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TMI Blog2017 (11) TMI 2012X X X X Extracts X X X X X X X X Extracts X X X X ..... rces of Rs.9,32,319/- and income of Rs.5,41,508/- received on account of investment ignoring the provision of section 13 of the Act. 2. During hearing, Shri H. N. Singh, ld. CIT-DR, advanced arguments, which is identical to the ground raised. On the other hand, Shri Vijay Mehta, ld. counsel for the assessee contended that the impugned issue is covered by the decision of the Tribunal, which was upheld by Hon'ble Delhi High Court (ITA No.505 of 2015) (pages 38 to 42 of the paper book) and also order of the Tribunal in its own case for Assessment Year 2009-10 (ITA No.4789/Mum/2013) and another order (ITA No.1782/Mum/2014). All these orders were made available by the assessee in its paper book. This factual matrix was not controverted by Ld. CIT-DR. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion of the order of the Tribunal dated 13/11/2015 for Assessment Year 2009-10 (ITA No.4789/Mum/2013) for ready reference and analysis:- "This appeal, filed by the Revenue, being ITA No. 4789/Mum/2013, is directed against the order dated 31-032013 passed by the ld. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee trust has purchased BMW Car from the funds of the trust in the personal name of the trustee Shri Abdul Qadir Kazi vide bill dated 20.3.2009 from M/s Navnit Motors for Rs. 32,20,000/- for which the payment has been made by the trust from the funds of the trust. Hence, in the opinion of the A.O., the funds of the trust amounting to Rs. 32,20,000/- have been diverted and used for the benefit of excluded persons as covered within the provisions of section 13(1)(c)(ii) and section 13(2)(g) read with section 13(3)(cc) of the Act for which notice dated 25th November 2011 was issued u/s 142(1) of the Act to the assessee trust asking to furnish a reply as to why it should not be concluded that funds of the trust amounting to Rs. 32,20,000/- have been diverted and used for the benefit of excluded persons as covered within the provisions of section 13(1)(c)(ii) and section 13(2)(g) read with section 13(3)(cc) of the Act. 4. The assessee trust in reply to notice dated 25th November 2011 to AO submitted that the purchase of the car was for the benefit and use of the assessee trust and for the use of the chairman, trustees and influential donors in their role and activities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust that the activities of the assessee trust are genuine and in accordance with its mission to fight cancer. The assessee trust submitted that it has played a pivotal role in the battle against the dreaded disease of cancer and the same is recognized by leading national and international agencies. The assessee trust also submitted that the ICICI bank loan account statements clearly mentioned that the assessee trust is the applicant and the asset was always intended to be the official property of the assessee trust and loan has been availed by the assessee trust. 5.The A.O. after considering the contentions of the assessee trust referred to section13(1)(c)(ii),13(2)(g) and 13(3)(cc) of the Act and held that the funds of the assessee trust was utilized for purchase of BMW car which is registered in the name of the Prof A A Kazi , trustee of the assessee trust which amounts to diversion of trust funds to the trustee and it is not a small amount and the justification given by the assessee trust to justify the purchase of car was not genuine. Nothing stopped the trust to purchase a decent car in the range of Rs. 10-12 lacs such as Honda City or Toyota corolla instead of buying a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the provisions of section 13(1)(c)(ii) and section 13(2)(g) r.w.s. 13(3)(cc)are attracted to the Trust. Against the same, Assessee, through its authorized representatives had submitted vide letter no. UA/08/JUNE/IT/2012 dated 26th June, 2012 that the Learned Assessing Officer had erred in withdrawing the exemption granted to the trust u/s 11. Further, as per the provisions of Section 12AA of the Income Tax Act clearly state that the registration u/s 12 AA granted to a trust can only be revoked by the Commissioner of Income Tax or Director of Income Tax (Exemption), if he is satisfied that the activities of the trust or institution to whom registration was granted are not genuine or are not being carried out according to the objects of the trust, by passing an order on writing cancelling the registration of such trust or institution. However, such order for cancelling the registration can only be passed after giving the assessee a reasonable opportunity of being heard." The assessee trust further submitted in its same reply that the payment for BMW car was made from bank account of the assessee trust, the car loan was obtained in the assessee trust name,the repayment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the user should be for the purposes of the trust. The A.O. has not given any finding that the car was used for nontrust purposes. In view of the Hon. Bombay High Court decision in CIT v. Dilip Singh Sardarsingh Bagga (1993) 201 ITR 995 wherein it was held that registration under the Motor Vehicles Act is not an essential pre-requisite for the acquisition of ownership of the motor vehicles and in view of the fact that the loan for purchasing the car was taken in the name of the trust and not in the name of the trustee, I am of the considered view that there is no contravention of provisions of section 13. 