2014 (9) TMI 319 - HC - Income Tax

Trust amalgamation doesn't affect tax exemption renewal under Income Tax Act. Court upholds decision.

The High Court held that the amalgamation of two trusts resulting in a change of name did not impact the renewal of an exemption certificate under section ... Renewal of exemption u/s 80G - Whether a new trust being formed and created by amalgamation of two trusts and with new name but no prior approval u/s 12A of the Income Tax Act having been obtained, can the certificate u/s 80G of the Income Tax Act be granted – Held that:- There is no new trust - The trust is one and the same namely Dr. R.K. Dhote Public Charitable Trust - the Tribunal has not committed any error in holding that the material was not enough to refuse the request of renewal of the certificate u/s 80G - this was a case of mere renewal and no wider controversy or larger question was involved - the reasons assigned by the Tribunal are in conformity with the factual position – thus, the reasonable request to renew the certificate has been rightly granted – Decided against revenue. Issues:- Interpretation of provisions under section 80G of the Income Tax Act, 1961 for granting renewal of exemption certificate.- Whether the formation of a new trust by amalgamation of two trusts without prior approval under section 12A can affect the renewal of the certificate under section 80G.Analysis:1. The primary issue in this case was the interpretation of provisions under section 80G of the Income Tax Act, 1961 for granting the renewal of an exemption certificate. The appellant argued that the Tribunal failed to consider that the original trust was amalgamated into a new trust without prior approval under section 12A. The Director of Income Tax had probed the matter and refused to renew the certificate under section 80G. The appellant contended that a substantial question of law arose concerning the renewal of the certificate in such circumstances.2. On the other hand, the respondent contended that the Tribunal's order correctly noted that the trusts had amalgamated with no change in their objects. The respondent argued that the denial of renewal was based on incorrect facts as the trust had only changed its name, not its identity. The respondent highlighted that all necessary formalities under the Bombay Public Trust Act, 1950 had been fulfilled. Therefore, the respondent argued that there was no substantial question of law involved in the denial of renewal.3. The High Court, after considering both arguments, found that there was no basis to support the appellant's contentions. The Court observed that there was no new trust formed, and the trust in question remained the same after the two trusts were amalgamated. The Court noted that the trust had previously enjoyed exemption under section 80G and that the denial of renewal was based solely on the change of the trust's name. The Court agreed with the Tribunal's decision that the change in name did not warrant a refusal to renew the certificate under section 80G. The Court concluded that the Tribunal's decision was based on factual accuracy and did not involve any substantial question of law. Therefore, the Court dismissed the appeal, emphasizing that the Tribunal's decision was not erroneous or perverse.4. In summary, the High Court's judgment clarified that the mere change in the name of a trust resulting from the amalgamation of two trusts does not affect the renewal of an exemption certificate under section 80G of the Income Tax Act, 1961. The Court upheld the Tribunal's decision, emphasizing that the refusal to renew the certificate was unwarranted based on the factual circumstances of the case. The judgment emphasized the importance of factual accuracy in such matters and concluded that no substantial question of law arose from the denial of renewal in this case.