement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard will be five. (c) The Chairman, if present, shall preside over the meeting of the Board and in his absence, the members present shall elect one from amongst themselves to preside. SUITS BY OR AGAISNT THE TRUST 9. All suits, complaints and applications by the Trust in any Court or Office whatsoever shall be instituted or filed in name of Trust under the signatures of the Member Secretary of the Trust / Board of Governors or if for any cause they are unable to do so on account of physical absence or otherwise, any other member of the Trust / Governing Body. Body may do so, if authorised by a resolution of the Trust duly passed at as meeting convened for the purpose. FUNDS OF THE TRUST 10 All funds of the Trust shall be invested in a Bank of Banks or in financially sound companies offering best rate of interest. The Member Secretary of the Trust alongwith other Trustees or members of the Building Committee to be nominated for this purpose shall be entitled to and authorised to deal with the name. For the prospers of dealing with Bank Or Banks or with Government in regard to funds and investments of the Trust, they shall be and are hereby authorised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm of Board of Governors was not extended further by Members of Sri Dashmesh Academy Trust , which means that the members of the assessee trust have conveniently stepped back and stopped entrusting the management affairs of the trust to the Governing body as against object clause mentioned in the original MOA as well as alleged amended MOA of the year 2017 attached with the aforesaid letter dated 5.2.2018. It is pertinent to mention here that the date on which the said amended MOA was passed, as is revealed from the above reproduced MOA , is mentioned as on the___day of August in the year 2017 at Chandigarh . The relevant date only finds mention in the letter dated 5.2.2017 addressed to the Registrar of Firms and Societies i.e. dated 17.7.2017. Even the month mentioned in the letter is July 2017, whereas, the month mentioned in MOA is that of August 2017. Why the members have not mentioned the date while singing and adopting the amended MOA has remained unexplained. It is pertinent to mention here that though the assessee trust (in its letter dated 12.6.2017) addressed to the ACIT (Exemptions) has claimed that it was formed by Ministry of Defence and Government of Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The copies of the bank statement are attached as Annexure B . All the payment relates to the direct expenditure made for running the school 5. The trust receives the grants from Punjab Govt. and Ministry of Defence as per the specific requirement from time to time. 6. The copies of Income Tax returns for the last three assessment years are attached as Annexure 'C'. The assesses claims the deductions u/s 10(23C)(iiiab) of Income Tax Act. 7. The assessee has filed the application u/s 11 12 of Income Tax Act on 7th August, 1981. The Hon'ble Commissioner of Income Tax, Patiala has communicated that the provisions of section 11 12 of Income Tax Act are not application to the trust, copy attached as Annexure 'D'. 8. No donation under FCRA has ever been received by the assessee. 9. The Corpus Money was contributed initially at the time of incorporation as per following details:- i) Punjab Govt. 2,00,00,000 ii) Punjab Defence and Security Relief Fund Committee (under the Ministry of Defence) 70,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly send the grants for all specific needs to meet the capital or revenue expenditure. The trust has not been accepting any grants or donations from the other parties except at one time SGPC had sent certain grant for specific capital expenditure. Since the trust is substantially finance by the Central State Governments thus being eligible for the said deductions. Further I wish to add that there were two income tax assessments u/s 143(3) where the deduction has been allowed u/s 10(23) (iiiab) of Income Tax Act. 7. The Memorandum of the trust incorporated in financial year 197778 and there was no specific requirement of the dissolution clause at that time. Since the said trust is the baby of the central and state Govt. and most of the Governing body members are Ex-officio members viz. Chief Minister of Punjab, one member of Punjab Defence Security Committee, three Administrative secretaries of Punjab Govt (Education, Finance Defence) etc. This constitution clarifies and justifies that the trust is being run by the Governments and in case of dissolutions no body shall be able to draw any share or benefit from the trust/ society. Further the trust shall take a note to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached with it and even against the alleged amended MOA of 2017. 15. It is pertinent to mention here that as on the date, Sardar Parkash Singh Badal is not the Chief Minister of Punjab. In fact Caption Amrinder Singh has assumed the office of Chief Minister of Punjab on 16.3.2017 and he is supposed to preside over the meeting of the Board of Governors. Further, as per clause 4(e) of the original MOA as well as amended MOA , the governing body to which management of the affairs of the trust are entrusted has to be constituted has to include one member to be nominated by Punjab Defence and Security Relief Fund Committee, three Administrative Secretaries of Punjab Government (Education, Finance and Defence Services Welfare Deptt.) as Ex-officio Members, two eminent educationists to be nominated by the Trust besides Secretary of the Trust and the Director of the Academy. However, a perusal of letter dated 5.2.2018 reveals that Members of the Trust have conveniently by not further extending the term of Board of Governors have entrusted unto themselves the control and management of the Trust. 16. Now, another particular fact on the file is that in the written pleading of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the trust after the year 2007 and that the Members of the trust, who are private persons, themselves have established control over the Trust. A totally false and wrong pleadings have been made by the assessee Trust before the Income Tax Authorities that it is a Government controlled organization . The facts on the file speaks that the trustees in violation of the MOA and Regulations of the trust have shifted control management of the Trust from the state and central government officials unto themselves. Under the circumstances, the Ld. CIT(E) had a valid and reasonable apprehension that in case of dissolution, the properties of the trust, which admittedly have been created and constituted out of 100% grants given by the State and Central Government and have now been attempted to be shifted in the hands of the private management, may be distributed amongst the private individual members of the trust. The above facts and circumstances also cast doubt about the functioning and genuineness of the objects of the trust. In view of this, we do not find any infirmity in the order of the CIT(E) in rejecting the application of the trust for registration u/s 12A of the Act. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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