8.3 Therefore, following the above discussion, ground No. 1 and 2 are allowed." 8. Aggrieved by the above decision of the CIT(A), the Revenue is in further appeal before the Tribunal. 9. The ld. D.R. submitted that the assessee trust had purchased BMW car for Rs. 32,20,000/- in the name of the trustee which is a diversion of fund and violation of section 13(1)(c)(ii) and section 13(2((g) r.w.s. 13(3)(cc) of the Act., hence the A.O. has rightly disallowed the exemption u/s 11 of the Act vide orders of assessment dated 28.12.2011 and he relied upon the orders of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar in which such a violation took place, gets excluded from the exemption provided under section 11 i.e., surplus income becomes taxable for that year. If there is any kind of misuse of trust funds by the trustee or a related person of the trustee, then the statute provides enough power to the Assessing Officer to forfeit the exemption and tax the surplus. However, in such a situation, it cannot be held that the entire activities of the trust have been rendered non- genuine or its activities are not carried out in accordance with the objects of the trust. Similar issue had also come up for consideration before the Bangalore Bench of the Tribunal in Krupanidhi Educational Trust (supra), (as relied upon by the learned Counsel for the assessee), wherein on similar purchase of the BMW car purchased in the name of the trustee, the Tribunal held that it cannot be the basis for cancellation of registration under section 12AA(3), at The Cancer Aid & Research Foundation the most, it can be a violation of provisions of section 13. Thus, this objection of the learned DIT(E) cannot be held to be sufficient ground for cancellation of the registration. ...... ....... ...... 20. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited in the bank account of the assessee trust . The loan re-payments to ICICI bank was also paid from the bank account of the assessee trust as well as payment of the initial funds for the purchase of the BMW car was also paid from the bank account of the assessee trust and these all evidences that the said BMW car was purchased by the assessee trust for its activities and was owned by the assessee trust. The assessee trust submitted in paper book which is placed on record the following documents which inter-alia includes following documents and also duly certified by the assessee trust to be placed before the authorities below during the relevant proceedings relating to the assessee trust: 1. The copy of amended trust deed of the assessee trust 2. Audited accounts of the assessee trust for the financial year 2008-09 3. copies of ledger accounts of the assessee trust evidencing that the BMW car is capitalized in the books of accounts and also copies of ledger account of the ICICI Bank car loan reflecting that the repayments of loan are from the assessee trust bank account 4. Affidavit dated 16.12.2011 by Prof . (Retd) Abdulqadir Abdulla Kazi , the chairman cum tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auditors of the assessee Trust. This clearly evidences on the touch stone of preponderance of probabilities that there was a mistake happened at the time of purchase of the BMW car whereby it got registered in the name of the trustee instead of the assesssee trust although it was purchased by the assessee trust and once the mistake was detected , the steps were initiated to correct the mistake and to transfer the motor car in the name of the assessee trust. We have also observed that the registration of the assessee trust u/s 12AA of the Act was cancelled by the Revenue and one of the grounds for cancellation of registration of the assessee trust was the registration of the afore-stated BMW car in the name of the trustee and the Mumbai Tribunal in ITA No. 1782/Mum/2014 vide orders dated 16-07-2014 has restored the registration of the trust u/s 12AA of the Act by holding as under : "18. The second objection of the learned DIT(E) is that the assessee had purchased BMW 325i car in personal name of the trustee Mr. A.A. Kazi, vide bill dated 20th March 2009. The car was purchased out of the funds of the trust. The learned DIT(E) held that nothing has been brought on record to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registration. ...... ....... ...... 20. In view of the aforesaid discussion, we find that none of the objections and the grounds which have been taken by the learned DIT(E) in the impugned order for cancelling the registration can be held to be sustainable either on facts or in law, so as to hold that the activities of the trust are either not genuine or they are not being carried out in accordance with the objects within the scope of section 12AA(3). Moreover, nothing has been brought on record to show that the application of the income of the trust from year-to-year has not been made towards attainment of the objects i.e., for the charitable purposes. If no discrepancy has been found in the income and expenditure account and there is a proper application of income towards the objects in accordance with the provisions of section 11, then neither the charitable nature of the trust should be doubted nor it can be held that its activities are not genuine or are not in accordance The Cancer Aid & Research Foundation with the objects for which registration was granted. Accordingly, we reverse the findings of the learned DIT(E) and hold that the registration granted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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